What Is a Small Business Subcontracting Plan?
A small business subcontracting plan is a document where large business contractors commit to subcontracting opportunities for small businesses on federal contracts. It's required by FAR Subpart 19.7.
When required:
- Contractor is other than small business
- Contract exceeds $750,000 ($1.5 million for construction)
- Contract has subcontracting possibilities
Why subcontracting plans exist:
- Government goal: 23% of contracting to small business
- Large business primes control much of contract value
- Subcontracting plans ensure small business participation
Goal categories:
- Small Business (SB) — Overall small business goal
- Small Disadvantaged Business (SDB)
- Women-Owned Small Business (WOSB)
- HUBZone Small Business
- Service-Disabled Veteran-Owned SB (SDVOSB)
Impact of not having a plan:
Without an acceptable subcontracting plan, large businesses cannot be awarded contracts meeting the threshold. The plan is a condition of award.
Types of Subcontracting Plans
Individual Subcontracting Plan:
- Covers one specific contract
- Goals based on that contract's subcontracting opportunities
- Most common type
- Approved by the contracting officer
Master Subcontracting Plan:
- Covers all contracts at a division or company level
- Commercial plans for commercial item contracts
- Provides for more flexibility
- Still requires annual updates
Commercial Plan:
- For contractors selling commercial items
- Company-wide plan covering all commercial contracts
- One plan for entire fiscal year
- Goals across all government sales
Which type to use:
- Individual plans: Most contracts, most control
- Master plans: Experienced contractors with multiple contracts
- Commercial plans: Commercial item contractors
Plan approval:
Contracting officer (or designated representative) must approve your plan before award. Negotiations on goals are possible.
Setting Subcontracting Goals
How goals are determined:
Goals should be based on:
- Nature of the contract work
- Realistic subcontracting opportunities
- Availability of qualified small businesses
- Your past performance on similar contracts
Government minimums:
Current government-wide goals (example):
- Small Business: 23%
- SDB: 5%
- WOSB: 5%
- HUBZone: 3%
- SDVOSB: 3%
Your contract goals may differ based on specific circumstances.
Goal calculation:
- Goals expressed as percentage of total subcontract dollars
- May also express as dollar amounts
- Base is estimated subcontract value (not total contract)
Realistic goal setting:
- Don't over-promise to win, then fail to deliver
- Consider your actual supply chain
- Account for requirements that limit subcontracting options
- Under-promise, over-deliver if possible
Negotiating goals:
If proposed goals seem unrealistic, negotiate with CO. Better to have achievable goals than miss ambitious ones.
Get the Cheat Sheet
Join 5,000+ GovCon professionals. Get weekly insights and free templates.
No spam. Unsubscribe anytime.
Plan Content Requirements
Required elements (FAR 52.219-9):
- Goals — Dollar and percentage for each category
- Total contract value and subcontract base
- Description of principal types of supplies/services to be subcontracted
- Method for developing goals
- Sources used to identify potential small business subcontractors
- Outreach efforts — How you'll identify small business sources
- Assurances of good faith effort
- Administrator — Named person responsible for compliance
- Records description — How you'll track and report
- Flow-down provisions — Requirements for your subs
Outreach activities to include:
- Using SBA's SUBNet or Dynamic Small Business Search
- Attending small business conferences/events
- Advertising subcontracting opportunities
- Participating in matchmaking events
- Contacting small business trade associations
Administrator responsibilities:
The named administrator must:
- Oversee plan implementation
- Ensure accurate reporting
- Develop internal procedures
- Conduct outreach activities
Compliance and Reporting
Electronic Subcontracting Reporting System (eSRS):
Report subcontracting accomplishments through eSRS.gov.
Reporting frequency:
- Individual plans — Semi-annual (October 30, April 30)
- Commercial plans — Annual
- Summary reports — Annual consolidation
What to report:
- Subcontract dollars by small business category
- Percentage achieved vs. goals
- Description of good faith efforts
Government review:
- Contracting officer reviews reports
- SBA may conduct compliance reviews
- Performance may be assessed in CPARS
What happens if you miss goals:
- Not automatic penalty if good faith effort demonstrated
- May affect past performance evaluation
- Patterns of failure affect future awards
- Liquidated damages possible for material breach
Good Faith Effort
What is good faith effort:
Even if you miss goals, you can avoid penalties by demonstrating good faith effort — genuine attempts to find and use small business subcontractors.
