SBA Seeks to Standardize and Simplify Calculation with Risk to Construction
AGC recently submitted comments on the Small Business Administration’s (SBA) proposed rule revamping small business prime contractor performance of work requirements. The proposed rule would change that requirement in concept from a prime contractor performance of work requirement to a limitation on the amount of work the prime contractor could subcontract. AGC noted the improvements this proposed rule would make, but AGC also highlighted the significant risks it would present small business construction prime contractors.
On the positive side, the proposed rule would simplify the performance of work calculation. SBA proposes to change the calculation from one that differs by small business set-aside category and excludes materials to one that is simply determined by the amount prime contractors pay to subcontractors compared to the overall amount paid by the government for the contract. Additionally, it would keep the current performance of work percentages—15 percent for general contractors and 75 percent for specialty and trade contractors—the same—15 percent limitation on subcontracting for general contractors and 25 percent for specialty and trade contractors.
However, AGC highlighted a number of concerns as to how the proposed rule would function in the practical federal construction market. One point to note: SBA’s proposed rule does not take into account government initiated modifications for which a small business contractor would have no ability to either self-perform or to adjust its subcontractor payments. Another issue AGC discusses is the unworkable subcontractor bid listing requirement this rule would mandate.
AGC will continue to work with the SBA to address its concerns during the rulemaking process.
For more information, please contact Jimmy Christianson at christiansonj@agc.orgor (703) 837-5325. Return to Top