Understanding the FAR: A Beginner’s Guide to Government Contracting (Part 20)
Government contracts are not just about procurement—they’re also a powerful tool to promote economic growth and stability. Part 20 of the Federal Acquisition Regulation (FAR) focuses on Labor Surplus Area (LSA) Contracting, a program designed to direct federal contracts to businesses in economically disadvantaged regions. By giving preference to contractors located in LSAs, the government can help stimulate job creation, support struggling communities, and foster economic resilience.
Part 20: Labor Surplus Area Contracting
Part 20 of the FAR outlines the government’s policy to award contracts to businesses located in LSAs. These are regions designated by the Department of Labor as having high unemployment rates or underemployment. Through this program, the federal government helps boost local economies in areas that need it most, giving contractors in these regions a competitive edge in securing federal contracts.
Subpart 20.1 – General Policies for Labor Surplus Area Contracting
Purpose and Policy: The LSA contracting program is intended to encourage job growth and economic revitalization in designated labor surplus areas. By awarding contracts to companies based in these regions, the government can direct economic opportunities to communities that face higher-than-average unemployment or limited economic activity.
LSA Designations: The Department of Labor (DOL) updates the list of LSAs annually. To qualify as an LSA, a geographical area—such as a county or metropolitan region—must meet specific unemployment criteria set by the DOL. These designations ensure that government contracting dollars go where they’re most needed.
Subpart 20.2 – Labor Surplus Area Set-Asides and Preferences
LSA Set-Asides: Similar to small business set-asides, contracting officers can set aside certain contracts exclusively for businesses located in LSAs. This gives qualifying companies an opportunity to compete for government contracts without direct competition from businesses outside LSAs.
LSA Preference: In some cases, contracting officers can apply a preference for LSA businesses, giving them an advantage even if the contract is not entirely set aside. This preference allows LSA businesses to compete more favorably, even if they do not offer the lowest bid, provided that their offers are within a certain range of the lowest offer.
Thresholds for LSA Set-Asides and Preferences: LSA preferences generally apply to contracts above the simplified acquisition threshold but may vary based on agency-specific guidelines and procurement needs.
Subpart 20.3 – Determining Eligibility for LSA Contracting
Eligibility Requirements: To qualify as an LSA contractor, a business must:
- Be located within a designated labor surplus area as defined by the DOL.
- Be able to demonstrate that at least 50% of the contract’s value will be performed within an LSA location, either by the prime contractor or through a subcontractor.
Self-Certification: Contractors are generally required to self-certify their LSA status. Contracting officers may request additional documentation to verify eligibility, particularly if the contractor’s location or staffing is questioned during the evaluation process.
Subpart 20.4 – Compliance and Oversight in LSA Contracts
Ensuring Compliance: Agencies are responsible for ensuring that LSA contractors meet the eligibility requirements throughout the life of the contract. This may include periodic reviews and audits to confirm that the contractor continues to perform work within the LSA.
Subcontracting Requirements: Prime contractors may be required to ensure that their subcontractors meet the LSA requirements. This helps ensure that contract dollars remain within designated labor surplus areas, supporting the primary goal of economic development.
Reporting and Documentation: Contractors awarded LSA contracts or given LSA preferences must maintain records of their work locations, staffing, and expenditures to verify compliance. Contracting officers review these records to confirm that contractors are fulfilling their LSA obligations.
Key Principles for Labor Surplus Area Contracting
Here are some essential principles and best practices for navigating Part 20 of the FAR:
- Stay Updated on LSA Designations: The Department of Labor updates LSA designations annually. Check the current list to determine if your location qualifies as an LSA, and verify that you meet eligibility requirements.
- Use LSA Set-Asides to Your Advantage: If your business is located in an LSA, explore LSA set-asides and preferences to improve your chances of winning government contracts.
- Demonstrate Commitment to LSA Goals: If awarded an LSA contract, keep documentation of your work locations, staffing, and expenditures. This will help demonstrate compliance and prevent challenges to your eligibility.
- Engage Subcontractors Within LSAs: If you’re subcontracting, choose partners within LSAs to help maximize the economic impact in those areas and meet compliance standards.
Practical Application: Case Studies
Let’s explore some hypothetical scenarios to illustrate how these principles apply in real-world situations:
Scenario 1: Competing for an LSA Set-Aside Contract
Your manufacturing business is located in an area with high unemployment, recently designated as an LSA by the Department of Labor. Here’s how you can leverage Part 20:
- Self-Certify LSA Status: You confirm that your business qualifies as an LSA contractor and self-certify your status in your bid proposal.
- Bid on LSA Set-Aside Contract: You pursue an LSA set-aside contract for the production of equipment, giving you an advantage over companies not located in LSAs.
Scenario 2: Ensuring Compliance with LSA Contract Requirements
Your company wins a contract with LSA preferences and must now demonstrate compliance throughout the project. Here’s how you navigate Part 20:
- Documentation of Work Locations: You keep detailed records of where contract-related work is performed, demonstrating that at least 50% of the work occurs within the designated LSA.
- Subcontracting in LSAs: When subcontracting portions of the work, you select subcontractors within LSAs to maximize compliance and align with the government’s objectives for economic development.
Scenario 3: Using LSA Preferences to Win a Competitive Contract
Your business submits a proposal for a federal contract not initially set aside for LSA contractors but eligible for LSA preference. Here’s how you proceed:
- Emphasize LSA Location in Bid: You highlight your LSA location and your commitment to performing the work locally in your proposal.
- Leverage Preference: Even though your bid is slightly higher, your LSA preference helps you secure the contract over competitors located outside of labor surplus areas.
Best Practices for Labor Surplus Area Contracting
Here are some practical tips to help your business stay compliant with Part 20 of the FAR:
- Monitor Annual LSA Designations: Check each year to see if your area qualifies as an LSA, as this could impact your eligibility for certain contracts and preferences.
- Document Work Performed in LSAs: Keep thorough records of work performed and expenditures in LSAs to demonstrate compliance and prepare for any audits.
- Choose LSA Subcontractors When Possible: Using subcontractors within LSAs strengthens your compliance and helps extend the economic benefits of LSA contracts to multiple businesses.
Conclusion
Part 20 of the FAR outlines the government’s commitment to using federal contracts as a means of supporting labor surplus areas. By prioritizing contracts for businesses located in economically distressed regions, the government can encourage job growth, boost local economies, and provide much-needed economic stability in these areas.
If your business is interested in understanding how to qualify for LSA preferences or set-asides, FedBiz Access has helped small businesses navigate government contracting requirements for over 23 years. Schedule a complimentary consultation with a FedBiz Specialist to see if your business qualifies for LSA or other socio-economic certifications and to explore your options in the government marketplace.
In our next installment, we’ll explore Part 22 of the FAR, covering Labor Laws and Policies applicable to government contracting. Stay tuned as we continue to break down the FAR into manageable, understandable sections to help you succeed in government contracting.
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FedBiz Access is the leading government contracting business development and marketing firm that offers research and engagement strategy coaching, registrations, certifications, and GSA Schedules, as well as marketing packages to target government buyers. We have over 23 years of experience working with thousands of small and medium sized businesses worldwide, helping them win over $35.8 billion in awards. From registration to award, FedBiz helps you succeed in the government marketplace. 🦅
Important Note: This information is accurate as of 10/30/2024. The Federal Acquisition Regulation (FAR) is updated regularly.
