FAR 19.704—Subcontracting plan requirements.
Plain-English Summary
FAR 19.704 explains what must be included in a subcontracting plan when a contractor is required to submit one under FAR 19.301-2(e) and 19.702(a)(1)(i), (ii), or (iii). The section covers the required percentage goals for subcontracting with small business concerns and the socioeconomic categories specifically identified in the FAR: veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business, including Alaska Native Corporations (ANCs) and Indian tribes where applicable. It also requires dollar-based subcontracting projections, descriptions of the work to be subcontracted, the method used to develop goals and identify sources, treatment of indirect costs, designation of the subcontracting program administrator, and the contractor’s efforts to provide equitable subcontracting opportunities. In addition, it requires flowdown and reporting commitments, including the clause at 52.219-8, adoption of subcontracting plans by certain lower-tier subcontractors, and use of eSRS for ISR and SSR reporting. The section is designed to make subcontracting plans measurable, enforceable, and transparent so the Government can evaluate whether the contractor is making a good-faith effort to meet statutory subcontracting objectives. In practice, this section is critical because it turns a general commitment to small business participation into a detailed, auditable plan with specific goals, reporting obligations, and downstream compliance requirements.
Key Rules
Set separate percentage goals
The plan must state separate percentage goals for subcontracting with small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business concerns. The rule expressly includes ANCs and Indian tribes where the category definition applies.
State total subcontract dollars
The plan must identify the total dollars planned for subcontracting and the total dollars planned for subcontracting to each required small business category, expressed as a percentage of total subcontract dollars. For individual subcontracting plans, the contracting officer may also require these goals to be shown as a percentage of total contract dollars.
Describe subcontracted work
The contractor must describe the principal types of supplies and services to be subcontracted and identify which types are planned for subcontracting to each small business category. This ties the goals to the actual scope of work rather than leaving them as abstract percentages.
Explain goal development methods
The plan must explain how the subcontracting goals were developed and how potential sources were identified for solicitation purposes. This allows the Government to assess whether the goals are realistic, supportable, and based on a meaningful market research process.
Address indirect costs
The offeror must state whether indirect costs were included in the subcontracting goals and, if so, describe how the proportionate share of indirect costs attributable to each category was determined. Commercial plans have special treatment under the referenced paragraph (d).
Name a program administrator
The plan must identify the individual responsible for administering the subcontracting program and describe that person’s duties. This creates accountability and gives the Government a clear point of contact for compliance and reporting.
Commit to equitable opportunity
The offeror must describe the efforts it will make to ensure that small business and the specified socioeconomic categories have an equitable opportunity to compete for subcontracts. This is a forward-looking commitment to outreach, competition, and fair access.
Include required flowdowns
The offeror must agree to include the clause at 52.219-8 in all subcontracts that offer further subcontracting opportunities and must require certain subcontractors with subcontracts above the applicable dollar thresholds to adopt compliant subcontracting plans under 52.219-9, except for small business concerns and entities treated as small business concerns by statute for certain purposes.
Commit to reporting and cooperation
The plan must include assurances that the contractor will cooperate in studies or surveys, submit periodic reports, and use eSRS to submit the ISR and SSR. For certain IDIQ contracts intended for use by multiple agencies, subcontracting data must be reported by order after November 30, 2017.
Require lower-tier reporting data
The contractor must ensure subcontractors with subcontracting plans agree to submit ISR and/or SSR through eSRS and must pass along the prime contract number, UEI, and the responsible official’s email address. Subcontractors with plans must likewise provide this information to their own subcontractors with plans.
Maintain compliance records
The plan must describe the types of records the contractor will maintain to show compliance with the plan and goals, including source lists and efforts to locate small business and other targeted concerns. These records support audits, reviews, and performance assessments.
Responsibilities
Contracting Officer
Determine when a subcontracting plan is required, review the plan for completeness and adequacy, and may require individual-plan goals to be expressed as a percentage of total contract dollars in addition to total subcontract dollars. The contracting officer also receives and may reject ISR and SSR submissions, triggering the contractor’s obligation to correct and resubmit within 30 days.
Offeror / Prime Contractor
Prepare a subcontracting plan that includes all required goals, dollar projections, work descriptions, goal-development methods, source-identification methods, indirect cost treatment, program administration details, equitable opportunity efforts, flowdown assurances, reporting commitments, lower-tier information-sharing obligations, and recordkeeping commitments. The prime must also submit required reports through eSRS and ensure subcontractor compliance with applicable reporting and plan-adoption requirements.
Subcontractors with Subcontracting Plans
Adopt and comply with a subcontracting plan when required by flowdown, submit ISR and/or SSR through eSRS, and provide their own subcontracting-plan information to lower-tier subcontractors with plans, including the prime contract number, their UEI, and the responsible official’s email address.
