Individual Subcontracting Reports (ISRs)

As a reminder, Other Than Small Businesses (OTSB) {also known as large businesses eSRS Home Page(LB)} are required to submit their Individual Subcontract Reports via the Electronic Subcontract Reporting System (eSRS) by 30 April 2015 (prime contractors and applicable large business first tier subcontractors).  Throughout the course of my blog I have posted several articles on the reporting requirements, you can review the following posts for further guidance:

For addition information you can visit the eSRS site for training guides and sample reports.

Advertisements

Small Business Program Policies and Procedures Manual

Policy ManualIf your firm is a large business federal contractor does it have a small business program policy and procedures manual and an assigned small business liaison officer (SBLO)?

Two of my earlier posts dealt directly with the Establishment a Small Business Program and Small Business Utilization Surveillance and Reporting.  To continue the theme, this post deals directly with the content and benefits of a policy and procedures manual for a federal contractor’s small business program.  One of the central reasons for implementing a policy and procedures manual is to provide your federal contracting team with the guidance, knowledge and resources to lead and manage a successful program.  In addition, it can elevate your firm’s small business program from maintaining baseline compliance to a comprehensive small business program that establishes key performance indicators for those leading and working with your federal contracting team.  This is the first step in pursuit of being awarded the Dwight D. Eisenhower Award For Excellence – the SBA’s award for large prime contractors that have excelled in their utilization of small businesses as suppliers and subcontractors.

The main purpose of this post is to provide a few examples of the content that should be included in your firm’s manual and generate a few thoughts of what you think are relevant.  That said, this post is not a manual on the theory, structure, and format of drafting a policy and procedures manual.  (There are a number of great resources available to address those concerns.)  While many business share similar characteristics, such as business type, location, or market each firm is unique and must tailor the manual to fit its needs.

What should a policy and procedures manual for a small business program office contain?

  1. The CEO’s vision, intent, and policy letter articulating his or her intent. This will allow the team to operate effectively and efficiently with minimal supervision.
  2. The mission statement for the small business program.
  3. An organizational matrix and narrative outlining the small business team and its relationship to the company’s leadership and other departments. This is helpful because you may be asked to provide this during an audit.
  4. Federal subcontracting guidelines and definitions.
  5. A library of references, templates, and tools:
    1. Subcontracting plan templates for the various agencies
    2. Small business Self-certification forms
    3. Small business utilization tracking templates
    4. First tier large business subcontractor guidelines and notification letters
    5. Subcontracting plan review guidelines (to assist with the review of your first tier large business subcontractor subcontracting plans)
  6. A description of your firm’s ongoing small business outreach efforts. For example, what events, conferences, or functions centered on boosting small businesses does your firm participate in regularly.
  7. Guidelines for your firm’s participation in Mentor-Protégé Programs.
  8. Internal and external training programs on small business.

Benefits:

  1. The small business team will be able to operate more effectively and efficiently.
  2. Compliance efforts will be reduced.
  3. Streamlined integration with other departments.
  4. Potential gains in small business utilization.
  5. Stronger relationships with the small business community and potential long term strategic small business partners.

Resources:

Summary

There are a number of styles and approaches available to help you develop a policies and procedures manual, but the first step along the journey is to identify what is needed.  The manual should be a living document that can mature as your company refines its processes.  In addition, through the process of drafting the manual you will identify and correct processes and procedures that need improvement.  I have drafted compliance guides for clients which turned out be an enlightening experience.  Particularly during the interview process, clients realize there are weaknesses in their program that can have a negative impact on their small business program.  When you are ready, you can tackle the completion of your firm’s federal contracting policies and procedures manual addressing the full spectrum of contracting matters.

2014 NDAA Allows Prime Contractors to Count Lower Tier Small Businesses

For a quick break in the current series, I want to briefly talk about an upcoming change in small business subcontracting resulting from the 2014 National Defense Authorization Act (NDAA).  On 26 December 2013 President Obama signed the NDAA into law.  While there is much discussion on funding levels for the Department of Defense (DoD) and its programs, there are other features of the NDAA of interest to DoD OSBP Image 2federal small business interest groups.  Specifically, prime contractors will be able to count lower tier small business contractors towards the prime contractor’s small business subcontracting goals.  Based on what is known today, it should be noted the new policy allowing primes to count lower tier small business subcontractors won’t eliminate the prime contractor’s responsibility to make a good-faith effort to meet negotiated 1st tier subcontracting requirements.

