1. Understanding the NonManufacturer Rule (NMR)
U.S. Small Business Administration
Office of Government Contracting
FY 2014

2. The Nonmanufacturer Rule Program
Applies to firms that receive supply contracts, above $25,000, under the 8(a) program or on a small business set aside, who can be either a manufacturer or a nonmanufacturer of a product;
A nonmanufacturer who receives one of these contracts must agree to supply the product of a domestic small manufacturer or processor;
SBA can waive this requirement;
Once a waiver of the manufacturer rule is approved, a firm may supply the product of a large manufacturer.
The Nonmanufacturer Rule (NMR) applies to firms that receive supply contracts, above $25,000, under the 8(a) program or on a small business set aside, who can be either a manufacturer or a nonmanufacturer of a product. A nonmanufacturer who receives one of these contracts must agree to supply the product of a domestic small manufacturer or processor. SBA can waive this requirement when there are no small manufacturers or processors available to supply the product. There are two types of waivers to the nonmanufacturer rule: (1) individual waivers, which apply only to a specific contract and are effective for the life of that contract, and (2) class waivers, which apply to categories of items and continue in effect unless revoked by SBA. Once a waiver of the manufacturer rule is approved, a firm may supply the product of a large manufacturer.

3. Overview Key Definitions Regulations, Laws Applicability Waivers
Best Practices

4. Definitions Manufacturer Nonmanufacturer Kit Assembler Reseller
Wholesaler

5. Who is a Manufacturer?
A manufacturer is a concern which, with its own facilities, performs primary activities in transforming inorganic or organic substances, including the assembly of parts and components, into the end item being acquired.
For example, a manufacturer may purchase all the separate parts and components necessary to build a personal computer, and assemble these parts within its own facility into the end-item. This is considered a manufacturer because of the necessary parts and components to produce the end item.

6. Who is a Nonmanufacturer?
A concern may qualify as a small business nonmanufacturer if:
Less than 500 employees;
Primarily engaged in retail or wholesale and normally sells type of product being supplied;
Takes ownership or possession of the item(s) with its personnel, equipment or facilities in a manner consistent with industry practice; and
Will supply the end product of a small business manufacturer or processor made in U.S. or obtain waiver to non-manufacturer rule
A concern may qualify as a non-manufacturer if:
Less than 500 employees;
Primarily engaged in retail or wholesale and normally sells type of product being supplied;
Takes ownership or possession of the item(s) with its personnel, equipment or facilities in a manner consistent with industry practice; and
Will supply the end product of a small business manufacturer or processor made in U.S. or obtain waiver to non-manufacturer rule
FAR   Size standards.
(a) The SBA establishes small business size standards on an industry-by-industry basis. (See 13 CFR Part 121.)
(b) Small business size standards are applied by—
(1) Classifying the product or service being acquired in the industry whose definition, as found in the North American Industry Classification System (NAICS) Manual (available via the Internet at best describes the principal nature of the product or service being acquired;
(2) Identifying the size standard SBA established for that industry; and
(3) Specifying the size standard in the solicitation so that offerors can appropriately represent themselves as small or large.
(c) For size standard purposes, a product or service shall be classified in only one industry, whose definition best describes the principal nature of the product or service being acquired even though for other purposes it could be classified in more than one.
(d) When acquiring a product or service that could be classified in two or more industries with different size standards, contracting officers shall apply the size standard for the industry accounting for the greatest percentage of the contract price.
(e) If a solicitation calls for more than one item and allows offers to be submitted on any or all of the items, an offeror must meet the size standard for each item it offers to furnish. If a solicitation calling for more than one item requires offers on all or none of the items, an offeror may qualify as a small business by meeting the size standard for the item accounting for the greatest percentage of the total contract price.
(f) Any concern submitting a bid or offer in its own name, other than on a construction or service contract, that proposes to furnish an end product it did not manufacture (a “nonmanufacturer”), is a small business if it has no more than 500 employees, and—
(1) Except as provided in paragraphs (f)(4) through (f)(7) of this section, in the case of Government acquisitions set-aside for small businesses, furnishes in the performance of the contract, the product of a small business manufacturer or producer. The end product furnished must be manufactured or produced in the United States or its outlying areas. The term “nonmanufacturer” includes a concern that can, but elects not to, manufacture or produce the end product for the specific acquisition. For size determination purposes, there can be only one manufacturer of the end product being acquired. The manufacturer of the end product being acquired is the concern that, with its own forces, transforms inorganic or organic substances including raw materials and/or miscellaneous parts or components into the end product. However, see the limitations on subcontracting at that apply to any small business offeror other than a nonmanufacturer for purposes of set-asides and 8(a) awards.
(2) A concern which purchases items and packages them into a kit is considered to be a nonmanufacturer small business and can qualify as such for a given acquisition if it meets the size qualifications of a small nonmanufacturer for the acquisition, and if more than 50 percent of the total value of the kit and its contents is accounted for by items manufactured by small business.
(3) For the purpose of receiving a Certificate of Competency on an unrestricted acquisition, a small business nonmanufacturer may furnish any domestically produced or manufactured product.
(4) In the case of acquisitions set aside for small business or awarded under section 8(a) of the Small Business Act, when the acquisition is for a specific product (or a product in a class of products) for which the SBA has determined that there are no small business manufacturers or processors in the Federal market, then the SBA may grant a class waiver so that a nonmanufacturer does not have to furnish the product of a small business. For the most current listing of classes for which SBA has granted a waiver, contact an SBA Office of Government Contracting. A listing is also available on SBA’s Internet Homepage at Contracting officers may request that the SBA waive the nonmanufacturer rule for a particular class of products.
(5) For a specific solicitation, a contracting officer may request a waiver of that part of the nonmanufacturer rule which requires that the actual manufacturer or processor be a small business concern if no known domestic small business manufacturers or processors can reasonably be expected to offer a product meeting the requirements of the solicitation.
(6) Requests for waivers shall be sent to the—
Associate Administrator for Government Contracting United States Small Business Administration Mail Code  Third Street, SW Washington, DC
(7) The SBA provides for an exception to the nonmanufacturer rule if—
(i) The procurement of a manufactured end product processed under the procedures set forth in Part 13—
(A) Is set aside for small business; and
(B) Is not anticipated to exceed $25,000; and
(ii) The offeror supplies an end product that is manufactured or produced in the United States or its outlying areas.
(8) For non-manufacturer rules pertaining to HUBZone contracts, see (e).
(g) The industry size standards are published by the Small Business Administration and are available via the Internet at

