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Nonmanufacturer Rule (NMR) & What it Means to You

Updated: Oct 2, 2023

Whenever the Government procures goods or services over the Simplified Acquisition Threshold and uses a small business set-aside, the contractor must cover at least 50% of the cost of manufacture and the final product must be made in the United States. The manufacturer is the company that with its own facilities performs the primary activities in transforming inorganic or organic substances, including the assembly of parts and components, into the end item being acquired.

If you are a small business that provides products or other supply items to the Government, you may not be the manufacturer of those items but instead a reseller or wholesaler. What are your chances of competing in those procurements?

The Nonmanufacturer Rule (NMR) is an exception to the manufacturing requirement. The NMR allows a small business to supply products it did not manufacture -- as long as those products come from another small business. A contractor may qualify as a small business nonmanufacturer if it:

  • Does not exceed 500 employees;

  • Is primarily engaged in the retail or wholesale trade and normally sells the type of item being supplied;

  • Takes ownership or possession of the item(s) with its personnel, equipment or facilities in a manner consistent with industry practice; and

  • Will supply the end item of a small business manufacturer, processor or producer made in the United States, or obtains a waiver of such requirement.

The NMR does not apply to contracts that have been assigned a service, construction, or specialty trade construction NAICS code. If a requirement is classified as a service or construction contract but also has a supply component, the NMR does not apply to the supply component of the requirement. The NMR also does not apply to small business subcontractors.

If the SBA determines that there are no small business manufacturers available to supply a product, it may waive the NMR. There are two types of waivers: class and individual. The SBA may issue a class waiver when no small business manufacturer exists for a class of products. Anyone can request a class waiver. Class waivers remain in place until the SBA is notified of a small business manufacturer that can provide the product to the government. Current class waivers can be found at:

The SBA may issue an individual waiver when there is no small business manufacturer that can meet the requirements of a specific contract. The Procuring Contracting Officer is the only one who can request an individual waiver. Individual waivers expire at the end of the contract and may be requested for more than one product on a contract. An SBA waiver of the NMR has no effect on requirements external to the Small Business Act which involve domestic sources of supply, such as the Buy American Act or the Trade Agreements Act.

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