The objective of this post is to put this concept in front of prime contractors and 1st tier large business subcontractors to use this lead time to prepare for implementation by the Small Business Administration (SBA).  That said, it will be 18-24 months, or longer, before the change is reflected in the acquisition regulations.  In fact, SBA hasn’t issued many final regulations from the Small Business Jobs Act of 2010, despite statutory deadlines set by Congress.  In the meantime large business contractors can take several steps that will prove beneficial regardless of the exact language in the regulations.  In addition to the points raised in my 21 May 2013 post Small Business Utilization Monitoring and Reporting the attributes of a successful small business program are highlighted below:

  1. Ensure the Small Business Liaison Officer post is filled and has a direct report capability to senior leadership in the organization.
  2. Update small business utilization policies and procedures.
  3. Assess the strength and effectiveness of small business outreach program.
  4. Conduct compliance of the prime’s subcontracting program.  The SBA recommends a five year look back.
  5. Conduct initial (as required) and periodic training for employees involved with subcontracting.  The project manager and support staff will require additional assistance to effectively manage the new requirements.
  6. Update small business source lists.
  7. Ensure the proper flowdown of small business subcontracting clauses.
  8. Ensure adequate controls are in place for 1st tier large business subcontracting plan compliance.

Several questions come to mind as we wait for implementation over the next 18-24 months:

  1. Will this impact subcontracting goals for the agencies and primes?
  2. Will the new requirements change the distribution of subcontracting goals within some of the agencies?

In summary, the change probably won’t happen too quickly and there will most likely be more scrutiny placed on prime contractors for enforcement of the requirements at all tiers.  I believe this change will be manageable, but it will be made easier with advance preparation.

Federal Small Business Reporting

tech-ind

Overview

This month Other Than Small Business (OTSB) {also known as a large business (LB)} contractors and subcontractors (those holding a contract or subcontract in excess of $650,000 or $1,500,000 for construction) are required to submit their Individual Subcontract Reports (ISR) and Summary Subcontract Reports (SSR) via the Electronic Subcontract Reporting System (eSRS). For some construction projects this can be a time consuming event given the large number of subcontractors.  My typical client has 30 to 90 subcontractors depending on the size of the project.  On May 21st I authored a piece highlighting Small Business Utilization Monitoring and Reporting requirements.  This post calls into action the tips and techniques covered in that post as 30 September 2013 marked the end of the most recent reporting period.  The ISRs and SSRs are due within 30 days of that date.

Individual Subcontract Plan Reporting

The ISR reporting period is 1 April – 30 September and the project team (or group responsible for managing reporting) should have collected and categorized all of the subcontract awards related to the contract.  It is beneficial to start the reporting process early so it can be broken down into several discreet steps creating a more manageable process reducing interference with regular tasks the project team completes on a daily or weekly basis.  Below is an overview of the basic steps for those reporting on small business to complete:

  • Collect and organize all of the subcontract award data (i.e. business name, award date, and amount) made during the period sorting by business type, OTSB, WOSB, SDVOSB, etc.  This can be accomplished using Excel, Access, certain contract / project management databases, or paper and pencil.
  • Ensure the required self-certifications and HUBZone certifications are collected and reviewed for accuracy.
  • Ensure the correct subcontracting plan goals are entered for the ISR to be submitted.
  • Enter the required data in the eSRS ISR reporting tool.  There are several useful step by step guides with detailed instructions on the eSRS site.  Of note the ISR tool will calculate the participation rate percentages for you, although I prefer to calculate the small business (SB) participation rates prior to beginning the process.
  • If required, enter an appropriate remark explaining why goals have not been met.  Regardless if the goals are or are not being met, the team buying out the subcontracts should keep detailed notes on the bidding for each bid package.  This is very valuable information to use for remarks in the ISR in addition to any future contract work in the same region.

Summary Subcontract Reporting

There are a few differences between the ISR and the SSR in addition to a couple of tips that are worth noting.

  • The SSR is a fiscal year summary of Federal subcontracting activity reported by agency.  The more contracts and agencies a company works with the more complex the process becomes.  A common mistake I see is firms incorrectly totaling all of the ISRs for a particular agency and reporting that number.  ISRs are reports documenting subcontracting activity for the life of a contract.  Using the ISR in this manner will inflate the data in the SSR.
  • SSRs are reported at the agency level which creates one or more confusing aspects of submitting the SSR of “who”  or “where” to send it to from the range of choices available on the drop down menu.  The good thing is most agency personnel are very good at directing reports to the correct destination.
  • Similar to the ISR, there are several guides available on the eSRS site containing detailed instructions.  I recommend using the guides as they are helpful.

