A federal contract performed entirely in Tonga is exempt from the subcontracting plan requirement under FAR 19.702(b)(3), which excuses contracts performed entirely outside the United States and its outlying areas.1Acquisition.GOV. FAR 19.702 – Statutory Requirements Tonga is an independent Pacific island nation and sits outside both categories, so a large-business prime contractor working there does not have to submit the plan that would otherwise attach to a contract of that size.
Why Tonga Falls Outside the Rule
FAR 2.101 defines “United States” as the 50 states and the District of Columbia. “Outlying areas” is a defined list: the commonwealths of Puerto Rico and the Northern Mariana Islands; the territories of American Samoa, Guam, and the U.S. Virgin Islands; and minor outlying islands including Wake Atoll, Midway Islands, and Palmyra Atoll.2Acquisition.GOV. FAR 2.101 – Definitions Tonga appears nowhere on that list. The exemption turns on geography, not on who holds the contract, so a U.S.-based large business performing in Tonga gets the same treatment as a Tongan firm.
The Word “Entirely” Does the Work
The regulation says “entirely outside,” and it means it. If any meaningful portion of the contract is performed in the United States, the exemption collapses and the standard subcontracting plan rules apply to the full contract.1Acquisition.GOV. FAR 19.702 – Statutory Requirements Preliminary design at a stateside office, testing at a U.S. facility, integration work back home before shipment — any of these can pull the contract back inside the rule.
If your performance is split between Tonga and the United States and the contract clears the dollar thresholds, assume you need a plan.
When a Plan Would Otherwise Be Required
Even without the overseas exemption, a subcontracting plan is only triggered when two things line up: the contract exceeds a dollar threshold, and the work offers subcontracting possibilities. As of October 1, 2025, the thresholds are $900,000 for most contracts and $2 million for construction contracts, and they apply equally to negotiated and sealed-bid acquisitions, including modifications that push a contract’s value over the line.3Acquisition.GOV. Threshold Changes – October 1st, 20251Acquisition.GOV. FAR 19.702 – Statutory Requirements
Three other exemptions in FAR 19.702(b) may also cover you before you ever reach the Tonga analysis:
- Small business concerns are exempt regardless of contract size or performance location.
- Personal services contracts are exempt.
- Modifications within the original scope of a contract that does not already contain the small business utilization clause at FAR 52.219-8 are exempt.
These exemptions stand on their own. A small business performing in Tonga qualifies twice over, and either ground would be enough by itself.1Acquisition.GOV. FAR 19.702 – Statutory Requirements
What Getting It Wrong Costs
If a plan was required and you either failed to submit one or failed to make a good-faith effort to meet its goals, the government can assess liquidated damages equal to the dollar shortfall between what you committed to subcontract to small businesses and what you actually subcontracted.4Acquisition.GOV. FAR 52.219-16 – Liquidated Damages – Subcontracting Plan Missing the goals is not itself the trigger. The contracting officer weighs the contractor’s overall effort, and factors like the unavailability of qualified small business subcontractors can justify a shortfall.5eCFR. 48 CFR 19.705-7 – Compliance With the Subcontracting Plan Ignoring the plan is what draws the penalty.
Tongan Law Still Applies
The FAR exemption is only about U.S. subcontracting rules. A contractor operating in Tonga still has to work through the country’s own requirements, which include business entity registration, foreign investment certification, business licensing, tax registration, employer registration, and any sector-specific permits.6Invest Tonga. Step-by-Step Guide to Starting a Business Read your contract clauses closely as well, since a contracting officer can impose requirements beyond the FAR baseline.