Non-Manufacturer Rule FAQs
The Non-Manufacturer rule allows a small business to offer a product that it did not manufacturer under a small business set-aside if SBA has offered a waiver. The NMR is an exception to the standard requirement that the contractor must perform at least 50 percent of the cost of manufacturing products (not including the cost of material) on a supply contract. In other words, it allows a contractor that is not the manufacturer to supply products that come from a small business manufacturer located in the United States.
No. The NMR applies to firms that receive contracts above $25,000 under the 8(a) program or on a small business set-aside (including set-aside orders against GSA Multiple Award Schedules). It is also important to note that if the value of the order is below $25,000, a small non-manufacturer (including a HubZone) can supply the product of any domestic business. The SBA amended its regulations through a Final Rule [PDF - 492KB] published on October 2, 2013, implementing the Small Business Jobs Act of 2010. This rule changed 13 CFR §121.406(d) to include orders placed against multiple award contracts. FAR Case 2014-002, entitled: Set-Asides Under Multiple Award Contracts, will implement these changes into the FAR.
No. The NMR only applies under a set-aside order. If the ordering activity does not restrict the order to small business (or any of the sub-categories) the NMR does not apply even when an award is made to a small business. However, the ordering activity will receive small business credit when awarding to a small business, just as they would for a small business set-aside.
Furniture is a commodity that is commonly manufactured by large businesses and distributed by small businesses. When an ordering activity restricts a furniture order to small business (i.e., conducts a set-aside) under GSA Schedules, the NMR applies to that order. This means that the items ordered must come from a small business manufacturer unless a waiver is received. In most cases, the small business dealers on the GSA Schedule are dealers for furniture manufactured by large businesses. Therefore, since the small business itself is not a manufacturer of the furniture being procured, the ordering activity must receive a waiver prior to issuing the solicitation in order to comply with the NMR. The small business dealer is responsible for ensuring compliance with the NMR. If the ordering activity does not restrict the competition to small business, but awards to small business, they will receive socio-economic credit for the order.
As the Contracting Officer applying the Non-Manufacturer Rule to your acquisition strategy, there are some things to remember:
- A non-manufacturer who receives a set-aside contract must agree to supply the product of a domestic small manufacturer or processor, unless the ordering activity receives a waiver from the SBA or a class waiver exists.
- The contracting officer must designate the proper NAICS code and size standard. Note that for orders placed against GSA Schedule contracts the NAICS code and size standard will flow down from the Schedule contract to the ordering activity’s delivery order.
- The NMR does not apply to service contracts.*
*The NMR has traditionally not applied to service contracts, however a recent Court of Federal Claims ruling broadens the reach of the NMR to all federal procurements that require the provision of manufactured supplies, regardless of whether the procurement also has a services component. See (Rotech Healthcare Inc. v. United States, Case No. 14-502C (Sept. 19, 2014) [PDF - 258 KB] for additional information.
Yes. The Small Business Act contains provisions that allow the Administrator of the Small Business Administration (SBA) to waive the Non-Manufacturer Rule requirement when there are no small business manufacturers or processors available to supply the product to the federal government except: non-manufacturer waivers are not granted for HUBZone procurements and non-manufacturer waivers cannot be granted after a solicitation has been released.
The SBA Administrator has delegated authority to grant waivers to the SBA Director of Government Contracting. Requests for waivers should be sent to SBA’s Director of Government Contracting at NonMfgRuleWaiverReqsts@sba.gov.
There are two classifications for NMR waivers: individual and class waivers. If the firm is not a manufacturer of the items being purchased, the ordering activity must receive a waiver (unless SBA has granted a class waiver) prior to issuing the solicitation.
For summary-level information refer to items below. You may also refer to www.sba.gov/content/non-manufacturer-waivers for additional details.
- Individual Waivers. An individual waiver is solicitation specific. The Contracting Officer is the only one with the authority to request an individual waiver for a specific solicitation.
- Required Documentation for Individual Waivers Less Than $500,000.The Contracting Officer’s request must include the following:
- A definitive statement identifying the specific products for which the waiver is being requested.
- Market research and other data to support the determination that no small business can reasonably be expected to offer a product meeting the specifications (including period of performance) required by the solicitation.
- The solicitation number for the procurement on which the item or items is required, the NAICS code, estimated dollar amount of the procurement, and a brief statement of the procurement history.
