1. Lesson 3: Pre-Solicitation: Developing a Subcontracting Strategy
In advising the acquisition team on opportunities for subcontracting to small businesses, the Small Business Professional (SBP) should be able to analyze market research data to identify the:
Types of work suitable for subcontracting
Small businesses that are available to subcontract
Small business capabilities to fulfill the requirement
Socioeconomic status of the identified small businesses
Acceptable subcontracting quantitative objectives
Feasibility of using incentive subcontracting
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2. Terminal Learning Objective
During the Pre-Solicitation phase of an acquisition, advise the acquisition team in pursuing a subcontracting strategy that maximizes small business participation.
Subcontracting
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3. Contracting Process for Acquisitions
Pre-Solicitation
Solicitation-Award
Post-Award
Pre-Solicitation
Solicitation-Award
Post-Award
Initial Planning/Form the Team
Solicitation (RFQ, IFB, RFP)
Monitor Performance
Market Research
Evaluation
Deliverables
Payments
Define Requirements (PWS, SOW, SOO)
Negotiation
Determining an acquisition strategy that involves subcontracting occurs during the Pre-Solicitation phase of the contracting process as the acquisition team, including the SBP, participates in:
Pre-solicitation planning for the acquisition
Conducting market research
Defining requirements
Recommending an acquisition strategy
Acquisition Business Strategy
Award
Closeouts
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4. Contracting Process for Acquisitions Process Flow
General Rule: The diagram on the preceding slide is generalized for teaching purposes in the small business courses and is not specific to governing policies and regulatory requirements for any specific type of acquisition (DoDI [ACATs]; DoDI [Services]; and others). SBPs must understand the type of acquisition applicable to any new or recurring requirements and follow those governing policies and regulations accordingly.
Solicitation-Award
Post-Award
Pre-Solicitation
Phase begins with a clearly defined acquisition strategy and acquisition plan.
These may or may not be approved, but they guide the development of solicitations and source selection plans.
Department of Defense (DoD) peer reviews occur prior to obtaining approval to issue a solicitation.
Decision Point: Approval To Issue Solicitation
Policy requires prior written approvals of the acquisition strategy, acquisition plan, and DoD peer reviews, if any.
Exchanges with Industry: Tightly controlled upon issuance of solicitation through award of contract(s).
Phase ends when the source selection decision is acted upon via award of a contract(s)
Phase begins with the valid acquisition need driving initial planning and team formation.
Phase ends with acquisition strategy that is documented in an acquisition plan.
Phase begins after the contract(s) is awarded.
Phase ends when all contract performance is complete and contract(s) closeout actions are completed.
This chart depicts activities that occur within each of the phases and what the entry (beginning) and exit (ending) criteria are for:
Pre-Solicitation
Solicitation-Award
Post Award
This Process Flow is generalized for teaching purposes in the small business courses and is not specific to governing policies and regulatory requirements for any specific type of acquisition.
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5. Enabling Learning Objectives
Identify effective market research techniques to gather information to support a proactive subcontracting strategy.
Recommend incentive subcontracting when appropriate.
Ensure that the acquisition strategy includes an appropriate subcontracting strategy that maximizes small business utilization.
Review the subcontracting strategy as documented on DD Form 2579.
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6. Market Research
What types of data collected during market research can be used to support the use of subcontracting as part of the acquisition strategy?
Where would you get that information?
How does market research to develop a proactive subcontracting strategy differ from market research to support a set- aside?
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7. Elements That Affect Subcontracting
Availability of Small Businesses
Capability and Capacity of Small Businesses
Type of Work
Complexity
Determining the the degree of subcontracting is based on many things, including the type of work to be done, the complexity of the work, the availability of small businesses, and the capabilities and capacity of small businesses.
Once the SBP can identify capable small business sources that can provide capabilities as subcontractors for the requirement, the degree of small business utilization as subcontractors can be determined.
When market research reveals that small businesses have been or are capable of performing certain types of work, the SBP can use the market research results to advocate for acquisition strategies that maximize the use of small businesses as subcontractors.
Degree of Subcontracting
Subcontracting
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8. Subcontracting Quantitative Objective
Activity 3.1: Determine a Subcontracting Quantitative Objective Based on Market Research Results – Activity Context
Set-Aside
Partial Set-Aside
Full and Open
Subcontracting Quantitative Objective
The quantitative objectives determined from market research can be used to:
Determine the reasonableness of subcontracting proposed in small business subcontracting plans and Small Business Participation Commitment Documents (SBPCDs) in proposals.