DoD Office of Small Business Programs (OSBP) recently updated is policy on SSRs and the Small Disadvantaged Business (SDB) participation report.  Highlights from the notice distributed several weeks ago are included below:

  • Starting in FY 2014 the SSR submission will be submitted once per year matching civilian agency requirements.
  • For FY 2013 reporting, contractors submit their consolidated SSR in eSRS to the Department of Defense (9700) and NOT to the department/agency which administers the majority of their subcontract plans.
  • For FY 2013 contractors should not submit the SDB participation report as they are no longer authorized since 10 U.S.C. 2323 expired.  For further guidance go to: http://www.acq.osd.mil/osbp/sbs/esrs.shtml

Summary:

  • Don’t procrastinate starting the reporting process and make sure time is left to review the data for accuracy and completeness.
  • If you have delegated the responsibility for data entry of the ISR, make sure you review the material before it is submitted.  Any errors will find their way back to you.
  • CEO or Senior VPs are required to sign the SSR, make sure they know the report is being submitted and they are briefed on the contents of the report.  Too often I have seen an electronic signature from the reporting authority used and not back-briefed on the event.

Small Business Utilization Monitoring and Reporting

In previous posts about small business subcontracting I have discussed activities along the small business planning continuum ranging from outreach efforts to putting a subcontracting plan in to action.  After project award the real work of a small business subcontract plan begins and this activity must be documented semi-annually in the Electronic Subcontract Reporting System (eSRS).  This series ends with an article addressing the monitoring and reporting requirements associated with a typical federal construction project.

Monitoring

Typically the Subcontracting Plan is administered by the Administrative Contracting Officer (ACO) for the government and the Small Business Liaison Officer (SBLO) for the prime contractor.  The ACO is responsible for monitoring, evaluating, and documenting contractor performance on behalf of the award agency.  Therefore, establishing an adequate program to monitor your small business program is important so the program is effectively and efficiently run.  Ultimately the success of a company’s small business program is an integral part of a firm’s business development efforts.  Failure to meet small business goals on federal projects can reflect negatively when responding to future proposals.

Feature of an adequate program:

  • Your company has a published policy letter from the Chief Executive Officer supporting the program.
  • The SBLO maintains documentation of meetings with top management on the status of the program.
  • The SBLO reports directly to senior leadership and depicted on the company organizational chart.
  • The small business policies and procedures are published and distributed to project teams.
  • Individuals directly involved with the program have received training on the small business program and the federal requirements.
  • Self-certification are reviewed, tracked to ISRs and SSRs, and retained for compliance reviews.
  • HUBZone Small Business certifications are verified through the SBA (FAR 52.219-8(d)(2).

Reporting

eSRS Home Page

Reporting small business utilization on federal projects is one of several post-award compliance tasks for large businesses (FAR 52.219-9(d)(10)(iii)).  Reporting is accomplished via eSRS.  Two types of reports are required, the Summary Subcontract Report (SSR) and the Individual Subcontract Report (ISR).

The SSRs collects prime and subcontractors award data for a specific agency during the given fiscal year.  Reporting periods:

For Department of Defense (DoD) and NASA:

  • 1 October – 31 March
  • 1 October – 30 September

For Non DoD agencies:

  • 1 October – 30 September

Reports are due 30 days after the reporting period ends.

The ISR collects prime contractor and subcontractor award data on a project basis over the life of the project.  Unlike SSRs the data carries over each year.  Reporting periods:

  • 1 October – 31 March
  • 1 October – 30 September

Reports are due 30 days after the reporting period ends.

Two common techniques to monitor participation include the use of the spreadsheets or a contract management database program.  Either technique is acceptable; the method used is dependent on which is most compatible with the IT maturity of the firm.  Related to my post on 30 January 2013 “Small Business Outreach and Database Management”, the level of effort in fulfilling the reporting requirements is affected by the capabilities, or lack of, with your contract management or small business utilization tracking tool (spreadsheets).

