Nonmanufacturer Rule

The Nonmanufacturer Rule is an SBA regulation under 13 CFR 121.406 that applies to small business set-aside contracts for the procurement of supplies. It requires that a small business offeror either manufacture the product itself or supply the product of a small business manufacturer or processor, preventing large manufacturers from routing supply contracts through small business resellers to capture set-aside awards.

What is the Nonmanufacturer Rule?

On supply contracts set aside for small businesses, the SBA's Nonmanufacturer Rule imposes two requirements. First, the offeror must be a small business under the size standard for the NAICS code assigned to the solicitation. Second, if the offeror is not itself the manufacturer of the supplies being delivered, it must supply the products of a domestic small business manufacturer or processor. This means a small business reseller or dealer can qualify for a supply set-aside only if its supplier is also a small business manufacturer.

The rule applies to supply contracts; it does not apply to service contracts, which instead are governed by the limitations on subcontracting rules regarding performance of work by the small business prime. For supply contracts, the NAICS size standard for the manufacturer (not the dealer/reseller) governs whether the supplier qualifies.

The SBA maintains a Nonmanufacturer Rule waiver process. If no small business manufacturers exist for a particular item, the SBA may grant a class waiver (applying to all procurements of that item) or an individual waiver (for a specific acquisition). With a waiver in place, a small business reseller can supply the product of a large manufacturer and still qualify for the set-aside. Contracting officers must request individual waivers from the SBA's Office of Government Contracting before award.

Why the Nonmanufacturer Rule Matters for Government Contractors

Small business supply dealers and distributors must understand this rule before pursuing supply set-asides. Certifying compliance without verifying that your supplier qualifies as a small business manufacturer is a misrepresentation that can lead to False Claims Act liability and debarment. Conversely, dealers whose suppliers qualify can legitimately pursue set-aside supply contracts. Checking whether an existing product line has a class waiver, which the SBA publishes publicly, is an essential pre-proposal research step.

Example

A small business office supply dealer competes on a total small business set-aside for toner cartridges. Its primary supplier is a large Korean manufacturer. Without a Nonmanufacturer Rule class waiver covering toner cartridges, the dealer cannot qualify for the set-aside because its supplier is neither domestic nor small. The dealer must either source from a qualifying domestic small manufacturer or confirm a class waiver exists for the product before certifying compliance.

Frequently Asked Questions

Does the Nonmanufacturer Rule apply to service contracts?

No. The Nonmanufacturer Rule applies specifically to supply contracts, contracts for the delivery of goods or products. Service contracts are governed by separate limitations on subcontracting rules that require the small business prime to perform a minimum percentage of the work. A contract that is primarily for services but incidentally includes some supplies is generally evaluated under the service contract rules.

How do I find out if a class waiver exists for the product I supply?

The SBA publishes a current list of approved Nonmanufacturer Rule class waivers on its website. Contracting officers and small business offerors can search this list by product description or FSC/PSC code before the solicitation closes. If no class waiver exists and no qualifying domestic small manufacturers are available, the contracting officer must request an individual waiver from the SBA before the set-aside can proceed with large manufacturer products.

What size standard applies when evaluating whether the manufacturer is small?

The applicable size standard is based on the NAICS code assigned to the manufacturing activity, which may be different from the NAICS code assigned to the overall supply contract for the dealer. The dealer uses the supply/trade NAICS code to determine its own eligibility; the SBA uses the manufacturing NAICS code to evaluate whether the product's manufacturer qualifies as small under the Nonmanufacturer Rule.

Can a small business offeror supply its own products and also act as a reseller of another manufacturer's products under the same contract?

Yes, a firm can be both a manufacturer for some contract line items and a compliant reseller for others, provided that any resold items come from domestic small manufacturers or are covered by a class waiver. The firm must track compliance at the CLIN level and maintain documentation identifying the manufacturer for each item type being supplied under the contract.