The goal of this procedure is to comply with federal regulations designed to promote the use of small businesses by those conducting research with federal contract funds.
As the subcontracting plan will eventually become a part of UVA’s federal contract or UVA's subcontract with the recipient of the prime federal contract, it is very important that cross-department cooperation – Office of Sponsored Programs, Faculty, and Procurement – take place early to identify the specific project requirements and to denote opportunities to incorporate small businesses into the subcontracting plan.
UVA Procedure for Federal Small Business Subcontracting Plans
(applicable to sponsored projects funded by federal contracts over $700,000)
In connection with UVA submitting a proposal to the federal government where the resulting contract (not grant) is expected to exceed $700,000 ($1.5M construction), including options, as prescribed by Federal Acquisition Regulation (FAR) 19.708(b), a small business subcontracting plan must be developed that complies with FAR 52.219-9 and submitted at time of proposal or at time of award, depending on the instructions provided in the federal Request for Proposal (RFP). OSP is listed as the UVA’s primary contact on the plan and signs the plan. PSDS’ Office of Supplier Diversity reviews the plan and initials the document on behalf of Procurement and Supplier Diversity Services before OSP provides a final copy of the plan to the sponsor.
It is important to formulate, budget, and execute a realistic subcontracting plan. There are potential monetary penalties for not meeting goals. The specific spending goals of the subcontracting plan encompass UVA’s direct spend with SWaM suppliers that can provide a specific good or service as well as the purchase of supplies, technical services, chemicals, and equipment made directly by UVA representatives. Moreover, non-compliance issues, such as not meeting goals set in the subcontracting plan, are documented by the federal agencies and will potentially affect all future funding applicants at UVA. [Note: A supplier provides ancillary goods or services that the principal investigator (PI) needs to conduct the research effort. A supplier is not responsible for the research results.]
Finally, the government defines “fair market price” as a price based on reasonable costs under normal competitive conditions and not on the lowest possible cost.
Notifying UVA’s Office of Sponsored Programs (OSP). When a federal contract, or subcontract, is awarded, the principal investigator (PI) shall contact the OSP to alert them a subcontracting plan may be necessary. If a subcontracting plan is required, the department (typically through the PI) must provide in-depth technical knowledge of the requirements of the project. Once the requirements are clarified, the OSP staff will work with PSDS and the PI to create a subcontracting plan. Detailed technical information is key in locating suppliers that can provide the required goods and services, or product. [Note: even if no budget is available, this advance knowledge is essential for the creation of a meaningful plan that leads to successful outcomes.]
Detailing a Budget. OSP will assist the PI with creating a plan that is responsive to the goals of the project. Budget allocations to small and disadvantaged businesses, when prudent, are essential. All spending percentage goals in the subcontracting plan will be made with input from the department. All budgets in the subcontracting plan must be reviewed by Procurement’s Office of Supplier Diversity and approved by OSP.
Identifying Vendors. Once the list of required goods and services is ready, and suitable suppliers have not yet been identified, it is important to contact Procurement’s Office of Supplier Diversity for assistance in locating a suitable supplier. The PI is best qualified to recognize an eligible supplier; hence, the PI (or staff) should contact PSDS-identified eligible suppliers to verify the suitability of their goods or services for the project. Highly technical projects may require specialized material, supplies, and services; PSDS can help you find them. Documenting the supplier search effort demonstrates UVA has exhausted all available avenues for finding qualified small business suppliers for each of the specified categories (to include SBA’s Dynamic Small Business database http://dsbs.sba.gov/dsbs/search/dsp_dsbs.cfm). As part of UVA’s good faith effort to use small businesses whenever possible throughout the life of the contract, the PI should be on the lookout for small businesses that can meet their project’s needs. Work with the PSDS to add a supplier to our database once one is located.
Tracking. As departmental progress is made on the project, the PI is required to track spending that aligns with the goals set forth in the subcontracting plan. [Note: For federal reporting purposes, some suppliers can be counted in more than one category. For example, if a business is a small business AND minority-owned AND women-owned, you can count the dollars spent with that supplier in all three categories. Some SWaM businesses are also federally certified small disadvantaged businesses operating from historically underutilized business zones (HUBZones). The specific certification(s) held by a supplier should be verified with each supplier. If local supplier database does not correctly categorize a supplier, please notify Procurement so the appropriate modification can be made. If you have trouble verifying a supplier’s certification status, refer to the Small Business Administration’s Dynamic Small Business database http://dsbs.sba.gov/dsbs/search/dsp_dsbs.cfm or contact Procurement’s Office of Supplier Diversity for assistance in gathering this information.]
Reporting and Documentation. Critical to the successful completion of the subcontracting plan is the ability to accurately report the spend totals for each of the small business categories in the plan. Procurement’s Office of Supplier Diversity (with critical, timely spend data input from OSP) will ensure reports are submitted electronically (eSRS) to the administrative contracting officer (ACO) semi-annually, during contract performance for the periods ending March 31st and September 30th. A separate report is required for each contract at contract completion. Reports are due to ACOs 30 days after the close of each reporting period unless otherwise directed by the contracting officer (OSP must provide data to PSDS NLT 10 days after reporting period). Reports are required when due, regardless of whether there has been any subcontracting activity since the inception of the contract or since the previous report. Additional reporting may be required under Subparts 19.704 and 19.706 if requested. All pertinent and relevant information and documentation must be maintained by the department/PI to help satisfy reporting requirements. All documentation regarding supplier contacts, subcontracting plan spend, and project status are necessary to meet federal reporting standards.
