Small Business Subcontracting Plans – Good Faith Efforts Updates
Key Details: Good faith efforts are steps a prime contractor takes to achieve a contract goal and to comply with their small business subcontracting requirements and plans. The National Aeronautics and Space Administration (NASA), General Services administration (GSA) and the Department of Defense (DoD) published a final rule recently about good faith efforts.
Amendment Overview: Good Faith Efforts FAR Update
The final rule amends the Federal Acquisition Regulation (FAR), primarily in section 19.705, to explain the evaluation of good faith more clearly on the part of prime contractors. This amendment also clarifies the determination of how liquidated damages should be applied should a prime contractor fail to make a good faith effort to adhere to its subcontracting plan.
In general, but sometimes subject to additional details, small business subcontracting plans are required from large prime contractors when a contract is expected to exceed $750,000 (or $1.5 million for construction) and the contract has subcontracting possibilities.
What Does the FAR Update Explain?
The updated FAR sections and related clauses explain and clarify, but are not limited to, the following:
- Inclusion of indirect costs in commercial small business subcontracting plan goals.
- Indicators of good faith efforts to meet subcontracting plan goals.
- Indicators of failures to make good faith efforts to meet subcontracting plan goals.
- The contracting officer’s post award responsibilities and notice requirements with regards to good faith efforts.
- The contractor’s documentation requirements and responsibility to reply in a 15-day window after a notice is received regarding compliance with good faith efforts.
- Assessment and payment of liquidated damages based on determination of failure to make good faith efforts to meet subcontracting plan goals.
This recent regulatory update mirrors the SBA’s guidance and now provides contractors with a clear idea of how contracting officers should respond in the event a good faith effort is not made. This FAR update is also an excellent reminder for federal contractors to review their small business subcontracting plans and goals to assess compliance, track adherence to goals, and document good faith efforts to follow their plans.
Failure to make a good faith effort can not only result in costly liquidated damage assessments, but also hurt a contractor’s reputation through inclusion of past performance information.
For more information regarding the background, discussion, and analysis of this final rule, please visit the Federal Register.
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