Per federal regulations, a small business subcontracting plan is required for federal contracts and subcontracts that exceed $700,000 over the course of the contract. Certain percentages of the direct cost expenditures must be spent with suppliers in small business categories. (See Federal Acquisition Regulation parts 19 and 52 for detailed information on small business plan requirements.)
The small business supplier categories and the federal prime contract percentage goals are:
Note: SDB, WBE, HUBZone, VOSB, and SDVOSB goals are subsets of SMB and are counted and reported in multiple categories, as appropriate.
It is critical that small business subcontracting goals are met. If the contractor (the University of Michigan) fails to make good-faith efforts to comply with the subcontracting goals, the sponsor may impose penalties, including partial or total reimbursement of funds. Failure to meet the subcontracting goals may also negatively affect future funding prospects for other University of Michigan applicants.
There are four steps involved in creating the small business subcontracting plan. Typically, the department's research administrator (RA) or equivalent acts on the principal investigator's (PI) behalf to complete the following steps:
1. Contact the Procurement Services Research Liaison – Send a message to firstname.lastname@example.org to request assistance with creating a small business plan. We recommend that you contact Procurement Services as far in advance of the proposal deadline as possible. It may take up to two weeks to develop the plan.
2. Provide a Detailed Budget – The budget must list, with as much detail as possible, the types of products and services you will need to purchase over the course of the project. Break down travel costs into airfare, ground travel, lodging, etc.
3. Identify Suppliers – Provide the research liaison a list of any suppliers you know can provide the products and services outlined in the budget. Include the supplier(s) name, address, phone, email, and fax number. The research liaison will determine the supplier’s business status. Your procurement agent and the research liaison can assist in identifying other potential suppliers that are available for small business contracting. However, because of the technical nature of research studies, the research liaison will rely on the expertise of the PI to determine whether a suggested supplier can provide the required product or service.
4. Review and Approve the Small Business Plan – The PI and RA should review the draft plan to make sure that the goals outlined in the plan can and will be met over the course of the contract period. Written justification is required to explain why certain purchases cannot be made with small businesses in each of the specified categories. The federal contracting officer who reviews the proposed plan may require that further efforts be made to find suppliers in one or more of the small business categories.
Once the PI and RA confirm with the research liaison that they agree with the proposed spend goals, the research liaison will send them a signed copy of the plan. The PI and RA then submit the plan to the sponsor with their proposal.
After the small business subcontracting plan is accepted by the sponsor, the expectation is that the goals will be met. The unit is responsible for managing and tracking spend according to the plan. The PI is ultimately responsible for ensuring the small business goals are met by the end of the contract.