Writing a Justification. It is VERY important, if the goals of the subcontracting plan have not been met, that a thorough and detailed justification for the failure be submitted. Under Subpart 19.705-7, the University could be subject to monetary damages if the University does not show a good faith effort to spend the allotted totals in the budget section of the subcontracting plan. The responsibility for writing this justification rests with the department/PI, with guidance from OSP and Procurement’s Office of Supplier Diversity. As a rule, zero percentages in any category are not acceptable; however, due to the very technical nature of research, zero or low percentages are at times unavoidable. The PI must make every effort to find SWaM suppliers (with assistance from Procurement’s Office of Supplier Diversity) and utilize these suppliers for every category in the subcontracting plan even if they are not the least expensive source. If the spend total in a given category did not meet the target, detailed justification is required. An extremely low total, however small, is far better than zero because it shows a good faith effort was made. Justification should be concise, but provide sufficient technical detail to allow the federal Small Business Officer to fairly evaluate the subcontracting plan. In sum, the department/PI justification should include the following specific information:
- If your service/product can only be purchased from a large business, detail a technical reason why that is not based solely on cost.
- If no small business could be located, detail the methodology and efforts taken to locate an eligible supplier.
- The specific circumstances under which a small business was located but stated they could not provide the goods or services requested.
- Concise detail as to the acute technical nature of the project that required a specific supplier, other than a small business, to be chosen.
- Any and all information that would speak to why the small business spending targets were not met (and demonstrates your good faith effort to execute to the subcontracting plan).
III. University Activities and Responsibilities
Principal Investigator (PI). When it is determined that an outside organization or institution is required to perform part of the research effort under a contract, the PI is responsible for:
- Preparing the statement of work (SOW)
- Subcontractor selection
- PIs are not authorized to obligate the OSP or the University contractually and should not sign any contracts or agreements. All contracts and award documents must be signed by an authorized OSP signatory. PIs risk incurring personal liability if they authorize a subcontractor to begin work and guarantee payment in the absence of an executed subcontract and purchase order.
- Subcontractor is not authorized to perform any work prior to the issuance of a valid purchase order and subcontract by the OSP
- Proper technical conduct of the research effort
- Closely monitor the subcontract effort to ensure performance in accordance with the subcontract’s requirements. These requirements include, but are not limited to, the period of performance, method of delivery or performance, quality assurance standards, property, and property reporting requirements.
- Manage project funds within the approved budget
- Internal subcontract schedules should include sufficient lead time for the procurement process, including preparation of RFP(s) and sufficient time for response, evaluation, negotiations, final award, and performance of the subcontracted effort.
- Comply with all University — and sponsor! — policies and procedures pertinent to the award
- Ensure work is completed within the specified period of performance. The PI should not authorize payment if the work is not satisfactory.
- Acceptance of deliverables and/or final report
- Timely completion and submission of required technical and subcontracting reports
- The PI should notify OSP if there is any potential delay or breach in the terms and conditions of the subcontract.
- Approving payments to subcontractors
- Authorization of payments of subcontractor invoices based on satisfactory performance
- Request amendments for any changes, continuations, or cancellations
School and/or Department. Sponsored research is conducted as a school/department function. As such, the departments and schools associated with an award are expected to monitor its fiscal status and assist the PI in resolving problems. Items to provide OSP (as they become available) include:
- Full copy of the RFP
- Budget (even if in draft state)
- Any specific knowledge about subcontracts or suppliers that might impact plan development
- Types of goods and services required
Office of Sponsored Programs (OSP). OSP will coordinate with the PI, school or department, and PSDS to develop a realistic small business subcontracting plan, generate and submit supporting data for required periodic subcontracting reports (with assistance from the PI and PSDS), and provide accounting, purchasing, and other administrative services to assist the PIs. For example:
- Prepare, review, submit, and negotiate proposals
- Accept awards
- Notify PSDS when a contract that requires a small business subcontracting plan has been awarded
- Prepare, review, and sign small business subcontracting plan (submitted with proposal or at time of award), consulting with PSDS for suppliers as needed, and submit to sponsor
- Obtain the necessary goods, services, and personnel to conduct the research effort
- Maintain a list of suppliers used to create the small business subcontracting plan, and update the list as needed
- Monitor performance and make adjustments as necessary to achieve subcontracting goals
- Provide feedback to PSDS concerning supplier performance
- Manage financial aspects of their projects
- Provide PSDS’s Office of Supplier Diversity spend data required to meet sponsor requirements for fiscal reports for all applicable contracts (subject to federal audit)
- Periods of performance ending March 31, September 30, and end of contract
- PSDS will submit required subcontracting reports through eSRS
- Consult with the PI, department, and/or PSDS
- Cooperate in compliance reviews or audit situations
Procurement and Supplier Diversity Services (PSDS). Procurement’s Office of Supplier Diversity will assist PIs who are required to create subcontracting plans. PSDS will assist throughout award life in identifying suppliers and ensuring the school/department is meeting their goals. Additionally, PSDS will:
- Make every effort to consult and assist in the identification of small business suppliers for inclusion and use under the plan
- Develop and maintain a list of University-approved/recommended suppliers to satisfy the small business subcontracting plan requirements
- Prepare and submit required reports through eSRS
- REMINDER: OSP provides required data to PSDS NLT ten (10) days after each reporting period for each contract
- visit www.esrs.gov for guidelines and information
DoD Subcontracting Program: The Basics (http://www.acq.osd.mil/osbp/sb/dod.shtml)