7. Who is a Kit Assembler?
When the manufactured item being acquired is a kit of supplies, or other goods provided an offeror for a special purpose, the offeror cannot exceed 500 employees, and 50 percent of the total value of the components of the kit must be a small business under the size standards for the NAICS codes of the components being assembled.
The offeror doesn’t need to be the manufacturer of any items assembled
When the manufactured item being acquired is a kit of supplies, or other goods provided an offeror for a special purpose, the offeror cannot exceed 500 employees, and 50 percent of the total value of the components of the kit must be a small business under the size standards for the NAICS codes of the components being assembled.
The offeror need not itself be the manufacturer of any items assembled

8. Who is a Retailer? Wholesaler?
Retailer -- a person who is authorized to sell someone else’s goods and/or services
Wholesaler -- An intermediary (go-between) which sells to other intermediaries, such as a firm that buys from a manufacturer and sells to a retailer
Retailer -- a person who is authorized to sell someone else’s goods and/or services
Wholesaler -- An intermediary (go-between) which sells to other intermediaries, such as a firm that buys from a manufacturer and sells to a retailer

9. Regulatory Requirements
The regulations that govern the NMR:
Federal Acquisition Regulation (FAR) Part 19
FAR et seq. - Definitions
FAR Size Standards
FAR (a)(3) - Provision
Code of Federal Regulations (CFR) 13 CFR
13 CFR § – The Rule
13 CFR § et seq. - Waivers
13 CFR § – SDVO Set-Asides
13 CFR § – WOSB Set - Asides
The regulations that govern the NMR:
Federal Acquisition Regulation (FAR) Part 19
FAR 19
FAR (a)(3) Small Business Program Representations provision states that the small business size standard for a concern submitting an offer in its own name, but proposes to supply a product which it did not itself manufacturer, is 500 employees
Code of Federal Regulations (CFR) 13 CFR
13 CFR §
13 CFR §
13 CFR §
13 CFR §

10. Summary of CFR regulations
SBA size regulations 13 CFR (h)
HUBZone regulations 13 CFR
SBA Certificate of Competency 13 CFR 125.5
Service-disabled veteran 13 CFR (b)
8(a) and SDB regulations 13 CFR
Small disadvantaged business 13 CFR (f)
WOSB Program 13 CFR 127
SBA Prime Contracting 13 CFR125.2
SBA Subcontracting 13 CFR125.3

11. Interaction of Small Business Programs
Below the SAT
Small business set asides are mandatory for the acquisition of supplies and services valued from $3,000 to $150,000
FAR permits but does not require the reservation of an award of a contract with a value less than the SAT to different types of small businesses such as 8(a), HUBZone, WOSB, SDVO SBCs

12. Interaction of Small Business Programs
Above the SAT
SBA’s regulations provide for parity among certain small business programs
KO will determine which set-aside program to use
SBA’s regulations provide for parity among certain small business programs for acquisitions above the SAT --8(a), HUBZone, WOSB and SDVO.
13 C.F.R. §§ , , (j).
In determining which program to use, the CO must conduct market research and should take into consideration historical data, anticipated award price, and other pertinent factors such as the procuring activity’s progress towards meeting its goals.

