How does the Government determine if a threshold applies to an acquisition?

Most often acquisition thresholds apply at the contract level. When that's the case, the Contracting Officer must use the total aggregate dollar value of the known requirement, to include all options. The total aggregate dollar value can be derived from--

✅ The Independent Government Cost Estimate (IGCE),

✅ The ceiling amount in the case of an Indefinite-Delivery Vehicle (IDV). The ceiling is based on historical, known, and anticipated utilization of the contract vehicle.

✅ Other means documented in the formal acquisition strategy or formal acquisition plan.

The total aggregated dollar value of the known requirement is then bounced against the threshold in the Federal Acquisition Regulation (FAR) and FAR's instructions as to how the threshold should be applied (i.e., if the dollar value is over or under the acquisition threshold).

Here is an example:

The Government has a known requirement for environmental cleanup of a Formerly Used Defense Site (FUDS) (a service acquisition) totaling $1M. The acquisition is going out full and open (unrestricted). The threshold for requiring a subcontracting plan is $750,000*, therefore FAR clause 52.219-9 Small Business Subcontracting Plan is required to be included in the solicitation and resultant contract. Should a large business be the otherwise successful offeror, they must submit a small business subcontracting plan prior to award for review and approval by the Contracting Officer. Submission is usually part of the price proposal but can be once notified prior to award, based on solicitation instructions.

In some cases thresholds may apply to a certain dollar thresholds for a subcontract, a portion of the work (like only the services portion of the effort), or materials (I'm it here a bit). When that's the case, the FAR will indicate what the particular dollar threshold should be measured against for purposes of the application of the threshold.

*This threshold is subject to inflationary increase based on the proposed rule published on 11/29/2024 (FAR Case 2024-001 found at https://www.federalregister.gov/documents/2024/11/29/2024-27851/federal-acquisition-regulation-inflation-adjustment-of-acquisition-related-thresholds.