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UNDERSTANDING THE NONMANUFACTURER RULE (NMR) U.S. Small Business Administration Office of Government Contracting FY 2014.

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Presentation on theme: "UNDERSTANDING THE NONMANUFACTURER RULE (NMR) U.S. Small Business Administration Office of Government Contracting FY 2014."— Presentation transcript:

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.

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.

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

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

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

9 Regulatory Requiremen ts The regulations that govern the NMR:  Federal Acquisition Regulation (FAR) Part 19 › FAR 19.001 et seq. - Definitions › FAR 19.102 Size Standards › FAR 52.219-1(a)(3) - Provision  Code of Federal Regulations (CFR) 13 CFR › 13 CFR § 121.406 – The Rule › 13 CFR § 121.1202 et seq. - Waivers › 13 CFR § 125.15 – SDVO Set-Asides › 13 CFR § 127.505 – WOSB Set - Asides

10 Summary of CFR regulations SBA size regulations13 CFR 121.103(h) HUBZone regulations13 CFR 126.616 SBA Certificate of Competency13 CFR 125.5 Service-disabled veteran13 CFR 125.15(b) 8(a) and SDB regulations13 CFR 124.513 Small disadvantaged business13 CFR 124.1002(f) WOSB Program13 CFR 127 SBA Prime Contracting13 CFR125.2 SBA Subcontracting13 CFR125.3

11 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 Interaction of Small Business Programs

12 Above the SAT SBA’s regulations provide for parity among certain small business programs KO will determine which set-aside program to use Interaction of Small Business Programs

13 Analysis: Regulatory Applications

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

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

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. § 121.402(b) SECTORS 42, 44 and 45 ARE NOT TO BE USED FOR GOVERNMENT PROCUREMENT OF SUPPLIES

17 Applying NAICS Codes to Acquisition s 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.

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.

19 Waivers to the NMR Two types of waivers  Class Waiver  Individual Waiver

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.

21 Four steps in checking “NMR” class waivers 1. NAICS code 2. Product description 3. Product service code at 4. 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.

23 How to Obtain an Individual Waiver 13 C.F.R. 121.406 and 121.1202 - 1204 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

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,, 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 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

27 How to Submit Submit NMR waiver requests and attachments to the NMR program email address at: Use the solicitation number and agency abbreviation in the subject line – ex: SBA SBA123-14-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 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 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)

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

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

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

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

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

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

35 Questions? Nonmanufacturer Rule Program Amy Garcia Office of Contract Assistance Office of Government Contracting U.S. Small Business Administration Washington, D.C. 202/205-6842

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