Subcontracting Plan Requirements (FAR 19.7)
Large businesses performing on government contracts over $750,000 must submit a subcontracting plan that demonstrates their commitment to providing meaningful opportunities to small businesses. These plans are a legal requirement, not a suggestion — and non-compliance can result in liquidated damages.
This guide covers everything you need to know: when plans are required, what goals to set, how to choose between individual and commercial plans, eSRS reporting obligations, and how to document good faith effort.
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When Is a Subcontracting Plan Required?
FAR 19.702 establishes the threshold for subcontracting plan requirements. A subcontracting plan is required when all of the following conditions are met:
- 1.The contract exceeds $750,000
For construction, the threshold is $1.5 million. These thresholds apply to the total estimated value including options.
- 2.The contractor is other than small
Size is determined by the NAICS code assigned to the contract. Small businesses are exempt from subcontracting plan requirements.
- 3.There are subcontracting possibilities
If the contractor will perform all work in-house with no subcontracting, a plan is technically not required. However, this is rare for contracts above the threshold.
The plan must be submitted as part of the proposal and is evaluated as part of the award decision. A contract cannot be awarded to a large business without an acceptable subcontracting plan (FAR 19.702(a)). The Contracting Officer reviews the plan for compliance, and the agency's Office of Small and Disadvantaged Business Utilization (OSDBU) provides input.
For indefinite-delivery contracts (including IDIQs and BPAs), the subcontracting plan typically covers the entire contract vehicle, with reporting at the contract level. Individual task orders inherit the plan from the base contract.
Small Business Subcontracting Goals
Every subcontracting plan must include specific percentage goals for subcontracting to each category of small business. These goals are expressed as a percentage of total subcontracting dollars (not total contract dollars).
Government-Wide Goal Targets (FY 2026)
Individual agencies and contracts may set higher goals. The solicitation will specify target percentages, and your plan should meet or exceed them. Setting artificially high goals that you cannot achieve is counterproductive — you will be evaluated on whether you made good faith efforts to meet your stated goals.
Goals are inclusive, not additive: SDB, WOSB, HUBZone, VOSB, and SDVOSB dollars also count toward the overall SB goal. A firm can count toward multiple categories simultaneously (e.g., a service-disabled veteran-owned women's business counts toward SB, WOSB, VOSB, and SDVOSB goals).
Individual vs Commercial Plans
Individual Plan
An individual subcontracting plan covers a single contract. The goals, reporting, and compliance are all specific to that contract. Each new contract requires a new individual plan.
- +Goals tailored to each contract's specific subcontracting opportunities
- +Clear line between plan commitments and contract performance
- -Administrative burden of maintaining separate plans for each contract
- -Must negotiate with each Contracting Officer separately
Commercial Plan
A commercial plan covers all of the contractor's commercial and government subcontracting company-wide. Once approved by any government agency, it applies to all contracts (FAR 19.704(d)).
- +One plan covers all government contracts — major administrative savings
- +Goals can be met across the company rather than per-contract
- -Only available to companies selling commercial products or services
- -Goals must cover both commercial and government subcontracting
eSRS Reporting Requirements
All contractors with individual subcontracting plans must report their subcontracting achievements through the Electronic Subcontracting Reporting System (eSRS) at esrs.gov. There are two types of reports:
Individual Subcontracting Report (ISR)
Reports subcontracting achievements for each individual contract. Filed semi-annually: by April 30 (for October 1 – March 31) and by October 30 (for April 1 – September 30). Reports cumulative data from contract inception, not just the reporting period.
Summary Subcontracting Report (SSR)
Reports aggregate subcontracting across all government contracts. Filed annually by October 30. Large prime contractors with multiple government contracts file one SSR covering all contracts. Companies with commercial subcontracting plans file only SSRs, not ISRs.
Reports flow through the Contracting Officer for review and acknowledgment. Late reports can result in payment withholding, and persistent non-reporting can be a factor in past performance evaluations. Set up calendar reminders well before the due dates and start compiling data early.
Liquidated Damages & Good Faith Effort
FAR 19.705-7 authorizes the government to assess liquidated damages when a contractor fails to make a good faith effort to comply with its subcontracting plan. The damages are calculated as the actual dollar amount by which the contractor fell short of each subcontracting goal.
However, liquidated damages are assessed based on effort, not just results. If you can demonstrate that you made a genuine, documented effort to meet your goals but fell short due to legitimate reasons, liquidated damages may not be assessed.
Documenting Good Faith Effort
- +Outreach records: invitations to bid, attendance at small business matchmaking events, SBA outreach
- +Market research: documentation showing you searched for small business sources for each subcontracting opportunity
- +Bid solicitation records: copies of RFQs sent to small businesses, bid responses received, and award rationale
- +Internal policies: designation of a Subcontracting Plan Administrator, small business liaison officer
- +Flow-down clauses: subcontracting plan requirements flowed to first-tier subcontractors
- +Reasons for shortfall: documented explanations for why goals were not met (no qualified SBs in the area, SBs declined to bid, etc.)
The best practice is to track good faith effort documentation continuously, not just at reporting time. Assign a subcontracting plan administrator who maintains records throughout the contract and ensures outreach activities are ongoing, not just one-time events.
Frequently Asked Questions
When is a subcontracting plan required?
A subcontracting plan is required for contracts and subcontracts that exceed $750,000 ($1.5 million for construction) when the prime contractor is other than small for the applicable NAICS code. This applies to all contract types including negotiated, sealed bidding, and task/delivery orders. Small businesses are exempt from submitting subcontracting plans. The requirement is in FAR 19.702 and the plan must be submitted with the proposal.
What are the small business subcontracting goal categories?
Subcontracting plans must include percentage goals for five categories: Small Business (SB), Small Disadvantaged Business (SDB), Women-Owned Small Business (WOSB), HUBZone Small Business, Veteran-Owned Small Business (VOSB), and Service-Disabled Veteran-Owned Small Business (SDVOSB). The government-wide goals are currently: SB 23%, SDB 5%, WOSB 5%, HUBZone 3%, and SDVOSB 3%. Individual agencies and contracts may set higher goals.
What is the difference between an individual and commercial subcontracting plan?
An individual subcontracting plan covers a single contract and includes goals and reporting for that contract only. A commercial subcontracting plan covers the contractor's entire commercial and government business and is negotiated with the initial contracting agency. Once approved, the commercial plan applies to all government contracts — the contractor does not submit separate plans for each contract. Commercial plans are available only to companies that sell commercial products or services (FAR 19.704(d)).
What happens if you do not meet your subcontracting goals?
Failure to make a good faith effort to meet subcontracting goals can result in liquidated damages per FAR 19.705-7. The damages equal the actual dollar amount by which the contractor failed to achieve each goal. For example, if your plan committed to $1M in SDB subcontracting and you only subcontracted $600K, the liquidated damages could be $400K. However, if the contractor demonstrates good faith effort through documented actions, liquidated damages may not be assessed even if numerical goals are not fully met.
What is eSRS and when must reports be filed?
eSRS (Electronic Subcontracting Reporting System) is the government system where contractors report their subcontracting achievements. Individual Subcontracting Reports (ISRs) are due semi-annually — by April 30 for the October-March period and by October 30 for the April-September period. Summary Subcontracting Reports (SSRs) are due annually by October 30. All contractors with individual subcontracting plans must report in eSRS. Late or missing reports can result in payment withholding and negative CPARS ratings.
Find Subcontracting Opportunities
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