The Small Business Administration (SBA) issued a class waiver of the non-manufacturer rule (NMR) on March 9, 2020. Effective April 8, 2020, it waives the NMR for commercially available off-the-shelf (COTS) laptop and tablet computers. The waiver is great news for small business resellers in the IT industry because the waiver will make it easier for these small businesses to comply with the NMR when reselling COTS laptops and tablets to federal agencies.

For some background, the NMR is an exception to the requirement that prime contractors on small business set-aside contracts supplying products—not construction or services—to the government perform at least 50 percent of the cost of manufacturing those products. The NMR allows a small business to supply products it did not manufacture with the caveat that those products must be made by another small business—unless SBA issues a waiver. If SBA issues a waiver, small business resellers may qualify under the NMR if the product they resell is made by a large business.

SBA issues two types of waivers, individual and class waivers. While only the contracting officer may request an individual waiver from SBA for a particular contract, anyone can ask SBA to issue a class waiver. If there are no small business manufacturers available to participate in the federal market for a class of products, SBA will waive the NMR for that class of products. PilieroMazza has submitted several requests for class waivers to SBA, including the request that resulted in the new class waiver for COTS laptops and tablets.

This class waiver is specifically limited to COTS laptops and tablet computers procured by the government. COTS is defined under the FAR as any item or supply, including construction material (but not bulk cargo), that is:

  • A commercial item;
  • Sold in substantial quantities in the commercial marketplace; and
  • Offered to the government, under a contract or subcontract at any tier, without modification, in the same form in which it is sold in the commercial marketplace.

The class waiver will allow small business nonmanufacturers to resell COTS laptops and tablets on set-aside contracts regardless of whether the COTS laptop or tablet manufacturer is a large or small business. This will make it easier for small business nonmanufacturers to resell COTS laptops and tablets to federal agencies, and should encourage more federal agencies to procure these common IT products via small business set-aside contracts.

The class waiver will also make it easier for small business nonmanufacturers to comply with the NMR. SBA is expected to increase scrutiny of NMR compliance as part of a growing focus on compliance with the limitations on subcontracting, particularly for new multiple-award indefinite-delivery, indefinite-quantity contracts. Therefore, we expect this waiver to be a big help for small business nonmanufacturers.

PilieroMazza prepared and submitted the related request for this waiver and is experienced at obtaining class waivers. If you make or resell a product that you believe could be covered under a class waiver of the NMR, or if you would like assistance with NMR compliance, please contact Jon Williams at [email protected] or 202.857.1000 to discuss.

Jon Williams, the author of this blog, is a Partner in the Firm’s Government Contracts, Cybersecurity & Data Privacy, and Small Business Programs & Advisory Services practice groups.