Limitations on Subcontracting

Quick response and did not check out this reference myself but take a look at 13 CFR 125.6 and see if answers your question.

@lotus There have been many detailed changes to this policy both in the Small Business Act and the implementing SBA regulations at Title 13 of the Code of Federal Regulations. There are several variables, including the type of contract or set-aside and the date of the clause in your contract (as opposed to the current FAR clause or current SBA regulation), which may affect the answer.

There is also a raging controversy over whether to follow the FAR clause in your contract or the SBA's latest regulatory implementation at Title 13 of the Code of Federal Regulations. PepeTheFrog's opinion is that you should follow the FAR clause in your contract and the SBA's regulatory implementation at the time your contract was signed, but that is just an opinion.

In short, your question is much more complex than you may have considered. The rabbit hole might be too deep for someone on Wifcon to research this for you, and the question may be too consequential for you to rely on someone else's research.

As a related piece of advice to you and any other contractor that is being challenged by the government on compliance with the limitation on subcontracting clause(s):

Ask the government to show you where your contract states that you are required to provide the information they request. The dirty secret is that most versions of the clause require the contractor to comply, but there is nothing requiring the contractor to provide proof of compliance. Therefore, a shrewd contractor can just repeat that they are in compliance and provide no further information.

@PepeTheFrog,

There is now a Data Item Document for "Small Business Utilization Report." A reporting requirement could be in a CDRL.

Clause 52.232-5   Payments Under Fixed-Price Construction Contracts requires the prime to list the total amount of subcontracts and payments to each subcontractor included in progress payments.

I don’t know current contract requirements that might require the prime to categorize each subcontractor’s socioeconomic status . However, it isn’t difficult to determine if specific firms are similarly situated. 

Edit: ah you are inquiring about the legacy clauses -  regarding how to calculate cost of personnel...

DoD has issued a deviation to the various FAR clauses that impose a limitation on subcontracting.  That deviation adopts the current SBA guidance as the guidance applicable to DoD contracts and orders issued after Dec. 3, 2018.

My understanding is that it is measured in a manner similar to this.  Please let me know if you know otherwise.

Total Amount Invoiced (not contract value or funded value)

minus direct costs of Travel, Materials, and Other Non-Labor Costs (e.g., ODC's), (including such costs passed thru from the sub along with the sub's invoiced indirect costs, which become direct costs to the prime),

equals Cost of Personnel.

      Note that indirect costs on Travel, Materials, and ODC's as part of the Cost of Personnel.  Note also that costs are counted based on Contractor's cost, whether they are invoiced to the Government or not, versus cost to the Government, which would disregard any uninvoiced costs.

      When a sub or other service provider invoices on a lump sum basis that includes Travel, Materials, and ODC's, the whole lump sum is part of the Cost of Personnel.

Lotus, are you dealing with a supply contract or a service contract?

On 1/17/2019 at 11:34 AM, Retreadfed said:

Lotus, are you dealing with a supply contract or a service contract?

I am dealing with a service contract.