- Required Documentation for Individual Waivers Greater Than or Equal to $500,000. In addition to the required documentation for individual waivers less than $500,000, for contracts expected to exceed $500,000, the Contracting Officer must also include:
- A copy of the Statement of Work.
- A determination by the procuring agency's contracting officer that there are no known small business manufacturers for the requested items.
- Class Waivers. A request for a waiver of a class of products should refer to a specific subdivision, or statement of product, within the NAICS Code Manual and the General Services Administration’s Product Service Code Directory. A Class Waiver is not applicable to a procurement unless the NAICS code, Product Service Code (PSC) and NAICS Code Descriptor currently in effect, match the item(s) being procured. See SBA class waiver list. The requesting organization must provide SBA with the following information:
- The relevant NAICS Code and Product Service Code.
- Market research and other data to support that no small business is available to participate in the federal procurement market.
According to the SBA website the common response time to a class waiver request is about 45 - 60 days. For questions specific to the non-manufacturer rule, individuals may call (202) 205-2500(202) 205-2500 or email NonMfgRuleWaiverReqsts@sba.gov. It is essential that organizations provide all the required information when requesting a waiver; not doing so may extend the process.
Refer to the terms and conditions of your GSA Schedule contract. All Multiple Award Schedule small business contracts contain the following clauses, which flow down to the order when an authorized ordering activity conducts a set-aside, and require the contractor to adhere to the NMR:
- FAR 52.219-3, Notice of HUBZone Set-Aside or Sole Source Award
- FAR 52.219-6, Notice of Total Small Business Set-Aside
- FAR 52.219-27, Notice of Service-Disabled Veteran-Owned Small Business Set-Aside
- FAR 52.219-29, Notice of Set-Aside for Economically Disadvantaged Women-Owned Small Business (EDWOSB) Concerns
- FAR 52.219-30, Notice of Set-Aside for Women-owned Small Business Concerns Eligible Under the Women-Owned Small Business Program
Refer to 13 CFR §121.108 which states, in part, that the Small Business Act provides severe criminal penalties for knowingly misrepresenting the small business size status of a concern in connection with procurement programs and the Act also provides, in part, for criminal penalties for knowingly making false statements or misrepresentations to SBA for the purpose of influencing in any way the actions of the agency.
Terms to Know Relating to the NMR.
- Dealer. An entity that buys goods from a producer or distributor for wholesale and/or retail reselling.
- Kit Assembler. An organization supplying a kit of supplies, or other goods provided for a special purpose. The assembler cannot exceed 500 employees, and 50 percent of the total value of the components in the kit must be manufactured by domestic small business concerns – meeting applicable NAICS code and size standards for those components. Further, source directed components, manufactured by large businesses are excluded from the 50 percent calculation. The assembler does not itself need to be the manufacturer of any of the items assembled in the kit.
- Manufacturer. A manufacturer makes or produces products. A manufacturer is a business concern that, with its own facilities, performs primary activities in transforming inorganic or organic substances, including the assembly of parts and components, into the end item being acquired.
- Non-manufacturer. A business concern with less than 500 employees that is primarily engaged in retail or wholesale trade activities and normally sells the type of product being supplied. The firm has or takes ownership or possession of the item or items – it is supplying - with its own personnel, equipment or facilities in a manner consistent with industry practice. In addition, the firm would supply the end product of a U.S. small business manufacturer, or a waiver to the Non-Manufacturer Rule would have to be in place.
- Reseller/Retailer. A reseller or retailer is a business concern that is authorized to sell someone else’s goods and/or services.
- Wholesaler. A wholesaler is an intermediary business concern that sells to other intermediary firms -- such as a firm that buys from a manufacturer and sells to a retailer.
The Small Business Act and SBA’s regulations impose performance requirements (limitations on subcontracting) on firms that are awarded set-aside contracts.
See the following regulations:
- 15 USC §§ 637(a)(14) – Limitations of Subcontracting
- 13 CFR § 125.6 – Prime contractor performance requirements (limitations on subcontracting).
- FAR §§ 52.219-14 – Limitations of Subcontracting
- 13 CFR §121.406 – The Rule
- 13 CFR §121.1202/1203/1204 – Waivers
- 13 CFR §125.15 – SDVO Set-Asides
- 13 CFR §127.505 – WOSB Set-Asides
- FAR 19.001 – Definitions
- FAR 19.102 – Size Standards
- FAR 52.219-1(a)(3) – Small Business Program Representations Provision
Further information on small business size may be viewed in this helpful guide: Government User Help Guide Regarding Small Business Information[PDF - 78 KB]