An Overview of Small Business Subcontracting: In Brief

For small businesses, participating in federal contracts as subcontractors can offer an important pathway to government contracting work and is one of the ways that the federal government can help maintain a diversity of suppliers. Congress may be interested in the policies and regulations surrounding small business subcontracting because the Small Business Act requires certain contractors to provide subcontracting opportunities for small businesses and because subcontracts are an access point for small firms seeking to provide goods and services to the government. The federal government maintains a policy of “maximum practicable” subcontracting opportunities for small businesses via prime contracts above $350,000, a value known as the simplified acquisition threshold. Regulations outline the details of agency and contractor obligations when subcontracts are awarded, and are implemented by agency purchasing officials across the government such as contracting officers, as well as SBA personnel that specialize in contracting support for small businesses. Other federal policies that foster small business subcontracting include monetary incentives to encourage prime contractors to subcontract with small businesses; legal protections for subcontractors such as assurances of timely payments; and “limitations on subcontracting” to prevent contracts intended for small businesses from being subcontracted to larger firms. This report discusses major components of small business subcontracting policy and select issues of congressional concern: contractor compliance with subcontracting regulations, and subcontracting reporting and data availability. It also provides recent legislative proposals that would affect subcontracting policy.