This bill removes the requirement that certain construction subcontracts awarded under the Small Business Act must be given to businesses located within the county or state where the work is performed.
Dan Sullivan
Senator
AK
This bill amends the Small Business Act to eliminate the requirement that certain construction subcontracts must be awarded to businesses located within the county or state where the work is performed. By repealing this outdated local subcontracting rule, the legislation grants federal agencies and small businesses greater flexibility in selecting subcontractors. This change removes geographical restrictions on awarding construction subcontracts under specific small business programs.
Federal Bill Ends Requirement for Construction Subcontracts to Stay Local, Opening Up Competition Nationwide
This bill is short and to the point: it eliminates an existing rule in the Small Business Act that required certain federal construction subcontracts to be awarded only to businesses located within the same county or state as the project. Essentially, the geographical guardrails are coming down on federal construction subcontracts awarded through the Section 8(a) program.
Construction Gets Flexible
For years, if a small business won a federal construction contract under the 8(a) program, they were often required to hire their subcontractors—think electricians, plumbers, or specialized roofers—from within the immediate area. This was meant to boost local economies. By repealing paragraph (11) of section 8(a) of the Small Business Act, the government is scrapping that local preference mandate. This means that a prime contractor building a new facility in rural Ohio could now hire a specialized subcontractor from, say, Texas or New York, if that company offers a better price or unique expertise.
Who Wins and Who Pays?
This change immediately increases the pool of potential bidders for federal construction subcontracts. For prime contractors and the federal agencies running the projects, this is a win for flexibility and potentially for the bottom line. Increased competition usually means lower prices, which could save taxpayer money on federally funded projects. Plus, if a project requires highly specialized work—like installing complex medical equipment or unique environmental systems—the prime contractor is no longer restricted to using only the talent available within a 50-mile radius.
However, the real-world impact hits local businesses that relied on the old rule. If you run a small, local construction firm that specializes in foundation work, you previously had a guaranteed advantage when bidding on subcontracts in your county. Now, you’re competing against every qualified firm in the country. This shift removes a protective layer for local economies and could make it harder for small, local companies to secure these government contracts, potentially shifting jobs and revenue away from the immediate project area. It’s a classic trade-off: efficiency and cost savings versus mandated local economic support.