Nonmanufacturer rule

To qualify as a small business concern for set-aside or sole-source supply contracts, the small business must either:

• Manufacture the product itself
• Supply a product manufactured by another small business, if it is a nonmanufacturer
• Supply the product of any sized manufacturer if SBA has granted a waiver to the nonmanufacturer rule

This includes contracts for small businesses certified as service-disabled veteran-owned, women-owned, economically disadvantaged women-owned, HUBZone, and 8(a).

The nonmanufacturer rule applies to socioeconomic categories for contracts valued above the micropurchase threshold. It applies to both socioeconomic categories and small businesses above the simplified acquisition threshold.

Review 13 C.F.R. § 121.406 for detailed information about the nonmanufacturer rule.

A manufacturer is defined as a business that, with its own facilities, performs primary activities in transforming inorganic or organic substances, including the assembly of parts and components, into the end product being acquired. In other words, a manufacturer makes or produces products.

A business may qualify as a nonmanufacturer if it:

• Does not exceed the 500 employee alternative size standard for nonmanufacturers
• Is primarily engaged in the retail or wholesale trade and normally sells the type of products being supplied
• Takes ownership or possession of the item(s) with its personnel, equipment, or facilities in a manner consistent with industry practice
• Supplies the end products of a small business manufacturer or processor made in the United States, or obtains a waiver of such requirement

If SBA determines that there are no small business manufacturers that can supply a product, it may waive the nonmanufacturer rule. There are two types of waivers: class and individual.

See 13 C.F.R §§ 121.1201 -1206 for detailed information concerning waivers of the nonmanufacturer rule for classes of products and for individual contracts.

SBA may issue a class waiver when no small business manufacturer has submitted, performed, or been awarded an offer on a solicitation for a class of products within the previous two years. Anyone can request a class waiver.

The request should include the relevant NAICS code and other identifying information about the product. It should also include market research and detailed information on the efforts made (market research) to identify small business manufacturers for the class of products. This could include a search of SAM.gov, SBA’s Dynamic Small Business Search, and other internet sites, in addition to posting Requests for Information, Sources Sought notices, reviewing previous similar procurements, seeking PCR assistance, and discussions with industry members.

Class waivers remain in place until SBA determines small business manufacturers or processors have become available to participate in the federal market or receives evidence that a small business manufacturer exists in the federal market for a waived class of products. See the list of approved class waivers.

Submit a class waiver request by emailing nmrwaivers@sba.gov. The request should include your name and contact information.

SBA may issue an individual waiver when there is no small business manufacturer that can meet the requirements of a specific contract.

Only a contracting officer can request an individual waiver. The contracting officer’s request must include:

• A definitive statement identifying the specific product for which you’re requesting the waiver
• An explanation addressing why the specific item is required
• The solicitation number for the procurement, the NAICS code, estimated dollar amount of the procurement, and a brief statement of the procurement history
• A determination that no small business manufacturer or processor reasonably can be expected to offer a product meeting the specifications of the solicitation
• A summary of market research detailing efforts to locate a small business manufacturer (not reseller) and provide supporting documentation including:
  • The results of your search from SBA’s Dynamic Small Business Search
  • The results of your discussions with small business representatives to find manufacturers
  • Other market surveys or research conducted
• A copy of the Statement of Work if contracts are expected to exceed $500,000
   

Individual waivers are contract-specific, must be utilized within one year of issuance, and expire at the end of the contract. You may request an individual waiver for more than one product on a contract. You must include the required information for each product. Submit your request for an individual waiver of the nonmanufacturer rule to nmrwaivers@sba.gov. Or mail your request to:

Attn: Director for Government Contracting
U.S. Small Business Administration
409 3rd St., SW
Mail Code 6700, 8th Floor
Washington, DC 20416

The regulations that govern the nonmanufacturer rule are provided in the Code of Federal Regulations (C.F.R) and in the Federal Acquisition Regulation (FAR).

• FAR 19.001: Size Standards Explanation of Terms
• FAR 19.102: Size Standards
• 13 C.F.R. § 19.1507: Limitations on Subcontracting and Nonmanufacturer Rule
• FAR 52.219-1(a)(3): Small Business Program Representations
• 13 C.F.R. § 121.406: The Nonmanufacturer Rule
• 13 C.F.R. § 121.1201 - §121.1206: Waivers for the Nonmanufacturer Rule
• 13 C.F.R. § 125.18(c): SDVO SBC Affiliates
• 13 C.F.R. § 127.504(f): EDWOSB and WOSB
• 13 C.F.R. § 126.601 (c): HUBZones

Office of Government Contracting
409 3rd St. SW, 8th Floor
Washington, DC 20416