PSC Calls for Revisions and Greater Consistency among “Limitation on Subcontracting” Regulations

In separate comments submitted to the FAR Council and the Small Business Administration (SBA) on Feb. 4, PSC recommended changes to their respective proposed rules on the “limitation on subcontracting” (LOS) to improve the rules, and to provide greater clarity and consistency in definitions and treatment across federal agencies. 

Section 1651 of the Fiscal Year 2013 National Defense Authorization Act (NDAA) amended the Small Business Act to establish the LOS for full or partial small business set-aside contracts based on the percentage of the total award amount that a prime contractor spends on its subcontractors, excluding from that calculation a “similarly situated entity” subcontractor. SBA issued a final rule to implement the statutory provision on May 31, 2016. On Dec. 4, 2018, the FAR Council issued a proposed rule to implement the 2016 SBA final rule. On the same day, SBA issued a proposed rule to, among other things, further amend its LOS regulations. Concurrently, on Dec. 3, 2018, the Department of Defense issued its own LOS coverage through a DFARS class deviation, which it subsequently updated on Jan. 8, 2019.

“PSC appreciates that both the FAR Council and the SBA have issued proposed rules and provided time for public comments on these important regulatory changes,” said PSC EVP and Counsel Alan Chvotkin. “While it is regrettable that is has taken more than 30 months since SBA published its May 2016 final rule to issue these changes, we welcome the opportunity to provide feedback on the regulations, and ask the FAR Council and SBA to modify and align their respective rules to create greater consistency and clarity and make other improvements.”