SBA Seeks Commentary on Nonmanufacturer Rule

On August 18, 2025, the Small Business Administration (SBA) published a notice of tribal consultation to be held in Michigan on September 17, 2025. In addition to seeking input from the Native American community on the management and operation of SBA’s Capital Access and Government Contracting and Business Development programs, SBA is focusing on the nonmanufacturer rule (NMR).

The NMR generally requires that, on small business set-aside supply contracts, the prime contractor must provide the product of a small business manufacturer (or processor) if the prime itself is not the manufacturer (or processor) of the product. Currently, agencies report the full value of the prime contract as small business spend. SBA reports that it has received conflicting information about the propriety of the NMR. SBA has received some input that the “NMR unnecessarily increases the price of manufactured items purchased by the Government” but has also been told that “nonmanufacturers play an integral role in assisting the Government [to] procure manufactured items when original manufacturers do not wish to deal directly with the Government.”

SBA is specifically seeking comments as part of this tribal consultation on: (1) the role of nonmanufacturers, (2) whether there should be any limitations imposed on the NMR, and (3) whether the entire value of manufactured items should count as small business spend, or if “only the portion added by the small business nonmanufacturer” should be counted.

In addition to small business manufacturers and small businesses that rely on the NMR to sell supplies to the government, original equipment manufacturers and large business resellers should note that SBA appears to be reconsidering its reliance on small business nonmanufacturers. While SBA is posing these questions in the context of a tribal consultation at which participation is limited, contractors may want to explore other routes to communicate their views on the NMR.