Set minimum quantitative requirements (MQRs) for use in small business participation evaluation criteria and/or contractual requirements.
Subcontracting
Subcontracting
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9. Activity 3.1: Determine a Subcontracting Quantitative Objective Based on Market Research Results
Using the market research data provided, determine an appropriate subcontracting quantitative objective for only small businesses and provide supporting rationale. (Graded Individual Assignment – 10 points)
In actual acquisitions, SBPs would also develop quantitative objectives for the socioeconomic categories, but that was omitted here due to time constraints.
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10. Activity 3.1 Rubric – Graded Activity
The instructors will use this rubric to score your response.
Assignment Element
Points Scored
Small Business Objective
1 point
Rationale addresses level of anticipated small business participation
3 points
Rationale addresses types of work (skill sets/industries) the Government believes are necessary for the requirement relative to what the industry responses indicate
Rationale addresses historical data from previous similar/same types of efforts
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11. Activity 3.1 Key Points
Quantitative objectives ≠ DoD subcontracting goals.
The degree of subcontracting is based on a variety of things.
Establishing subcontracting quantitative objectives helps the Government:
Understand how realistic small business subcontracting plan goals are.
Decide whether or not goals should be negotiated.
Decide whether requiring a minimum level of quantitative participation is appropriate.
In actual acquisitions, SBPs would also develop quantitative objectives for the socioeconomic categories, but that was omitted here due to time constraints.
Key Points:
The quantitative objectives for a particular solicitation will not (and most likely should not) necessarily be the same as the Department of Defense (DoD) subcontracting goals.
The degree of subcontracting is based on a variety of things, including the type of work to be done, the complexity of the work, the availability of small businesses, and the capability and capacity of the small businesses.
Establishing subcontracting quantitative objectives provides the Government with a starting point for understanding how realistic small business subcontracting plan goals are—and in turn whether or not goals should be negotiated. It also helps in deciding whether requiring a minimum level of quantitative participation (MQR) is appropriate.
In actual acquisitions, SBPs would also develop quantitative objectives for the socioeconomic categories, but that was omitted here due to time constraints.
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12. Incentive Subcontracting
Provides the Government with the opportunity to encourage subcontracting to small businesses by providing a monetary incentive
Must be commensurate with the efficient and economical performance of the contract [FAR (c)(1)]
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13. Incentive Subcontracting (cont’d.)
Why would the Government use incentive subcontracting?
What are some examples of times when incentive subcontracting could be used?
When would incentive subcontracting not be used?
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14. Common Types of Incentive Subcontracting
Incentive Subcontracting Program
(FAR )
Cost-Plus-Award-Fee Contract
Awarded based on an assigned percentage of the dollars in excess of each goal in the subcontracting plan, unless the Contracting Officer determines that the excess was not due to the contractor’s efforts.
Small business subcontracting can be one of the factors to consider when determining the award fee.
A percentage of the award fee pool is awarded based on the adjectival rating earned.
Note: FAR gives Contracting Officers the flexibility to be innovative in creating other incentives, so long as they are within the regulatory parameters.
There are two commonly used types of incentive subcontracting:
Incentive Subcontracting Program (uses Clause ) – Provides a fully quantified schedule of payments based on actual subcontract achievement.
Cost-Plus-Award-Fee Contract – Small business subcontracting can be one of the factors to consider when determining the award fee.
These are not the only monetary incentives that can be used; FAR gives Contracting Officers the flexibility to be innovative in creating other incentives, so long as they are within the regulatory parameters.
Note: If the award fee approach is used, the Contracting Officer is prohibited from using FAR
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15. Non-Monetary Alternatives to Incentive Subcontracting
Evaluate small business participation as an evaluation factor/substantial subfactor in source selection.
Establish MQRs in the solicitation.
There are alternatives to incentive subcontracting, including:
Evaluating small business participation as an evaluation factor/substantial subfactor in source selection
Establishing MQRs in the solicitation (to be addressed later in the course)
Note that alternatives to incentive subcontracting are non-monetary things that can be done to improve subcontracting to small businesses.
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16. Activity 3.2: Review an Award Fee Plan
Activity Context: Award fees are one way to implement incentive subcontracting.
