The U.S. Small Business Administration releases a long-sought, AGC rule allowing prime contractors to receive credit toward their subcontracting goals for small business subcontracts at lower tiers.  

On October 11, the U.S. Small Business Administration (SBA) released a final rule that will permit a prime contractor with an individual subcontracting plan to apply credit for subcontracts to small businesses at lower tiers toward its subcontracting goals. To do so, the prime contractor would incorporate the lower-tier subcontracting performance into its subcontracting-plan goals. This rule is effective on November 13, at which AGC expects guidance from individual federal agencies. Prior to this rule SBA restricted non-small prime contractors from counting and receiving credit for the first-tier small business subcontracts towards their overall small business subcontracting goals.

It has been nearly a decade since AGC-backed legislation passed Congress requiring SBA to publish a rule to count lower-tier subcontractors towards a prime contractor’s small business goals, both in the FY 2014 and FY 2020 National Defense Authorization Act. In December 2015, AGC submitted its first set of comments on SBA’s proposed rule for prime contractors to receive credit for lower-tier small business subcontracting goals. In August 2019, AGC submitted its second set of comments to SBA’s notice of proposed rulemaking for prime contractors to receive credit for lower-tier small business subcontracting goals. In February 2023, AGC submitted a third set of comments.

AGC will continue to provide input to the federal agencies as they issue implementation guidance and will notify AGC members of any developments.

For more information, contact Jordan Howard at [email protected] or (703) 837-5368.