Can you resell products to the government? The nonmanufacturer rule, explained
Yes, a small business can win government supply contracts as a reseller, buying from a manufacturer or distributor and delivering to the agency. Many successful small contractors never manufacture anything. The one rule to understand is the nonmanufacturer rule, which decides whose products you may supply on a set-aside.
The rule in one paragraph
On a contract set aside for small businesses, a reseller normally has to supply a product made by a small business (in the United States) to count as a small business itself. That is the nonmanufacturer rule. But it has a large exception that matters most to beginners.
When you can supply any manufacturer's product
On a regular small business set-aside worth between $15,000 and $350,000, the nonmanufacturer rule does not apply. You can supply a large manufacturer's product. Full-and-open (unrestricted) contracts have no such rule either.
When it does apply
- Small business set-asides above $350,000.
- 8(a), service-disabled veteran-owned (SDVOSB), women-owned (WOSB and EDWOSB) and HUBZone set-asides above $15,000.
- In those cases you need a small business manufacturer's product, unless SBA has granted a waiver for that kind of item (SBA keeps a class-waiver list).
What else to check before you resell
- Approved sources: some items can only come from listed manufacturers and part numbers.
- Country of origin: Buy American and Trade Agreements rules can limit where the product is made.
- Authorized distribution: some agencies and items require proof you bought from the manufacturer or an authorized distributor.
- Your margin after shipping, packaging and any fees, and whether you can front the cost until you are paid.
Sources
- 13 CFR 121.406, the nonmanufacturer rule
- FAR 19.505, limitations on subcontracting and nonmanufacturer rule
- SBA nonmanufacturer rule class waivers