This bill eliminates the requirement for small businesses awarded certain construction contracts to award subcontracts only to businesses located within the county or state of performance.
Nicholas Begich
Representative
AK
This bill amends the Small Business Act to eliminate the requirement that recipients of certain construction contracts must award subcontracts to businesses located within the county or state of performance. By repealing this outdated rule, the legislation removes a geographic restriction on subcontracting for small businesses awarded these contracts. This change aims to provide greater flexibility in awarding construction subcontracts.
Federal Bill Cuts Local Hiring Rule for Small Business Construction Contracts: What It Means for Local Crews
This bill is simple, direct, and cuts straight to the point: it eliminates a federal requirement that forced small businesses with certain construction contracts to hire subcontractors located within the county or state where the project was taking place. Specifically, it targets a section of the Small Business Act (15 U.S.C. 637(a)(11)) that applied to small businesses receiving contracts under the 8(a) program. If you’re a prime contractor, this means you just got a significant amount of freedom back in how you staff your jobs.
More Freedom, Fewer Forms: The Prime Contractor View
For the small business owner who wins a federal construction contract, this change is all about flexibility. Before this bill, if you won a contract to build a facility in rural Ohio, you were legally required to find and hire local subcontractors, even if they weren't the best fit or the most affordable option. This bill removes that geographic mandate entirely. Now, prime contractors can select subcontractors based purely on expertise, cost efficiency, or established working relationships, regardless of where the sub is headquartered. This potentially speeds up the contracting process and might lower overall project costs by allowing the prime to shop around for the best value.
The Trade-Off: Local Crews Lose Their Edge
While prime contractors gain flexibility, this bill changes the game for local subcontractors. That old requirement was essentially a protection designed to ensure federal dollars stimulated the economy right where the construction was happening. For a local electrician or plumbing firm in a small town, that rule meant guaranteed consideration—and often, guaranteed work—on major federal projects in their backyard. With that protection gone (SEC. 1.), those local businesses now have to compete directly with firms from anywhere in the country. If you’re a local sub, your proximity to the job site is no longer a guaranteed advantage; you'll need to focus even more on competitive pricing and specialized skills to win bids.
Why This Matters for the Rest of Us
This legislation is a classic trade-off between efficiency and local economic support. On one hand, removing the mandate could lead to more efficient, potentially cheaper execution of federal projects, which is good for taxpayers. On the other hand, it shifts economic activity away from a guaranteed local spend. If a prime contractor from Texas wins a contract in Montana, they can now bring their trusted, cheaper subcontractor from Texas instead of having to partner with a local Montana crew. This increases the operational freedom for the prime contractor but removes a layer of economic insulation for local communities that relied on those federal contracts to keep local construction firms busy. It’s a move that prioritizes the efficiency of the small business prime contractor over the localized economic benefit of the subcontracting pool.