The Office of Federal Procurement Policy (OFPP) recently issued a memorandum focused on enhancing small business participation in federal subcontracting. Small business subcontracting is a critical entry point for many companies into the federal procurement ecosystem, enabling them to gain familiarity with federal operations while contributing to supply chain resilience. Despite recent successes, including $86.4 billion in small business subcontract awards in FY 2023—a record high—significant gaps remain in meeting subcontracting goals, especially for certain socioeconomic categories.

The memorandum highlights that while many prime contractors are committed to effective subcontracting practices, data reveals inconsistencies. For instance, many subcontracting plans lacked goals for specific small business categories, and if all goals had been met, small businesses could have received an additional $1.5 billion in awards. Similarly, socially and economically disadvantaged businesses (SDBs) missed out on $850 million. This underperformance underscores the need for more rigorous oversight and accountability.

To address these issues, OFPP urges agencies to enhance collaboration with small business specialists during the pre-award phase. Contracting officers are encouraged to evaluate an offeror’s past performance in achieving subcontracting goals as a predictor of future success. The memorandum also emphasizes the importance of challenging proposed subcontracting plans that lack meaningful opportunities for small businesses, particularly those with zero or negligible goals.

Incentive strategies are another focal point, with the OFPP advocating for the use of monetary incentives to motivate contractors. By tying rewards to actual subcontracting achievements, agencies can strengthen the small business supplier base in areas where capacity and capability are needed. The memorandum also recommends expanding the use of small business participation evaluation factors (SBPEFs), which incentivize offerors to commit to small business subcontracting and partnering opportunities.

Post-award, the memorandum stresses the importance of diligent monitoring and enforcement. Contracting officers must ensure that subcontracting plans are adhered to, and any deviations must be justified and addressed. This includes using tools like the Contractor Performance Assessment Reporting System (CPARS) to evaluate contractor performance against subcontracting goals. Agencies are also encouraged to consider new policies, such as allowing subcontractors to request past performance ratings from prime contractors, to help small businesses transition to prime roles.

The OFPP highlights the value of integrating subcontracting commitments into contracts through mechanisms like the Small Business Participation Commitment Document (SBPCD). This approach holds prime contractors accountable for their promises and provides a clear framework for measuring success. Furthermore, the memorandum advocates for better procurement forecasting, giving small businesses earlier and more accurate access to upcoming opportunities, which can help lower barriers to entry.

This memorandum reflects a broader federal commitment to fostering a more inclusive and resilient procurement landscape. By strengthening oversight, encouraging innovative strategies, and holding contractors accountable, the federal government aims to bridge existing gaps and maximize opportunities for small businesses. These efforts not only benefit small businesses but also enhance the overall robustness and diversity of federal supply chains. This blog is for informational purposes only and does not guarantee accuracy or provide legal advice.