Evidence of good faith:
- Active small business outreach
- Advertising subcontracting opportunities
- Providing timely notice to small businesses
- Attending small business events
- Breaking out work into smaller pieces
- Documenting why small businesses weren't selected
Document your efforts:
Keep records of:
- Outreach activities and dates
- Small businesses contacted
- RFQs issued to small businesses
- Reasons small businesses weren't selected (price, capability)
- Changes in market conditions affecting goals
When good faith isn't enough:
Good faith doesn't excuse:
- No effort at all
- Systemic exclusion of small businesses
- Misrepresenting subcontracting data
- Changing subcontractors after award to non-small
Liquidated damages:
For failure to make good faith effort, government can assess liquidated damages equal to the dollar amount by which you failed to meet goals.
Subcontracting for Small Businesses
Small businesses and subcontracting plans:
Small businesses are exempt from subcontracting plan requirements. You don't need a plan to win contracts.
Opportunity for small businesses:
Large business subcontracting requirements create opportunity:
- Large primes need small business subs
- Goals create demand for qualified small businesses
- Relationship building with primes
How to get on large business teams:
- Register in SBA's Dynamic Small Business Search
- Respond to SUBNet postings
- Attend prime contractor industry days
- Develop capability statement
- Pursue mentor-protégé relationships
Small business teaming:
When small businesses act as primes on larger contracts:
- No subcontracting plan required
- Still subject to limitations on subcontracting
- Must perform required percentage of work
Growing out of small:
When you exceed size standards and become "other than small," you'll need to develop subcontracting plans. Plan ahead.
Managing Subcontracting Compliance
Build a compliant system:
- Assign clear responsibility (administrator)
- Create tracking mechanisms
- Integrate into procurement processes
- Train procurement staff
Tracking subcontracts:
- Maintain database of all subcontracts
- Verify subcontractor size status
- Track dollars by small business category
- Monitor progress against goals
Subcontractor verification:
- Check SAM.gov for current size status
- Verify certifications (8(a), HUBZone, etc.)
- Document verification at time of award
- Size is determined at subcontract award
Flow-down requirements:
Include FAR 52.219-8 in subcontracts over $750,000 to "other than small" subcontractors. They need their own plans.
Course corrections:
If you're trending below goals:
- Increase outreach efforts
- Review upcoming subcontracting opportunities
- Break work into smaller pieces
- Document barriers and efforts
Frequently Asked Questions
Q:Do small businesses need subcontracting plans?
No. Small businesses are exempt from subcontracting plan requirements regardless of contract value. This is an advantage of small business status. However, when you exceed size standards, you'll need plans.
Q:What happens if I don't meet my goals?
Missing goals isn't automatically penalized if you demonstrate good faith effort. However, repeated failures may affect your past performance ratings, future awards, and in extreme cases, trigger liquidated damages.
Q:Can I change my goals after award?
Goals are part of the contract. Changes require contract modification and CO approval. If circumstances significantly change (scope changes, market conditions), discuss with the CO and document rationale.
Q:How is subcontracting plan compliance evaluated?
Compliance may be assessed in CPARS under "Small Business" element. Contracting officers review eSRS reports. SBA can conduct compliance reviews. Patterns affect future source selections.
Q:Do joint ventures need subcontracting plans?
Depends on the JV's size status. A JV that qualifies as small doesn't need a plan. A JV that's "other than small" needs a plan like any large business. JV members' sizes and structure determine this.
Q:What is the difference between goals and requirements?
Goals are targets you commit to pursue. They're not guarantees. You must make good faith effort to meet them. Requirements (like limitations on subcontracting for set-asides) are mandatory minimums.
Q:How do I verify a subcontractor's small business status?
Check SAM.gov for their size status and certifications. NAICS code matters — a company may be small under some codes and large under others. Verify at subcontract award time. Document your verification.
Q:Can I count the same subcontractor in multiple categories?
Yes, if they qualify. A business that's WOSB and HUBZone counts toward both goals. A business that's small but not disadvantaged counts only toward overall small business. Count accurately based on actual certifications.
Master Subcontracting Compliance
Subcontracting plans affect your competitive position and past performance. Our team helps you develop realistic plans, implement tracking systems, and maintain compliance.
Get Expert HelpLand a High-Paying GovCon Role
Jobs that use the skills from this guide