In December, the National Defense Authorization Act was signed  into  law.  This  Act  includes  a  significant change for prime contractors seeking to achieve small business subcontracting goals. The Act will enable prime contractors to receive credit for lower-tier small business contractors toward the prime contractor’s small business subcontractinggoals. TheActmodifiespriorregulationsthatlimitedlower-tiersubcontractingcredittoonlythoselower-tier subcontracts with an ANC or Indian tribe. While the new law will greatly improve the subcontracting opportunities for small businesses and improve the prime contractor’s ability to meet its subcontracting goals, the change will not be effective for approximately 18 months after the rulemaking process occurs.

The law will expand the field of lower-tier subcontractors that a prime contractor can receive small business subcontracting credit for, providing a method for prime contractors to receive credit for utilizing small businesses— including veteran-disabled, veteran-owned, women-owned and additional specified small business concerns—rather than being limited to only receiving small business credit for contracting with ANC or Indian tribe companies.

This change could significantly improve the dynamic of small business contracting by increasing the utilization of small business concerns and likely reduce the misuse of “pass-through” subcontracting.  Further still, the law presents a viable option to assist prime contractors with meeting and satisfying small business subcontracting goals.

Potential Changes to Davis-Bacon Threshold

H.R. 1637 was introduced by Representative Jeff Duncan (R-SC) on April 18, 2013, for the purposes of updating the Davis-Bacon Act threshold from $2,000 to $50,000. The change is designed to update the Davis-Bacon threshold to account for inflation, but in practical terms, this change could significantly alter the landscape for prevailing wage determinations, as currently nearly all federal construction projects qualify under the low threshold.

The updated $50,000 would continue to provide prevailing wages on those projects that are most typically considered construction projects, while removing those that may be light “construction”—e.g., remodeling, redecorating or painting—that would qualify  under  the  lower  threshold.  The  legislation,  if  passed,  could reduce the compliance obligations for small companies and contractors that are not typically involved in heavy construction or have tangential roles to a federal construction project. Moreover, it could lessen the oversight that prime contractors must employ to ensure that lower-tier subcontractors are complying with the applicable Davis-Bacon flow down provisions, particularly in the context of potential Miller Act claims.

The bill is currently before the Subcommittee on Workforce Protections.  It will be interesting to see what progress, if any, can be made to update the Davis-Bacon Act thresholds.