FAR 19.708—Contract clauses.
Plain-English Summary
FAR 19.708 tells contracting officers which small business subcontracting clauses must be included in solicitations and contracts, and when optional subcontracting incentive language may be used. It covers the mandatory use of the Utilization of Small Business Concerns clause at 52.219-8, the mandatory use of the Small Business Subcontracting Plan clause at 52.219-9 and its Alternates I through IV, and the mandatory use of the Liquidated Damages-Subcontracting Plan clause at 52.219-16 when a subcontracting plan clause is included. It also addresses when a contracting officer may add the Incentive Subcontracting Program clause at 52.219-10, including the special rule that the incentive clause may not be used when subcontracting performance is instead being evaluated as an award-fee factor in a cost-plus-award-fee contract. In practice, this section is the clause-selection roadmap for subcontracting policy compliance: it determines whether a contractor must make good-faith efforts to use small business concerns, whether a formal subcontracting plan is required, whether liquidated damages exposure applies, and whether a monetary incentive structure is appropriate to encourage subcontracting to small business categories.
Key Rules
Insert 52.219-8 broadly
The Utilization of Small Business Concerns clause must be included in solicitations and contracts expected to exceed the simplified acquisition threshold, unless the contract is a contemplated personal services contract or the work will be performed entirely outside the United States and its outlying areas. This clause is the baseline small business subcontracting requirement for covered acquisitions.
Require subcontracting plans when thresholds are met
The Small Business Subcontracting Plan clause at 52.219-9 must be included when the acquisition offers subcontracting possibilities, is expected to exceed $900,000 ($2 million for construction of any public facility), and must include 52.219-8, unless the acquisition is set aside or is under the 8(a) program. This clause creates the formal subcontracting plan obligation.
Use the correct alternate version
The contracting officer must select the proper alternate to 52.219-9 depending on the procurement method or reporting situation: Alternate I for sealed bidding, Alternate II when subcontracting plans are required with initial proposals in negotiated procurements, Alternate III when the action will not be reported in FPDS under the specified exceptions, and Alternate IV when a subcontracting plan is incorporated by modification under 19.702(a)(1)(iii).
Add liquidated damages clause with plans
The Liquidated Damages-Subcontracting Plan clause at 52.219-16 must be inserted in all solicitations and contracts that contain 52.219-9 or any of its alternates. This makes liquidated damages available if the contractor fails to make a good-faith effort to comply with its subcontracting plan.
Incentive clause is discretionary
When contracting by negotiation and a subcontracting plan is required, the contracting officer may include a clause substantially the same as 52.219-10 if a monetary incentive is needed to increase subcontracting opportunities for the listed small business categories and the incentive is consistent with efficient and economical contract performance. The clause is optional, not mandatory.
Incentives must be tied to contractor effort
Any incentive structure should reward only results attributable to the contractor’s efforts under the incentive subcontracting program. The contracting officer may use a range of approaches, from formula-based payments to award-fee methods, but the incentive should not pay for outcomes unrelated to the contractor’s subcontracting actions.
No 52.219-10 with award-fee factor
For cost-plus-award-fee contracts, the contracting officer may consider small business subcontracting as an award-fee evaluation factor, but if that approach is used, the contracting officer shall not use the Incentive Subcontracting Program clause at 52.219-10. The regulation prevents duplicative or conflicting incentive mechanisms.
Responsibilities
Contracting Officer
Determine whether the acquisition exceeds the applicable thresholds and whether subcontracting possibilities exist; insert 52.219-8 when required; decide whether 52.219-9 applies and select the correct alternate; include 52.219-16 whenever a subcontracting plan clause is used; and decide whether to add a subcontracting incentive clause only when negotiation, need, and contract economics support it.
Contracting Officer
Ensure exceptions are applied correctly, including the personal services and overseas-performance exceptions for 52.219-8, and the set-aside and 8(a) exceptions for 52.219-9. Also avoid using 52.219-10 when subcontracting performance is already being addressed through award-fee evaluation in a cost-plus-award-fee contract.
