Important New SBA HUB Zones Subcontracting Compliance Amendments for Small Business Subcontracts

The SBA adopted new rules and revised 13 CFR 126.200(b)(6). HUBZ Ones small businesses must still comply with the required subcontracting requirements in the performance work statement.

In other words, the company must certify in its bid that it will company with the limitation on subcontracting requirements with respect to any procurement it receives as a qualified HUBZone.

Small businesses, however, must be aware that 13 CFR 126.601 still requires that they have to be qualified both at the time of the offer and at the time of award.

When it comes to subcontracting HUBZone compliance requirements, the amendments remind small businesses that for the subcontractor to be similarly situated, and to escape affiliation liability, it must also be qualified as HUB ZOnes and must also be small under the NAICs Code assigned to the subcontract.

The amended limitation on subcontracting rules that apply to HUBZone state that in order to be awarded a full or partial small business set-aside contract with a value greater than $150,000, an 8(a) contract, an SDVO SBC contract, a HUBZone contract, a WOSB or EDWOSB contract pursuant to the 13 CFR 127, with a value greater than $150,000, a small business concern must agree that:

• In the case of a contract for services (except construction), it will not pay more than 50% of the amount paid by the government to it to firms that are not similarly situated. Any work that a similarly situated subcontractor further subcontracts will count towards the 50% subcontract amount that cannot be exceeded.
• 1) In the case of a contract for services (except construction), it will not pay more than 50% of the amount paid by the government to it to firms that are not similarly situated. Any work that a similarly situated subcontractor further subcontracts will count towards the 50% subcontract amount that cannot be exceeded.
• (2)(i) In the case of a contract for supplies or products (other than from a nonmanufacturer of such supplies), it will not pay more than 50% of the amount paid by the government to it to firms that are not similarly situated. Any work that a similarly situated subcontractor further subcontracts will count towards the 50% subcontract amount that cannot be exceeded. Cost of materials are excluded and not considered to be subcontracted.

(ii) In the case of a contract for supplies from a nonmanufacturer, it will supply the product of a domestic small business manufacturer or processor, unless a waiver as described in 13 CFR 121.406(b)(5) of this chapter is granted.

(A) For a multiple item procurement where a waiver as described in 13 CFR 121.406(b)(5) of this chapter has not been granted for one or more items, more than 50% of the value of the products to be supplied by the nonmanufacturer must be the products of one or more domestic small business manufacturers or processors.

• (B) For a multiple item procurement where a waiver as described in 13 CFR 121.406(b)(5) of this chapter is granted for one or more items, compliance with the small business subcontracting requirement will not consider the value of items subject to a waiver. As such, more than 50% of the value of the products to be supplied by the nonmanufacturer that are not subject to a waiver must be the products of one or more domestic small business manufacturers or processors.
• (C) For a multiple item procurement, the same small business concern may act as both a manufacturer and a nonmanufacturer.

Although the new SBA HUBZone compliance amendments for Small Business subcontracts focus on relaxing the previous legal standards for small business size protests and affiliation, companies can still fall prey and lose the contract. See information about HUBZone joint venture requirements.

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Call 1-866-601-5518 for help with federal subcontracts compliance , call Watson & Associates, LLC small business lawyers at SBA HUBZone compliance attorneys.