Noncompliant small federal contractors may face increased penalties due to the Small Business Administration's new ruling, which enforces further restrictions on businesses accessing the agency's set-aside programs.
The rule sets limitations on subcontracting for small-business prime contractors to ensure the intended purpose of supplying work to small federal contractors is met. The SBA aims to prevent small businesses from acting as a front for larger companies by clarifying requirements for choosing third-party providers.
The rule puts the SBA's guidelines in line with Federal Acquisition Regulation and includes penalties for noncompliance, which may affect a firm's ability to obtain a contract in the future. However, there are some extenuating circumstances outlined in the rule that may negate a negative rating.