52.226-5
Restrictions on Subcontracting Outside Disaster or Emergency Area
FAR 52.226-5 requires contractors to perform a minimum percentage of contract work within the designated disaster or emergency area, ensuring local economic benefit.
Overview
FAR 52.226-5 establishes restrictions on subcontracting for contracts set aside for disaster or emergency areas. Its primary purpose is to ensure that a significant portion of contract performance benefits businesses and workers located within the designated disaster or emergency area. The clause sets minimum percentages of contract work that must be performed by the contractor or by other businesses residing or primarily operating in the set-aside area, depending on the type of contract (services, supplies, general construction, or special trade construction).
Key Rules
- Services Contracts (Except Construction)
- At least 50% of the cost of contract performance for personnel must be expended on employees of the contractor or other businesses in the designated area.
- Supply Contracts (Other Than Nonmanufacturers)
- At least 50% of the cost of manufacturing (excluding materials) must be performed by the contractor or other businesses in the set-aside area.
- General Construction Contracts
- At least 15% of the contract cost (excluding materials) must be performed by the contractor or other businesses in the set-aside area.
- Special Trade Construction Contracts
- At least 25% of the contract cost (excluding materials) must be performed by the contractor or other businesses in the set-aside area.
Responsibilities
- Contracting Officers: Must include this clause in applicable contracts and monitor compliance.
- Contractors: Must ensure required percentages of work are performed by themselves or qualifying local businesses.
- Agencies: Oversee and enforce compliance with subcontracting restrictions.
Practical Implications
- This clause is designed to stimulate economic recovery in disaster/emergency areas by directing contract dollars to local businesses and workers.
- Contractors must carefully track and document the location and percentage of work performed to ensure compliance.
- Noncompliance can result in contract penalties or termination.