13. Analysis: Regulatory Applications
Statute
Federal Acquisition Regulations
SBAs Regulations
Sections 8(a)(17) and 46 of the Small Business Act, 15 U.S.C. §§ 637(a)(17) and 657s
FAR 19
13 CFR , 1204 /
13 CFR 121, 124, 125, 126, 127
Small Business Jobs Act of 2010:
FAR Subpart 8.4 amended to clarify that agencies may set aside orders and blanket purchase agreements under the GSA Schedule
FAR Subpart 12.2 now acknowledges that discretionary set-asides may be used under multiple-award contracts
FAR Subpart 16.5 and 19.5 amended to clarify that agencies may set-aside orders for small businesses in connection with multiple-award contracts (and orders thereunder)
National Defense Authorization Act of Section 1651 – Limitations on Subcontracting
FAR Subpart Limitations on Subcontracting will be affected although NDAA has not yet been implemented in the FAR
13 CFR will be affected although NDAA has not yet been implemented in SBA’s regulations

14. Applicability of the NMR
Small business set-asides on supply contracts, orders, BPAs over $25k
The NMR will be applied when a small business nonmanufacturer will provide the end item of:
a small business manufacturer
an other than small business manufacturer under a waiver (an existing class waiver or individual –or solicitation specific-waiver)
Does not apply to full and open solicitations
For purposes of government contracting, the NMR applies to small business set-asides only. The NMR qualifies a small business nonmanufacturer for a set-aside on a supply procurement.
The NMR will be applied when a small business nonmanufacturer will provide the end item of:
a small business manufacturer
an other than small business manufacturer under an existing class waiver
an other than small business manufacturer under an existing individual (solicitation-specific) waiver
While the NMR applies to small business set-asides, partial set-asides, and sole source small business acquisitions, the NMR does not apply to full and open solicitations.

15. When the NMR does NOT apply
There are NO waivers to the NMR for:
Service or construction contracts
HUBZone Contracts
NAICS codes outside of sector 31-33, Manufacturing
Blanket Purchase Agreements – A waiver to the NMR is applied to the primary contract – orders placed against the contract are covered by the waiver.
Service or construction contracts
HUBZone Contracts (A HUBZone small business nonmanufacturer agrees to furnish in performing a contract only end items manufactured by HUBZone small business manufacturer concern. This does not apply in connection with construction or service contracts.) . HUBZone contracts valued below $25K, the offeror must supply the product of a domestic manufacturer.
NAICS codes outside of sector 31-33, Manufacturing. SBA’s regulations prohibit the use of wholesale or retail NAICS codes in government contracting

16. Choosing NAICS Codes
The North American Industry Classification System (NAICS) code chosen must be that which best describes the principal purpose of the product or service being acquired
Procurements for supplies must be classified under the appropriate manufacturing NAICS code, NOT under the wholesale or retail trade NAICS code. 13 C.F.R. § (b)
SECTORS 42, 44 and 45 ARE NOT TO BE USED FOR GOVERNMENT PROCUREMENT OF SUPPLIES
The NAICS code chosen must be that which best describes the principal purpose of the product or service being acquired. Considerations include:
Descriptions in the NAICS Manual
Product or service description in the solicitation
Value of the components of the procurement
Function of the goods or services being purchased
FAR (c)(d)&(e)
c) For size standard purposes, a product or service shall be classified in only one industry, whose definition best describes the principal nature of the product or service being acquired even though for other purposes it could be classified in more than one.
(d) When acquiring a product or service that could be classified in two or more industries with different size standards, contracting officers shall apply the size standard for the industry accounting for the greatest percentage of the contract price.
(e) If a solicitation calls for more than one item and allows offers to be submitted on any or all of the items, an offeror must meet the size standard for each item it offers to furnish. If a solicitation calling for more than one item requires offers on all or none of the items, an offeror may qualify as a small business by meeting the size standard for the item accounting for the greatest percentage of the total contract price.
Procurements for supplies must be classified under the appropriate manufacturing NAICS code, NOT under the wholesale or retail trade NAICS code. 13 C.F.R. § (b).
SECTORS 42, 44 and 45 ARE NOT TO BE USED FOR GOVERNMENT PROCUREMENT OF SUPPLIES.

