Government contractors must navigate various regulations to ensure compliance when pursuing and managing federal contracts. One such regulation is the Non-Manufacturer Rule (NMR), which plays a significant role in determining a contractor’s eligibility to supply products they do not produce themselves. Understanding the NMR is crucial for businesses looking to participate in small business set-asides and sole-source contracts, as it allows nonmanufacturers to supply products as long as they meet specific criteria.

The NMR rule allows small businesses to supply products for set-aside or sole source contracts that they did not produce or manufacture as long as those products come from another small business.  The SBA can grant a waiver with the approval of the Contracting Officer, this waiver is valid for the term of the contract but cannot exceed a five-year period. The Nonmanufacturer rule is specified in FAR 52.219.33 for reference.

A manufacturer is considered a business that, with its own facilities, performs manufacturing processes to include the assembly of parts and components, resulting in a product being produced.

A Nonmanufacturer Small Business Must Meet the Following Requirements:

• Does not exceed the 500-employee alternative size standard for nonmanufacturers
• Is primarily engaged in the retail or wholesale trade and normally sells the type of products being supplied
• Takes ownership or possession of the item(s) with its personnel, equipment, or facilities in a manner consistent with industry practice
• Supplies the end products of a small business manufacturer or processor made in the United States, or obtains a waiver of such requirement

However, if the procurement is for multiple items and less than 50% of the estimated contract value is composed of items that are manufactured by other than small business concerns, you can still meet the requirement.

Impact of the Non-Manufacturer Rule on GSA Schedule Holders

GSA Schedule holders should be aware of how the Non-Manufacturer Rule (NMR) applies when adding new products or processing modifications to their GSA contracts. The NMR can significantly affect a contractor’s ability to supply products they do not manufacture themselves. When a GSA Schedule holder wants to add new products to their existing contract, they must ensure that the products meet the criteria outlined in the NMR if those products are sourced from non-manufacturers.

On the GSA contract level, the NMR should not affect the addition of products, but you will need to demonstrate compliance on task orders that are set-aside for small business and meet the dollar thresholds. This is particularly important for contractors who are looking to expand their offerings but are not involved in the manufacturing of certain products. If the products are from other than small businesses, the contractor may need to submit a request for an individual waiver, which would involve providing the necessary documentation and market research to show that no small business manufacturer is available to meet the procurement specifications.

Does the NMR Rule Apply to All Small Business?

The nonmanufacturer rule does not apply to small business set-aside contracts between the micro-purchase threshold and the simplified acquisition threshold ($250,000) or to Service and Construction NAICS (except for the ITVAR exception to NAICS code 541519). For service NAICS, the limitations on subcontracting rules would apply.

If the SBA determines that there are no small businesses available to supply a product it may decide to waive the nonmanufacturer rule. There are two types of waivers, class and individual.

Class waivers are granted when there are no small businesses that have submitted, performed or been awarded an offer on a solicitation for a particular class of product(s) within the previous two years. Anyone can submit a request for a class waiver here nmrwaivers@sba.gov. If you are unsure if a class waiver exists, the SBA maintains a list of all active class waivers.

Individual Waivers are issued when there are no small businesses that can meet the requirements of a specific contract, these waivers can only be requested by the Contracting Officer. The Contracting Officers request must include the following:

• A definitive statement identifying the specific product for which you’re requesting the waiver
• An explanation addressing why the specific item is required
• The solicitation number for the procurement, the NAICS code, estimated dollar amount of the procurement, and a brief statement of the procurement history
• A determination that no small business manufacturer or processor reasonably can be expected to offer a product meeting the specifications of the solicitation
• A summary of market research detailing efforts to locate a small business manufacturer (not reseller) and provide supporting documentation including:
• The results of your search from SBA’s Dynamic Small Business Search
• The results of your discussions with small business representatives about finding manufacturers
• Other market surveys or research conducted
• A copy of the Statement of Work if contracts are expected to exceed $500,000

Please contact Coley GCS for more information, Coley has 24 years’ experience helping thousands of companies obtain their GSA Schedule. Contact us today by email  at hello@coleygsa.com, by phone at 210-402-6766, or schedule a call  at your convenience to get started on obtaining your GSA Schedule—a critical step on your road to success in the government market.  If you’re a government contractor looking for business development resources, check out FedMap.us, the number one growth-focused online community for government contractors looking to Accelerate their Growth.