Rule Changes

DoD CyberSecurity

Cyber Incident Compliance Deadline 12/31/2017

For defense contractors and subcontractors, the cybersecurity requirements of DFARS 204.73 and the clauses at 252.204.7008, 7009, and 7012 have been an issue since they were enacted in 2013 and rolled out Dec. 30, 2015. When originally enacted the rule referred to a vague NIST standard, which did little to explain what compliance would look like or how it could be accomplished. In October 2016 a final version of the NIST Standard 800-171 resolved and clarified compliance.

NH GovCon can direct you to services offered by NH MEP, private IT consultants and commercial software products to help small businesses that are subject to this rule.

At the present time, DoD deems that having a formal, documented plan for compliance is sufficient and is deemed compliant.

Additional information, including resources to help your business comply with the new requirements, can be found here.

SBA Mentor-Protégé

On July 25, 2016, the SBA published a final rule for its new Mentor-Protégé program, which establishes a mechanism designed to benefit both small business protégées and their large business mentors. In this program, small businesses receive meaningful development assistance from seasoned prime contractors, and the primes get partial access to small business set-asides when they joint venture with their protégé. This program is similar to the 8(a) Mentor-Protégé Program, but is open to small businesses of all categories.

The 7/25/2016 Federal Register publication of this new rule is available here.

Limitations on Subcontracting

A lesser-known rule limiting the portion of work that can be subcontracted in set-aside contracts (whether set-aside for small business, SDVOSB, HUBZone or WOSB/EDWOSB) was changed by Congress in 2013. It has taken quite a while for the rules to catch up and for the contract clauses to come into use, but the final rule became effective on June 30, 2016 for contracts executed after this date..

Most important is a change to the calculation of the percentage of subcontracting. Instead of being based only on the labor portion of the contract, the total contract value will be used. This typically will decrease the amount of subcontracting allowed. The affect is primarily for service and construction contracts; situations covered by the non-manufacturer rule are not affected.

Congress has added substantial penalties for violations of this rule. More information is available here.

Similarly Situated Entity

Along with the more burdensome changes to limitations on subcontracting, Congress has liberalized the new rule by establishing the similarly situated entity. This enables all set-aside contract awardees to fulfill part of their self-performance requirement by subcontracting to another small business that qualifies for the set-aside category.

This helps take some of the sting out of the increased self-performance requirements of the recently amended limitations on subcontracting and sets up a new dynamic that may encourage teaming among similar or related small businesses that share a socio-economic program status. More information is available here

Micro-purchase Threshold to $3,500

The micro-purchase threshold is raised from time to time, and was last set at $3,500 on July 2, 2015. Remember when it was $2,500? Micro-purchases are small purchases generally made by a government purchase card and can be conducted with reduced advertising, competition and documentation. The Department of Defense has implemented a class deviation from the FAR that allows DoD to use a threshold of $5000.

NAICS codes required for 1st tier subcontracts

Large Prime contractors are required to assign a NAICS code to every subcontract.

13 C.F.R. 125.3(c) states: (v) The contractor must assign each subcontract the NAICS code and corresponding size standard that best describes the principal purpose of the subcontract (see § 121.410). The prime contractor may rely on subcontractor self-certifications made in SAM (or any successor system), if the subcontract contains a clause which provides that the subcontractor verifies by submission of the offer that the size or socioeconomic representations and certifications in SAM (or any successor system) are current, accurate and complete as of the date of the offer for the subcontract. A prime contractor or subcontractor may not require the use of SAM (or any successor system) for purposes of representing size or socioeconomic status in connection with a subcontract.

View 13 C.F.R. 125.3 in its entirety here.

For more information, contact the New Hampshire Procurement Technical Assistance Center

This procurement technical assistance center is funded in part through a cooperative agreement with the Defense Logistics Agency. We are also funded by the NH Department of Business and Economic Affairs, and we operate as a program within the Division of Economic Development.