17. Applying NAICS Codes to Acquisitions
The KO designates the size standard of the procurement by selecting the size standard in effect on the date the solicitation is issued.
The basis for designation NAICS that best describes the goods or services that are going to be procured.
SBA's size regulations pertaining to federal procurement are also found in the Federal Acquisition Regulation, 48 CFR part 19.
To bid on a federal contract, a concern must self-certify that it is a small business under the appropriate size standard in the solicitation.
For federal contracts, the contracting officer designates the size standard of the procurement by selecting the size standard in effect on the date the solicitation is issued.
The basis for designation is the North American Industry Classification System (NAICS) that best describes the goods or services that are going to be procured. For example, when a non-manufacturer is being considered, the NAICS code is not a retail, or wholesale code because the business is not being procured, the end items of the business is being procured. “You are not buying the retailer, you are buying the products of the retailer.”
SBA's size regulations pertaining to federal procurement are also found in the Federal Acquisition Regulation, 48 CFR part 19.
To bid on a federal contract, a concern must self-certify that it is a small business under the appropriate size standard in the solicitation.

18. Applicable Size Standards-NMR
A small business nonmanufacturer must meet size standards that apply to acquisitions covered by the NMR.
A small business nonmanufacturer (500 or less employees) will provide the end item of:
a small business manufacturer (as regulated by SBA’s Table of Size Standards 13 C.F.R. § 121 whether the size standard is 500 employees or not)
an other than small business manufacturer under a waiver
The size standard for a nonmanufacturer is 500 or less employees. In any case, a small business nonmanufacturer cannot exceed 500 employees.
For purposes of government contracting, a small business nonmanufacturer must meet size standards that apply to acquisitions covered by the NMR.
A small business nonmanufacturer (500 or less employees) will provide the end item of:
a small business manufacturer (as regulated by SBA’s Table of Size Standards 13 C.F.R. § 121, whether the size standard is 500 employees or not)
an other than small business manufacturer under an existing class waiver
an other than small business manufacturer under an existing individual (solicitation-specific) waiver
The size standard threshold for a small business nonmanufacturer is not based on a dollar (revenue) amount, but instead based on an employee number. In any case, a small business nonmanufacturer cannot exceed 500 employees.

19. Waivers to the NMR Two types of waivers Class Waiver Individual Waiver
There are two types of waivers
Class Waiver – Identification that no small business manufacturer exists within a specific industry
Applied broadly to all set-aside solicitations
Is used in combination with a GSA Product Service Code Number
Turn around is approximately 60 days
Individual Waiver – Justification that no small business manufacturer exists that can meet the requirement on a specific solicitation
Solicitation-specific and is applied only to the primary contract
Turnaround is approximately 15 business days depending on the complexity of the request

20. Class Waivers to the NMR
A class waiver applies to all items in a class of products.
Class waivers apply to categories of items and continue in effect unless revoked by SBA.
A waiver of the NMR for classes of products has no time limitation or duration.
Any government agency, business association, or interested party may request a waiver for a class of products.
Discovery of even one small business manufacturer for a single item in the class will justify denial of a request for a class waiver.
A class waiver applies to all items in a class of products, which is defined as a subcategory within a six digit NAICS code. For example, Computer and Electronic Product Manufacturing is 334, which is a sub-sector in the class of products. The six digit NAICS for electronic computer manufacturing is
Class waivers apply to categories of items and continue in effect unless revoked by SBA.
A waiver of the NMR for classes of products has no time limitation or duration.
Any government agency, business association, or interested party may request a waiver for a class of products.
Discovery of even one small business manufacturer for a single item in the class will justify denial of a request for a class waiver.

21. Four steps in checking “NMR” class waivers
NAICS code
Product description
Product service code at
Federal Register, where SBA communicates “NMR” changes

22. Individual Waivers to the NMR
SBA will consider granting in individual waiver when a KO determines no small business manufacturers exist to meet requirement
The waiver to the NMR on an individual procurement is provided for in Section 8(a)(17) of the Small Business Act.
An individual waiver is narrowly applied to select contract line item numbers (CLINS) for a specific solicitation.
A NMR Waiver must be in place prior to receipt of offers in order for a nonmanufacturer to qualify as a small business for set-aside purposes.
SBA will consider granting in individual waiver after reviewing a determination by a contracting officer that no small business manufacturer or processor can reasonably be expected to offer a product meeting the specifications (including period of performance) required of an offeror or by the solicitation.
The waiver to the NMR on an individual procurement is provided for in Section 8(a)(17) of the Small Business Act.
An individual waiver is narrowly applied to select contract line item numbers (CLINS) for a specific solicitation.
A NMR Waiver must be in place prior to receipt of offers in order for a non-manufacturer to qualify as a small business for set-aside purposes.

