52.219-14
Limitations on Subcontracting
Small business prime contractors must perform a minimum percentage of work on set-aside and sole-source contracts, limiting the amount subcontracted to non-similarly situated entities.
Overview
FAR 52.219-14, Limitations on Subcontracting, establishes the percentage of contract work that small business prime contractors must perform on set-aside and sole-source contracts, as well as certain orders, to prevent excessive subcontracting to non-similarly situated entities. The clause defines key terms, outlines specific percentage limitations based on contract type (services, supplies, general construction, and special trade construction), and details how these limitations apply to joint ventures and orders under multiple-award contracts. It also clarifies compliance timing and the treatment of independent contractors as subcontractors.
Key Rules
- Applicability
- Applies to set-aside and sole-source contracts for small business concerns, certain orders under multiple-award contracts, and contracts using the HUBZone price evaluation preference (unless waived).
- Limitations on Subcontracting
- For services (except construction): No more than 50% of contract value (excluding similarly situated entities) may be subcontracted.
- For supplies: No more than 50% (excluding cost of materials and similarly situated entities).
- For general construction: No more than 85% (excluding cost of materials and similarly situated entities).
- For special trade construction: No more than 75% (excluding cost of materials and similarly situated entities).
- Similarly Situated Entities
- Subcontracts to entities with the same small business program status and size standard do not count toward the limitation.
- Joint Ventures
- Aggregate work by joint venture participants counts toward the limitation; small business protégés or 8(a) participants must perform at least 40% of the joint venture’s work (excluding administrative functions).
- Compliance Timing
- Contractors must meet the limitation by the end of the base term/option period or by the end of each order, as specified by the Contracting Officer.
Responsibilities
- Contracting Officers: Must specify compliance timing and ensure the clause is included in applicable contracts.
- Contractors: Must track and limit subcontracting to non-similarly situated entities, ensure compliance with percentage thresholds, and maintain documentation.
- Agencies: Oversee compliance and enforce limitations during contract performance.
Practical Implications
- Ensures small businesses perform a significant portion of set-aside contracts, preventing pass-through arrangements.
- Contractors must carefully monitor subcontracting relationships and percentages throughout contract performance.
- Non-compliance can result in contract termination, penalties, or loss of future contracting opportunities.