Limitations on Subcontracting
Limitations on subcontracting cap what a small business prime on a set-aside contract may pay subcontractors that are not similarly situated: 50 percent of the amount the government pays for services and supplies, 85 percent for general construction, 75 percent for special trade construction.
On a set-aside or sole-source award under a small business program, the prime must self-perform a minimum share of the work, measured in dollars paid rather than hours or tasks. For services, no more than 50 percent of what the government pays the prime may flow to subcontractors that are not similarly situated. Supplies use the same 50 percent excluding the cost of materials; general construction allows 85 percent and special trade 75 percent, both excluding materials.
Similarly situated entities are the release valve. A first-tier subcontractor holding the same program status as the award and small under the assigned NAICS code does not count against the cap — but only for work it performs itself; dollars it passes down a tier count as if the prime had subcontracted them directly. Compliance is measured over the base term, then each option period.
The statutory penalty is the greater of $500,000 or the dollars spent beyond the permitted level (15 U.S.C. 645(d)), which turns sloppy workshare tracking into an enforcement problem rather than a paperwork one.
Regulatory Reference
15 U.S.C. 657s; 15 U.S.C. 645(d); 13 CFR 125.6; FAR 19.505; FAR 52.219-14
RFO Status
The RFO Part 19 model deviation rebuilds the part around three subparts and moves the clause prescription to 19.104-3(c); the percentages are statutory and carry over unchanged.
Category
Regulations & Policy
How AcqBot Helps
AcqBot applies the correct limitations clause to each set-aside, then gives the contracting team a dollars-paid view of prime versus subcontractor performance so compliance checks under 13 CFR 125.6 rest on payment data instead of the prime's assurances.
Related glossary entries
Class Deviation
A class deviation authorizes an agency to depart from specific FAR or supplement provisions for a category of contract actions rather than a single case — the mechanism agencies are using to implement the Revolutionary FAR Overhaul ahead of formal rulemaking.
Commercial Products and Services (FAR Part 12)
Commercial products and commercial services are items of a type sold, leased, licensed, or offered in the commercial marketplace, defined at FAR 2.101. FAR Part 12 implements the statutory preference for buying them whenever market research shows they can meet the agency's need.
Rule of Two
The rule of two directs a contracting officer to set aside an acquisition for small business when there is a reasonable expectation of receiving offers from at least two responsible small business concerns and making award at fair market prices, per FAR 19.502-2.
Controlled Unclassified Information (CUI)
Controlled Unclassified Information (CUI) is information the government creates or possesses, or that an entity handles on its behalf, that a law, regulation, or governmentwide policy requires safeguarding or dissemination controls for — sensitive but not classified, governed by 32 CFR Part 2002.