23. How to Obtain an Individual Waiver
13 C.F.R and
The basis of granting an individual waiver rests on the market research presented with an agency’s request to justify the claim that no small business manufacturers exist that can meet the procurement requirements
The process to obtain a waiver to the NMR is found in 13 C.F.R and
Additional guidance can be found on SBA’s website at or
HOWEVER, a solid MARKET RESEARCH report should provide you with the justification needed for the waiver request.

24. What to Submit
Using an SBA NMR request template, submit the following:
NMR request on Agency letterhead, signed by a KO
Include elements of SBA’s requirements (FAR has limited guidance)
Market Research report or memo as an attachment
Market research should be based on search for SB manufacturers using the NAICS code for the solicitaion
Supporting documentation or copies of:
FBO Sources Sought / RFI / Vendor Survey including a summary of findings
Brand Name Justification for brand name items
DSBS search results (don’t search for name brands, use generic terms and remember to search on the NAICS code used for the solicitation)
Internet searches (Google, Thomasnet.com, etc.)

25. What to Submit, cont.
List of items to be waived – provide specific information including multiple item requests
Statement of Work is REQUIRED on contracts expected to exceed a total estimated value of $500,000
Any other documents that you think would help in the analysis and determination that no small business can produce the end product

26. One waiver per solicitation
Identification of Small Business Sources on Multiple Item Request for a Single Solicitation (Individual Waiver)
Each line item must identify whether the end product will be supplied by a small business manufacturer
CLINs
NSNs
SINs
One waiver per solicitation
Each line item must identify whether the end product will be supplied by a small business manufacturer
If small business will supply the end item, no waiver is needed
If other than small business will supply the end item a waiver is needed for those items
One waiver per solicitation

27. How to Submit
Submit NMR waiver requests and attachments to the NMR program address at:
Use the solicitation number and agency abbreviation in the subject line – ex: SBA SBA Q-0001 Waiver Request

28. Analysis: Review for Completeness
Regulatory vs Program Requirements
Use the NMR Waiver Request template as a guide
Minimum Required Documents
NMR Request Package
Request template preferred
Required information must be included in the request
Agency Request
Research must be recent and specific
Supporting documentation must be presented
Market Research
Required on contracts estimated to exceed $500,000
Other names include: Minimum Technical Requirements, Purchase Requirements, etc.
Statement of Work (SOW)
Agency request
Market research
SOW
Minimum Required Docs
Brand-name justification
Copy of FBO notices (Sources Sought, RFI)
DSBS results, including summary of findings
Acquisition history
Supporting Evidence
Specific item(s) to be waived
Identification of SB vs LB representation on multiple item procurements
Item Description or List of Items

29. You have a Waiver, Now What?
Excellent “NMR” reference with size standard

30. Excellent “NMR” reference with “LOS”
You have a Waiver, Now What?
Excellent “NMR” reference with “LOS”

31. FBO Notices
Oops. Incorrect “4” NAICS code used

32. Class Waivers to the NMR
Does the class waiver to the “NMR” apply?
Are they looking for resellers or dealers?

33. Market Research Recommendations
SBA’s Dynamic Small Business Search
FedBizOpps – Sources Sought results
Summary of event results, i.e. “Industry Day” etc.
Online product information
Acquisition history
SBA Procurement Center Representative (PCR)
FAR Part 10
SBA’s Dynamic Small Business Search - CCR or
FedBizOps – Sources Sought results
Summary of event results, i.e. “Industry Day” etc.
Online product information
Acquisition history
SBA Procurement Center Representative (PCR)
FAR Part 10

34. Best Practices Plan ahead
Solid market research with supporting documentation
Communicate to contractors how the NMR is applicable to solicitations (FBO listings, etc.)
Communicate with the small business office to identify small business goaling needs or opportunities
Work with an SBA PCR - Small Business Coordination Record (Form DD 2579)
Use the right NAICS code for procurement of supplies
Plan ahead
Solid market research
Communicate with the small business office to identify small business goaling needs or opportunities
Work with an SBA PCR - Small Business Coordination Record (Form DD 2579)
Use the right NAICS code for procurement of supplies

35. Questions? Nonmanufacturer Rule Program Amy Garcia
Office of Contract Assistance
Office of Government Contracting
U.S. Small Business Administration
Washington, D.C.
202/