Can Agency Set Subcontracting Limits on Unrestricted Procurements?

Previously there was a thread on Any Subcontracting Limits on Unrestricted Procurements, see /legacy/reg/37ca19c0701d12bb.html.

To take it a step further, my question is, Can an agency deliberately set a subcontracting limit on a procurement? Can an agency require that the prime contractor not subcontract at all? I'm thinking that the standard for whether this is OK or not is if the requirement is "reasonable."

Here is an example in which a blanket restriction on subcontracting might be considered reasonable: for IT cloud computing IaaS/PaaS/SaaS services, including data storage and maintenance, it is quite a risk for an agency to allow a contractor to subcontract out this work, because what if the subcontractor refuses to return government data to the agency? Then the agency will lack privity of contract with the sub and it will likely halt the agency's performance of its mission.

Does anyone see anything wrong with doing it this way?

Any requirement (i.e. restriction) established by the Government can be challenged as non-competitive. If the requirement is challenged, the Gov?t must demonstrate that the requirement is reasonably related to its needs. See this extract from a GAO decision published today - Airforce Turbine Service, Ltd., B-404478, Feb. 16, 2011:

Quote

The determination of a contracting agency's needs and the best method of accommodating them are matters primarily within the agency's discretion. Systems Application & Techs., Inc., B-270672, Apr. 8, 1996, 96-1 CPD para. 182 at 3. However, where a protester challenges a specification as unduly restrictive of competition, we will review the record to determine whether the restrictions imposed are reasonably related to the agency's needs. Id.; LBM, Inc., B-286271, Dec. 1, 2000, 2000 CPD para. 194 at 3.

Unquote

If you can demonstrate that a prohibition against subcontracting in the Cloud is necessary to meeting your agency mission, you will be OK.

At first blush, I don?t think you can support the prohibition, but I am not an ITer. Is subcontracting for data storage prohibited now? Don?t Gov?t contracts for data storage on terra firma present the same issue you raise? Would you not have the same remedies against a prime that subcontracted the work?

napolik wrote:

At first blush, I don?t think you can support the prohibition, but I am not an ITer. Is subcontracting for data storage prohibited now? Don?t Gov?t contracts for data storage on terra firma present the same issue you raise? Would you not have the same remedies against a prime that subcontracted the work?

My answer:

Well, to be practical, even though the agency could pursue its remedy against the prime ktr, in reality, the agency would be going without its precious Government Data, probably for months or years (litigation can be very slow), and in essence, the agency could not perform its mission.

napolik wrote:

At first blush, I don?t think you can support the prohibition, but I am not an ITer. Is subcontracting for data storage prohibited now? Don?t Gov?t contracts for data storage on terra firma present the same issue you raise? Would you not have the same remedies against a prime that subcontracted the work?

My answer:

Well, to be practical, even though the agency could pursue its remedy against the prime ktr, in reality, the agency would be going without its precious Government Data, probably for months or years (litigation can be very slow), and in essence, the agency could not perform its mission.

It appears that subcontracting in the Cloud is not uncommon in the commercial world: https://www.infosecisland.com/blogview/8738...-of-Rights.html

In a recent solicitation we prohibited the prime from subcontracting more than 50% of the work

In a recent solicitation we prohibited the prime from subcontracting more than 50% of the work

Lacylu:

Did you get any objection from the pool of offerors/vendors? How did you justify this restriction as reasonable?

In a recent solicitation we prohibited the prime from subcontracting more than 50% of the work

Was this a set-aside contract?