Award Fee Plan
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17. Activity 3.2: Review an Award Fee Plan (cont’d.)
Working in pairs, review the Award Fee Plan.
Answer the questions on the worksheet.
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18. Activity 3.2 Key Points
Incentive subcontracting is a viable tool for increasing small business utilization in contracts.
The award fee can be an effective method of incentive subcontracting.
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19. Activity 3.3: Develop a Small Business Subcontracting Incentive
Activity Context: FAR (c) states that subcontracting incentives can take many forms. What can you come up with?
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20. Activity 3.3: Develop a Small Business Subcontracting Incentive (cont’d.)
What should you consider when developing a subcontracting incentive?
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21. Draft solicitation language for your incentive.
Activity 3.3: Develop a Small Business Subcontracting Incentive (cont’d.)
Working in teams, develop a small business subcontracting incentive in response to a scenario.
Draft solicitation language for your incentive.
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22. Activity 3.3 Rubric
You will use the activity rubric, which identifies desired behaviors, to rate your performance.
Desired Behaviors
Carefully analyze the scenario.
Address the given considerations.
Use the maximum flexibility afforded in FAR (c).
Develop an effective and fiscally sound incentive.
Develop an incentive that is palatable to industry.
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23. Activity 3.3 Key Points
FAR (c) allows Contracting Officers to be innovative in developing incentives to address acquisition small business subcontracting challenges.
Use of incentives is one way we can promote small business.
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24. Acquisition Plans
Address all the technical, business, management, and other significant considerations that will control the acquisition (FAR 7.105).
Discuss the small business strategy, including set-asides, bundling and consolidation, and subcontracting.
As stated in FAR 7.105, the acquisition plan must address all of the technical, business, management, and other significant considerations that will control the acquisition. This includes addressing the small business strategy, such as whether the acquisition will be set-aside, if there is bundling or consolidation, and if subcontracting will be required. The specific content of plans will vary, depending on the nature, circumstances, and stage of the acquisition.
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25. Acquisition Plan Requirements
FAR – Contents of Written Acquisition Plans
DFARS
DFARS
Requirements for acquisition plans are in FAR 7.105, DFARS , and may also be in DoD components regulations. However, for our purposes, we will focus on the FAR and DFARS requirements.
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26. Acquisition Plan Review
When market research does not support a set-aside, SBPs need to ensure that the acquisition plan reflects a proactive subcontracting strategy that maximizes opportunities for small businesses.
It is important for SBPs to thoroughly review the acquisition plan to ensure that the Program Manager and Contracting Officer are pursuing proactive subcontracting strategies that maximize opportunities for small businesses consistent with efficient contract performance (assuming that market research does not support a set-aside). SBPs need to exert influence as early in the process as possible, because it is much more difficult and time-consuming to make changes after the solicitation is drafted.
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27. Acquisition Plan Review Considerations
Column 1 – Drawn from FAR 7.105/DFARS 207
Column 2 – Small Business Strategy Considerations
Column 3 – Findings and Other Notes
The Acquisition Plan Review Considerations document is a tool that you can use back on the job to review acquisition plans. It is organized as follows:
The first column contains the requirements from FAR 7.105/DFARS 207.
The second column contains small business strategy considerations that the SBP should be mindful of while reviewing the acquisition plan.
The third column contains space to record findings and other notes from the review.
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28. Activity 3.4: Draft the Small Business Subcontracting Sections of an Acquisition Plan
Activity Context: To ensure that the acquisition plan contains a robust and tailored acquisition strategy, SBPs should be proactive and draft the sections related to small business subcontracting.
SBPs need to be proactive in shaping acquisition strategy to include a robust and tailored subcontracting strategy. One way to do this is to draft the sections of the acquisition plan related to small business subcontracting.
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29. Activity 3.4: Draft the Small Business Subcontracting Sections of an Acquisition Plan (cont’d.)
Based on the market research results you analyzed earlier, work in your teams to draft the small business subcontracting sections of the acquisition plan:
1. Sources
2. Competition
12. Make or Buy
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30. Activity 3.4 Rubric
You will use the activity rubric, which identifies desired behaviors, to rate your performance.
Desired Behaviors
Collaborate to develop a team strategy for approaching the activity.
Carefully analyze the market research results.
Develop language that is tailored to the acquisition.
Develop robust language that encourages small business subcontracting.