Government / Agency
Use the subcontracting plan and subsequent reports to monitor compliance, evaluate subcontracting performance, and assess whether the contractor is making the required good-faith effort to meet stated goals. The agency also relies on the reporting system and supporting records for oversight and policy analysis.
Practical Implications
This section is one of the most compliance-heavy parts of subcontracting administration: a plan is not just a narrative, but a detailed, measurable commitment with specific categories, percentages, dollar amounts, and reporting obligations.
A common pitfall is treating the goals as generic diversity statements instead of tying them to actual work scope, market research, and realistic subcontracting opportunities. Weak goal development can make the plan vulnerable to rejection or later scrutiny.
Another frequent issue is incomplete reporting in eSRS, especially missing ISR/SSR deadlines, failing to report when there was no subcontracting activity, or not correcting rejected reports within 30 days.
Contractors often overlook the downstream flowdown requirements, especially the need to require certain subcontractors to adopt their own plans and to pass along the correct contract number, UEI, and responsible official contact information.
For IDIQ contracts intended for use by multiple agencies, contractors must be especially careful about order-level subcontracting data requirements, because reporting obligations can differ from a single-award, single-agency contract structure.
Official Regulatory Text
(a) Each subcontracting plan required under 19.301-2 (e) and 19.702 (a)(1)(i), (ii), and (iii) shall include- (1) Separate percentage goals for using small business (including ANCs and Indian tribes), veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business (including ANCs and Indian tribes) and women-owned small business concerns as subcontractors; (2) A statement of the total dollars planned to be subcontracted and a statement of the total dollars planned to be subcontracted to small business (including ANCs and Indian tribes), veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business (including ANCs and Indian tribes) and women-owned small business concerns, as a percentage of total subcontract dollars. For individual subcontracting plans only, a contracting officer may require the goals referenced in paragraph (a)(1) of this section to be calculated as a percentage of total contract dollars, in addition to the goals established as a percentage of total subcontract dollars; (3) A description of the principal types of supplies and services to be subcontracted and an identification of types of supplies or services planned for subcontracting to small business (including ANCs and Indian tribes), veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business (including ANCs and Indian tribes), and women-owned small business concerns; (4) A description of the method used to develop the subcontracting goals; (5) A description of the method used to identify potential sources for solicitation purposes; (6) A statement as to whether or not the offeror included indirect costs in establishing subcontracting goals (for commercial plans, see paragraph (d) of this section), and a description of the method used to determine the proportionate share of indirect costs to be incurred with small business (including ANCs and Indian tribes), veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business (including ANCs and Indian tribes), and women-owned small business concerns; (7) The name of an individual employed by the offeror who will administer the offeror’s subcontracting program, and a description of the duties of the individual; (8) A description of the efforts the offeror will make to ensure that small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business concerns have an equitable opportunity to compete for subcontracts; (9) Assurances that the offeror will include the clause at 52.219-8 , Utilization of Small Business Concerns (see 19.708 (a)), in all subcontracts that offer further subcontracting opportunities, and that the offeror will require all subcontractors (except small business concerns, including entities that are treated as small business concerns by statute for certain purposes ( e.g., ANCs, see 13 CFR 125.3(b)(2) )) that receive subcontracts in excess of $900,000 ($2 million for construction) to adopt a plan that complies with the requirements of the clause at 52.219-9 , Small Business Subcontracting Plan (see 19.708 (b)); (10) Assurances that the offeror will- (i) Cooperate in any studies or surveys as may be required; (ii) Submit periodic reports so that the Government can determine the extent of compliance by the offeror with the subcontracting plan; (iii) After November 30, 2017, include subcontracting data for each order when reporting subcontracting achievements for indefinite-delivery, indefinite-quantity contracts with individual subcontracting plans where the contract is intended for use by multiple agencies; (iv) Submit the Individual Subcontract Report (ISR), and the Summary Subcontract Report (SSR) using the Electronic Subcontracting Reporting System (eSRS) ( http://www.esrs.gov ), following the instructions in the eSRS. (A) The ISR shall be submitted semi-annually during contract performance for the periods ending March 31 and September 30. A report is also required for each contract within 30 days of contract completion. Reports are due 30 days after the close of each reporting period, unless otherwise directed by the contracting officer. Reports are required when due, regardless of whether there has been any subcontracting activity since the inception of the contract or the previous reporting period. When a contracting officer rejects an ISR, the contractor is required to submit a revised ISR within 30 days of receiving the notice of the ISR rejection. (B) The SSR shall be submitted annually by October 30 for the twelve-month period ending September 30. When an SSR is rejected, the contractor is required to submit a revised SSR within 30 days of receiving the notice of SSR rejection; (v) Ensure that its subcontractors with subcontracting plans agree to submit the ISR and/or the SSR using the eSRS; (vi) Provide its prime contract number, its unique entity identifier, and the e-mail address of the offeror’s official responsible for acknowledging receipt of or rejecting the ISRs to all first-tier subcontractors with subcontracting