Reporting Tips:

  • A database can reduce the level of effort to complete the reporting requirements.  For example, Primavera Contract Manager and Prolog can both be modified at the company level to facilitate the reporting process.
  • Develop a consistent methodology to help project teams collect, document, and store self-certifications.  Per 13 CFR 121.411(a), a subcontractor must qualify and self-certify as a small business at the time it submits its offer as a small business subcontractor. Do not retroactively apply small business subcontracting accomplishments. (eSRS Quick Reference Guide)
  • Visit the eSRS website, there are numerous guides, step-by-step samples, and instructional videos to assist with the reporting process.
  • Don’t wait until the last minute to start the reporting process.
  • Throughout the reporting period make sure the project team is collecting information on subcontract awards, self-certifications, and the bid history for each subcontract to document good faith efforts.
  • Review self-certification against System for Award Management (SAM) or the SBA Dynamic Small Business Search (DSBS).  Occasionally small businesses will inadvertently check the incorrect subcategory or miss one entirely.  The effort in due diligence will help the large business and the small business.
  • Under current regulations a self-certification form must be collected for each small business for each project. (SBA SBLO Handbook)

Common trends I find during subcontracting programs reviews for clients:

  • Self-certifications are completed incorrectly resulting in missed or inaccurate small business credit for the prime contractor.
  • The tracking tool used has math errors or small businesses are not categorized according to their self-certification.
  • Summary Subcontract Reports (SSRs) contain more than one fiscal year of data.
  • ISRs are not submitted in a timely manner.
  • ISRs contain insufficient information documenting good faith efforts and are rejected by the Contracting Officer or ACO.

Subcontracting Plan Development

The Small Business Act of 1953 established the policy that small businesses shall have the maximum practicable opportunity (MPO) to participate on federal projects.  Specifically, the Act requires that small businesses have the MPO to participate on federal contracts greater than $150,000 and that all contracts greater than $650,000 ($1,500,000 for construction) include a formal subcontracting plan.  Therefore, one avenue for small businesses to participate on federal projects is to serve as a subcontractor.

??????????????????????????????

In accordance with the Small Business Act and the requirements outlined in FAR 19.702, 19.704, and 52.219-9 large business prime contractors and subcontractors are required to submit and negotiate a subcontracting plan (not to be confused with a small business participation plan required by USACE and NAVFAC).  Typically, the subcontracting plan is submitted with an offeror’s proposal and finalized upon award.  The subcontracting plan is not the most heavily weighted part of the overall proposal, but it plays an important part of the proposal process and becomes a material part of the contract for the successful offeror.  Therefore the subcontracting plan deserves serious consideration prior to proposal submission.

Key Considerations:

  1. It is essential to review and understand the requirements and goals in the RFP during proposal development.  Invariably there are subtle differences and it is important to address any questions through the request for information (RFI) process.  The 11 required elements of the subcontracting plan are outlined in FAR 19.704 and 52.219-9.
  2. Typically, the agencies posting an RFP (USACE, NAVFAC, or GSA), provide a template or some type of guidance for the subcontracting plan reducing the amount of guess work required.  The NAVFAC and GSA templates are posted on their respective websites.
  3. During the subcontracting plan development process it is vital to create a plan that meets or exceeds the proposal requirements or adequately justifies why lower goals are proposed, developed with the project team in mind and the best opportunity for success, and offers small businesses maximum possible opportunity to participate in a wide variety of trades.
  4. While the FAR establishes a regimented program to follow, it does allow for and encourage contractors to be innovative in their methods to increase small business participation.  For example, FAR 15.404-4 (d)(iii) Profit – Federal socioeconomic programs allows for greater profit opportunity for a display of unusual initiative towards increasing small business participation.  The key aspect being the contractor will go above and beyond the average contractor.
  5. As highlighted earlier, large business subcontractors are required to submit a subcontracting plan if their subcontract is greater than $650,000 ($1,500,000 for construction) and has the potential for further subcontracting opportunities.  It is important for the prime contractor to clearly articulate this during proposal development and estimating.  Similarly, every large business trade subcontractor should anticipate this requirement and begin dialogue with the prime contractor.  As a best practice, a prime contractor should develop a standard letter template to distribute to the large business subcontractors outlining the requirements and expectations upon award.

Common mistakes found in subcontracting plan audits:

  1. Check your math, and then check it again.  It is too common I find basic math errors calculating percentages and dollar values in the subcontracting plan.
  2. Improper interpretation of the rules to calculate small business participation.  Small business participation in the subcontracting plan is calculated based on “subcontracted dollars”, not the total contract value.  Using the total contract value lowers the achieved participation rate.  It is worthwhile to note the opportunity confusion as the small business participation plan is calculated based on “total contract value.
  3. Self-certification errors.  Some self-certifications are not completed correctly exposing the prime contractor to risk and possible loss of small business credit.

