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Don’t be caught non-compliant

With each new year comes a new set of sub and prime contract goals each non-small business contractor and government agency must adhere to. Agencies achieve their goals by awarding prime contracts to small businesses. Non-small business contractors who compete for contracts worth $750,000 or more ($1.5 million for construction contracts) are required to submit a small business subcontracting plan. The plan must include how a contractor will attract small businesses and ensure that those businesses actually have an opportunity to subcontract (FAR 19.702). The plan must show separate dollar and percentage goals for small businesses, those services/supplies to be subcontracted, and an explanation of how small business contracts will be secured. (JDSupra April 23, 2020)

To keep contracts in check, the federal government may intermittently audit contractors. The audits verify small business subcontracting plan s are being fulfilled. The Small Business Administration (SBA) is the lead for the evaluations, the SBA may delegate this authority to other federal agencies. Department of Defense contracts are generally evaluated by the Defense Contract Management Agency (DCMA). (ibid)

Compliance reviews are random and any contractor with a subcontracting plan can be selected for review. The government considers the following factors during compliance reviews:

  • Number and size of the contractor’s government contracts
  • Date of last compliance review
  • Most recent compliance review results
  • Importance/sensitivity of the project
  • Reporting compliance in the electronic subcontracting reporting system (ibid)

The following may be reviewed during an audit:

  • Contract files/correspondence related to the contract
  • IT systems
  • Documentation on subcontracting methods and procedures (ibid)

Once the audit is complete, a contractor can expect to receive a report on non-compliant items found and a rating based on the review. A rating can range from unsatisfactory to outstanding. No further action is necessary if a contractor receives an outstanding rating. When the rating is below satisfactory, the contractor must create a corrective action plan (CAP) within 30 days, explaining the steps they will take to become compliant. (ibid)

It is a good idea for contractors to have the required documents on hand, should they receive notice of an upcoming audit. They may include the following:

  • Small business certification paperwork
  • Subcontracting program policies
  • Any prior compliance reviews
  • Organizational charts
  • Policy letters from the company CEO verifying subcontracting program
  • Historical subcontracting reports
  • Listing of any small business conferences or trade shows attended
  • Documentation of success stories – showing contracts awarded
  • A letter identifying small business liaison officer (ibid)

Companies that are well prepared for audits and have a subcontracting plan in place will undoubtedly move through a review smoothly and quickly.

Do you have all of your ducks in a row for a possible upcoming audit? Give us a call.