Contractor
Comply with the inserted clauses, including making good-faith efforts to use small business concerns, preparing and following any required subcontracting plan, and understanding that failure to meet plan obligations may trigger liquidated damages or affect incentive/award-fee outcomes.
Agency
Support proper acquisition planning and clause inclusion, including identifying whether the procurement is set aside, under 8(a), expected to exceed the relevant thresholds, or subject to FPDS reporting exceptions that affect clause selection.
Practical Implications
Clause selection here is not optional housekeeping; it drives whether a contractor must have a subcontracting plan and whether noncompliance can lead to liquidated damages or reduced fee outcomes.
A common mistake is forgetting that 52.219-8 and 52.219-9 have different triggers: one is tied to the simplified acquisition threshold, while the other depends on subcontracting possibilities and the higher dollar thresholds.
Another frequent pitfall is using the wrong alternate to 52.219-9, especially in sealed bidding, negotiated procurements with initial proposals, FPDS reporting exceptions, or post-award modifications.
Contracting officers should be careful not to stack conflicting incentive mechanisms: if subcontracting is being evaluated as an award-fee factor in a cost-plus-award-fee contract, 52.219-10 should not be used.
For contractors, the practical takeaway is that subcontracting compliance can affect both contract administration and payment outcomes, so plan development, reporting, and actual subcontracting performance should be managed as part of overall contract execution.
Official Regulatory Text
(a) Insert the clause at 52.219-8 , Utilization of Small Business Concerns, in solicitations and contracts when the contract amount is expected to exceed the simplified acquisition threshold unless- (1) A personal services contract is contemplated (see 37.104 ); or (2) The contract, together with all of its subcontracts, will be performed entirely outside of the United States and its outlying areas. (b) (1) Insert the clause at 52.219-9 , Small Business Subcontracting Plan, in solicitations and contracts that offer subcontracting possibilities, are expected to exceed $900,000 ($2 million for construction of any public facility), and are required to include the clause at 52.219-8 , Utilization of Small Business Concerns, unless the acquisition is set aside or is to be accomplished under the 8(a) program. When- (i) Contracting by sealed bidding rather than by negotiation, the contracting officer shall use the clause with its Alternate I; (ii) Contracting by negotiation, and subcontracting plans are required with initial proposals as provided for in 19.705-2 (d), the contracting officer shall use the clause with its Alternate II; (iii) The contract action will not be reported in the Federal Procurement Data System pursuant to 4.606 (c)(5), or (c)(6), the contracting officer shall use the clause with its Alternate III; or (iv) Incorporating a subcontracting plan due to a modification as provided for in 19.702 (a)(1)(iii), the contracting officer shall use the clause with its Alternate IV. (2) Insert the clause at 52.219-16 , Liquidated Damages-Subcontracting Plan, in all solicitations and contracts containing the clause at 52.219-9 , Small Business Subcontracting Plan, or the clause with its Alternate I, II, III, or IV. (c) (1) The contracting officer may, when contracting by negotiation, insert in solicitations and contracts a clause substantially the same as the clause at 52.219-10 , Incentive Subcontracting Program, when a subcontracting plan is required (see 19.702 ), and inclusion of a monetary incentive is, in the judgment of the contracting officer, necessary to increase subcontracting opportunities for 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 is commensurate with the efficient and economical performance of the contract; unless the conditions in paragraph (c)(3) of this section are applicable. The contracting officer may vary the terms of the clause as specified in paragraph (c)(2) of this section. (2) Various approaches may be used in the development of small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business concerns’ subcontracting incentives. They can take many forms, from a fully quantified schedule of payments based on actual subcontract achievement to an award-fee approach employing subjective evaluation criteria (see paragraph (c)(3) of this section). The incentive should not reward the contractor for results other than those that are attributable to the contractor’s efforts under the incentive subcontracting program. (3) As specified in paragraph (c)(2) of this section, the contracting officer may include small business, veteran-owned small business, service-disabled veteran-owned small business, HUBZone small business, small disadvantaged business, and women-owned small business subcontracting as one of the factors to be considered in determining the award fee in a cost-plus-award-fee contract; in such cases, however, the contracting officer shall not use the clause at 52.219-10 , Incentive Subcontracting Program.