Small Business Outreach and Database Management

This is the third post in a series about managing a large general contractor’s small business program.   Maintaining a vibrant and productive small business outreach program is a critical skill for a large business prime contractor’s or first tier subcontractor’s Small Business Liaison Officer (SBLO).  The ability to meet the small business subcontracting goals for most projects requires a deep bench of quality small business subcontractors from a variety of socio-economic subcategories.  Therefore, the outreach program is the tool to develop that roster of go-to subs.  Since there is not a magic formula the objective of this post is to highlight several key considerations in the conduct of a successful outreach effort and management of a small business database.

  1. Establish realistic and achievable goals for the outreach effort based on your company’s objectives.  The goals of the program should be reviewed annually to maintain their relevance and compatibility with the overall small business program.  The goals should dovetail seamlessly with mission & vision of the company’s policy on the use of small business concerns.
  2. Planning.  A successful start to outreach begins with planning and reduces headaches during execution.  Ideally, the SBLO should develop an annual plan based on the company’s desired bid plan and integrated with the business development strategy.  This will ensure a comprehensive plan is assembled maximizing efficiency of resources.  Elements to consider in the planning process include how many networking events to host through the year, which small business events to attend (national & local), or professional groups and associations to become involved with.
  3. Networking.  Connect with the extensive network of small business planning resources.  Examples of resources available include Small Business Administration (Dynamic Small Business Search), Procurement Technical Assistance Centers, Chambers of Commerce, Society of American Military Engineers (Small Business Council), and DoD Small Business Regional Councils to name a few.  In addition, Linked In and Twitter should be included in your tool kit of networking resources.
  4. Execution.  Deploying the outreach plan is simplified with a well-developed and resourced plan.  It is important to reflect throughout the year and adapt the current plan to address changes or targets of opportunity.  Also, make notes during the year of changes to incorporate for the next year; build on the successes and avoid repeating the elements that did not work.

Database Considerations

The second major objective to cover is database management, or capturing and managing the list of small businesses subcontractors to include in future bidding opportunities.  The requirement for having a dynamic database tool becomes more critical for regional or national general contractors.

Currently there is not a perfect database tool that accurately and efficiently allows a SBLO to store, track, and sort small businesses that is fully integrated with a construction friendly purchasing system.  Don’t give up yet though, with a little research there are several capable programs available.  From the federal construction perspective, several key attributes that are helpful in a database are the ability to track subcontractors by type (small business, Small Disadvantaged Business, Woman Owned Small Business, HUBZone, and etc.), key contacts, primary NAICS codes (what do they do best), bonding, past projects, and geographic operating range.

Establishing and Maintaining a Small Business Program

For a general contractor operating in the federal arena there are a multitude of elements that make up a small business program.  Several important items that should make up the foundation to your program are vision and mission statements, tangible objectives, and functions for the program with buy-in at every level from the CEO and below.  In essence this is the framework for a Small Business Center of Excellence (SBCOE) that provides a road map for success beginning from the C-suite down to the project teams in field.

Establishment of a small business center of excellence SBCOE does not involve the creation of extraneous bureaucracy; rather it allows a smaller team to operate more efficiently.  Regardless of the structure used to manage a small business program the vision, mission, objectives, and functions should be compatible with goals and objectives of the government’s.

The mission statement can be written in a straightforward manner with plain language effectively delivering the organization’s goals and aid employees in their decision making processes.  Something as simple as: “Our Challenge is to position ABC Company as the industry leader in small business utilization on its federal projects consistent with our corporate values.”

Similarly, a vision statement does not need to be complicated or profound, but it needs to be well crafted since it serves as the framework for employees to work within.  For example “Build an environment with ABC Company in which employees recognize the benefit of small businesses and engage them as a valued partner in project execution…”

The objectives of the program outline with more specificity what it will achieve.  A couple of examples are:

  1. To build or maintain a standardized corporate small business program which increases small business utilization while expanding the capabilities of our small business partners within the local communities we operate.
  2. To train our employees to more effectively search and employ small businesses to the maximum extent possible.

It is important to outline the functions of what the small business personnel will do, this promotes consistency across project teams and business units within a company.    Several examples of functions the small business team can fill include:

  1. Publish and maintain a corporate Small Business Program Manual.
  2. Provide technical experts to draft the small business participation plan and subcontracting plan for all proposals.
  3. Accomplish all small business reporting requirements.
  4. Build and maintain relationships with the small business community to include PTACs, SBA Commercial Market Representatives, and small business subcontractors.
  5. Provide internal and external training.
  6. Manage all active Mentor-Protégé agreements.

While there are numerous responsibilities and a never ending stream of compliance issues, there are plenty of resources to help SBLOs.  A future post will include a review of the numerous resources that are available and the assistance they can provide.