A subcontracting goal rewards only the activity that can count toward it. SBA’s December 23, 2016 final rule expands that accounting boundary for other-than-small primes with individual plans: qualifying small-business awards below the first tier can contribute to goal performance. The market mechanism is recognition within procurement targets, not a subsidy paid to a supplier. [2016-30874]

The October 6, 2015 proposal described a system focused on the prime’s first-tier awards. Moving beyond that boundary could give a prime a reason to pay more attention to small-business sourcing by its larger subcontractors. That is an incentive-based interpretation of the change, not evidence that purchasing shifted. The proposal also warned against double and triple counting, which would let repeated reporting masquerade as additional activity. [2015-25234][2016-30874]

The final rule makes the information constraint concrete. It separates first-tier and lower-tier goals and uses each covered contractor’s first-tier reports rather than unrestricted aggregation through the chain. The prime remains responsible for accurate reporting. Commercial and comprehensive plans are excluded; the final explanation retains the proposal’s distinction between those broader arrangements and individual contract plans. [2016-30874][2015-25234]

These limits matter when evaluating the competitive case. Credit depends on qualifying awards being captured through the required plans and reports, so a wider accounting boundary alone cannot demonstrate entry by new suppliers or higher sales. The rule takes effect January 23, 2017, and guarantees neither financing nor contracts. Proposal and final publication document one SBA policy process, not two independent observations of a market response. [2016-30874][2015-25234]

Source documents

  1. Credit for Lower Tier Small Business Subcontractinghttps://www.govinfo.gov/content/pkg/FR-2016-12-23/html/2016-30874.htm
  2. Credit for Lower Tier Small Business Subcontractinghttps://www.govinfo.gov/content/pkg/FR-2015-10-06/html/2015-25234.htm