plans so they can enter this information into the eSRS when submitting their ISRs; and (vii) Require that each subcontractor with a subcontracting plan provide the prime contract number, its own unique entity identifier, and the e-mail address of the subcontractor’s official responsible for acknowledging receipt of or rejecting the ISRs, to its subcontractors with subcontracting plans; (11) A description of the types of records that will be maintained concerning procedures adopted to comply with the requirements and goals in the plan, including establishing source lists; and a description of the offeror’s efforts to locate small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business concerns and to award subcontracts to them; (12) Assurances that the offeror will make a good faith effort to acquire articles, equipment, supplies, services, or materials, or obtain the performance of construction work from the small business concerns that the offeror used in preparing the bid or proposal, in the same or greater scope, amount, and quality used in preparing and submitting the bid or proposal. Responding to a request for a quote does not constitute use in preparing a bid or proposal. An offeror used a small business concern in preparing the bid or proposal if– (i) The offeror identifies the small business concern as a subcontractor in the bid or proposal or associated small business subcontracting plan, to furnish certain supplies or perform a portion of the contract; or (ii) The offeror used the small business concern's pricing or cost information or technical expertise in preparing the bid or proposal, where there is written evidence of an intent or understanding that the small business concern will be awarded a subcontract for the related work if the offeror is awarded the contract; (13) Assurances that the contractor will provide the contracting officer with a written explanation if the contractor fails to acquire articles, equipment, supplies, services or materials or obtain the performance of construction work as described in (a)(12) of this section. This written explanation will be submitted to the contracting officer within 30 days of contract completion; (14) Assurances that the contractor will not prohibit a subcontractor from discussing with the contracting officer any material matter pertaining to payment to or utilization of a subcontractor; and (15) Assurances that the offeror will pay its small business subcontractors on time and in accordance with the terms and conditions of the subcontract, and notify the contracting officer if the offeror pays a reduced or an untimely payment to a small business subcontractor (see 52.242-5 ). (b) Contractors may establish, on a plant or division-wide basis, a master plan (see 19.701 ) that contains all the elements required by the clause at 52.219-9 , Small Business Subcontracting Plan, except goals. Master plans shall be effective for a 3-year period after approval by the contracting officer; however, it is incumbent upon contractors to maintain and update master plans. Changes required to update master plans are not effective until approved by the contracting officer. A master plan, when incorporated in an individual plan, shall apply to that contract throughout the life of the contract. (c) For multiyear contracts or contracts containing options, the cumulative value of the basic contract and all options is considered in determining whether a subcontracting plan is necessary. If a subcontracting plan is necessary and the offeror is submitting an individual subcontracting plan, the individual subcontracting plan shall contain all the elements required by paragraph (a) of this section and shall contain separate statements and goals based on total subcontract dollars for the basic contract and for each option. (d) A commercial plan (as defined in 19.701 ) is the preferred type of subcontracting plan for contractors furnishing commercial products and commercial services. The subcontracting goals established for a commercial plan shall include all indirect costs with the exception of those such as the following: Employee salaries and benefits; payments for petty cash; depreciation; interest; income taxes; property taxes; lease payments; bank fees; fines, claims, and dues; original equipment manufacturer relationships during warranty periods (negotiated up front with the product); utilities and other services purchased from a municipality or an entity solely authorized by the municipality to provide those services in a particular geographical region; and philanthropic contributions. Once a contractor's commercial plan has been approved, the Government shall not require another subcontracting plan from the same contractor while the plan remains in effect, as long as the product or service being provided by the contractor continues to meet the definition of a commercial product or commercial service. The contractor shall— (1) Submit the commercial plan to either the first contracting officer awarding a contract subject to the plan during the contractor’s fiscal year, or, if the contractor has ongoing contracts with commercial plans, to the contracting officer responsible for the contract with the latest completion date. The contracting officer shall negotiate the commercial plan for the Government. The approved commercial plan shall remain in effect during the contractor’s fiscal year for all Government contracts in effect during that period; (2) Submit a new commercial plan, 30 working days before the end of the Contractor’s fiscal year, to the contracting officer responsible for the uncompleted Government contract with the latest completion date. The contractor must provide to each contracting officer responsible for an ongoing contract subject to the plan, the identity of the contracting officer that will be negotiating the new plan; (3) When the new commercial plan is approved, provide a copy of the approved plan to each contracting officer responsible for an ongoing contract that is subject to the plan; and (4) Comply with the reporting requirements stated in paragraph (a)(10) of this section by submitting one SSR that includes all indirect costs, except as described in paragraph (d) of this section, in eSRS, for all contracts covered by its commercial plan. This report will be acknowledged or rejected in eSRS by the contracting officer who approved the plan. The report shall be submitted within 30 days after the end of the Government’s fiscal year.