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31. Activity 3.4 Key Points
The acquisition plan must include a thorough discussion of small business considerations, including small business subcontracting.
It is important to consider small business as early as possible in the contracting process.
SBPs are the experts on small business matters on the acquisition team, so they need to be prepared to draft sections of the acquisition plan related to small business subcontracting.
There is not a single correct way to draft the acquisition plan.
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32. Purpose of DD Form 2579
The SBP (and the SBA Procurement Center Representatives, as required) is required to review and make recommendations for acquisitions before issuing the solicitation or certain contract modifications by documenting the review on DD Form 2579, Small Business Coordination Record.
IAW DFARS (c)(10) the Small Business Specialist (Professional) (and SBA Procurement Center Representative, as required) is required to review and make recommendations for acquisitions before issuance of the solicitation or certain contract modifications. The SBP indicates whether he or she concurs or does not concur with the selected acquisition strategy by documenting the review on DD Form 2579, Small Business Coordination Record.
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33. Subcontracting on DD Form 2579
Block 13:
Indicate whether a small business subcontracting plan is required.
Specify actions that will be taken to maximize small business participation (if the acquisition is not a set-aside or is consolidated or bundled).
According to the instructions in DFARS Procedures, Guidance and Information (PGI) , the text box should include the following considerations: Requirements of FAR 19.7; acquisition history; anticipated subcontracting goals; market research to identify small business capability at the subcontract level; source-selection evaluation factor for small business utilization (DFARS , ); incentives; contract performance metrics; and so on. State detailed objectives for the subcontract. (Attach additional pages as necessary.)
Note: The Procuring Contracting Officer initiates DD Form 2579.
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34. Activity 3.5: Review DD Form 2579
Activity Context: Reviewing DD Form 2579 is one of the SBP’s most important responsibilities.
The requirement to review and make recommendations on acquisitions—and to document the review using DD Form 2579, Small Business Coordination Record—is one of the SBP’s most important responsibilities. DD Form 2579 in and of itself is not as important as the documents provided to support what is documented on the form.
SBPs must be engaged early in the acquisition processes to have the greatest influence in shaping small business strategies because surprises at the DD Form 2579 review point are unwanted and tend to foster adversarial encounters. When SBPs are more proactive and engaged in the acquisition process, Contracting Officers and Program Managers are more willing to embrace their expert advice and guidance.
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35. Activity 3.5: Review DD Form 2579 (cont’d.)
According to DD Form 2579, will a small business subcontracting plan be required for this procurement?
Is the recommendation on DD Form 2579 appropriate (for requiring or not requiring a small business subcontracting plan)? Why or why not?
Is the description of actions that will be taken to maximize small business participation appropriate? Why or why not? If not, how could it be improved?
As an SBP, would you concur with the subcontracting strategy as written? Why or why not?
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36. Activity 3.5 Key Points
It is important to thoroughly review the subcontracting strategy in DD Form 2579.
The more detailed information on the subcontracting strategy in the revised DD Form 2579 emphasizes the importance DoD is placing on maximizing opportunities for small businesses as subcontractors.
The requirement to review and make recommendations on acquisitions—and to document the review using DD Form 2579—is one of the SBP’s most important responsibilities.
The DD Form 2579 itself is not as important as the documents provided to support it.
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37. Lesson Summary Terminal Learning Objective
During the Pre-Solicitation phase of an acquisition, advise the acquisition team in pursuing a subcontracting strategy that maximizes small business participation.
Enabling Learning Objectives
Identify effective market research techniques to gather information to support a proactive subcontracting strategy.
Recommend incentive subcontracting when appropriate.
Ensure that the acquisition strategy includes an appropriate subcontracting strategy that maximizes small business utilization.
Review the subcontracting strategy as documented on DD Form 2579.
During the lesson, students participated in developing a subcontracting strategy during pre-solicitation by:
Determining subcontracting quantitative objectives from market research data
Describing incentive subcontracting requirements
Contributing to an acquisition plan
Reviewing the subcontracting strategy as documented on DD Form 2579
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38. Identify one key insight from this lesson.
Action Planning
Identify one key insight from this lesson.
Identify one thing you will do differently on the job.
Discuss with your accountability partner.
Your ultimate goal is to operate within the acquisition and contracting process to maximize opportunities for small business to execute the agency’s mission to ultimately support the warfighter.
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