Explainer: The SBA's New Subcontracting Rule--and Penalties for NoncomplianceTwenty-three percent of all government contracting dollars must go toward small businesses. A new rule from the SBA is out to ensure they get their due.

Noncompliant small federal contractors may face increased penalties due to the Small Business Administration's new ruling, which enforces further restrictions on businesses accessing the agency's set-aside programs. 

The rule sets limitations on subcontracting for small-business prime contractors to ensure the intended purpose of supplying work to small federal contractors is met. The SBA aims to prevent small businesses from acting as a front for larger companies by clarifying requirements for choosing third-party providers. 

The rule puts the SBA's guidelines in line with Federal Acquisition Regulation and includes penalties for noncompliance, which may affect a firm's ability to obtain a contract in the future. However, there are some extenuating circumstances outlined in the rule that may negate a negative rating. 

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