Subcontracting percentage for overseas contract

PATRICK3 said:

I know for a fact that Apple can't perform 50% of the work...

Are you the contracting officer? If you know Apple will not comply with the limitation on subcontracting, determine the offeror to be non-responsible and (1) make award to the next in line; or (2) if Apple is a small business, refer the matter to the SBA for a certificate of competency.

Are you an unhappy competitor? File a protest -- your attorney can advise you whether to protest to the GAO or to the SBA.

But, do your homework first.  Does the solicitation contain a limitation on subcontracting? Really? Are you sure? You said it is for an overseas contract, but the FAR Part 19 clauses that normally impose limitations on subcontracting might not apply to contracts outside the United States and its outlying areas. Check your solicitation carefully.

PATRICK3 said:

I have a situation that I need assistance with... I'll use Apple and Best Buy as an example...

Apple is the Prime that submitted a proposal with the Subcontractor (Best Buy). 

The refences listed in their Past Performance was for Best Buy and not for Apple who is the Prime. 

Apple stated that the venture would be split between the two companies at 50/50 and the services would be billed by Apple. 

Basically, Apple has the certifications and is SAM registered, but doesn't have the qualified technicians but Best Buy does, which is why the partnership is happening. 

I know for a fact that Apple can't perform 50% of the work, because they don't have qualified technicians, but are they allowed to win the contract? Doesn't the Prime need to state who would be delegated to oversee the Sub Contractor on site? I was always under the impression that the Prime had to do at least 51% of the work, but I'm not sure where I got that information from. 

This is an LPTA award for services as well with a little over 2 million.

There are only two question marks in that post. They come at the end of these two sentences:

PATRICK3 said:

I know for a fact that Apple can't perform 50% of the work, because they don't have qualified technicians, but are they allowed to win the contract?

The answer to that, based on the scenario, is yes.

PATRICK3 said:

Doesn't the Prime need to state who would be delegated to oversee the Sub Contractor on site?

The answer to that, based on the scenario, is no.

Don't we need to know if this is a set-aside contract, or are we simply assuming that even though it wasn't stated? The 51% rule (or any limitation on subcontracting rule) is for set-asides, not unrestricted solicitations.

The scenario is that the prospective contractor is Apple. The contract can't be a set-aside. In no known universe is Apple a small business.

So -- unrestricted solicitation. The answer to Patrick is no limitation on subcontracting, no 51% or any other rule, Apple can structure its team any way it wants. Whatever he has heard about primes being required to do at least 51% of the work only applies to small business set-asides.

Fara Fasat said:

Whatever he has heard about primes being required to do at least 51% of the work only applies to small business set-asides.

You are misstating a more complicated rule. Read the clause.

I think the original poster used Apple and BestBuy for A and B -- I don't think he used Apple to insist that the winner is a large business.

I asked Patrick (the original poster), "Does the solicitation contain a limitation on subcontracting? Really? Are you sure?"  I am hopeful that he will answer the question.

@ji20874, Yes that's exactly true. I was using Apple as an example. My question was more about can we award to Apple (Not the real company) and have them use the sub (Best Buy) as 50-50? I see that @ji20874stated that I could move on as the CO, but @Vern Edwardsstated that I could still use them. Was that just a suggestion to move on or you feel it's necessary to do so? The Past Performance didn't even have Apple but had the Sub Best Buy. Thanks again to everyone. I'm the CO as well.

Vern Edwards said:

You are misstating a more complicated rule. Read the clause.

Are you talking about 52.219-14? If so, the prescription says that it goes in contracts if any portion is to be set aside for small businesses, i.e., not in a fully unrestricted solicitation. The clause then says that it does not apply to the unrestricted portion of a partial set-aside. In either case the limitations would not apply to a large prime. Are you saying they would? 

The intent of the rule is to prevent a small business from being used as a front to win a set-aside contract, and then subbing most of the work to a large. When would those limitations apply to a large winning an unrestricted competition, or the unrestricted portion of a contract?

So, does your solicitation include a limitation on subcontracting? (choose one) YES   NO

I did not say you could move on.  I said, if you know for a fact that Apple will not comply with a limitation on subcontracting requirement (assuming that there really is one in your solicitation), that you could determine Apple to be non-responsible and (1) make award to the next in line; or (2) if Apple is a small business, refer the matter to the SBA for a certificate of competency.

Good grief!

Off hand, I recall only two general percentage limitations on subcontracting—the one in FAR 52.219-14, which applies only to small business set-asides and which limits subcontracting with not similarly-situated entities, but does not require that a prime do 51 percent "of the work," and the one in 52.236-1, which applies only to construction and which does not set a standard percentage limitation.

Patrick3 cited Apple "as an example" and asked, 

PATRICK3 said:

I know for a fact that Apple can't perform 50% of the work, because they don't have qualified technicians, but are they allowed to win the contract?

He also said,

PATRICK3 said:

I was always under the impression that the Prime had to do at least 51% of the work, but I'm not sure where I got that information from.

Well, he got it from nowhere.

My answers to Patrick3's two questions based on his "example" are yes and no.

If Patrick3 didn't use a proper "example" or ask the right questions, that's his fault.

What he really wanted to know is whether there is a limitation on subcontracting and, if so, what is it?

@ji20874It's onthe solicitation, but it's not checked off? Lol

I appreciate the assistance @ji20874

Patrick,

So, does your solicitation contain a limitation on subcontracting?  That really is a YES or NO question...

@ji20874Yes it does.

Okay. You know for a fact that your prospective winner, Apple, cannot perform 50% of the work.  But the limitation on subcontracting is not whether Apple can perform 50% of the work, so your fact is not dispositive as your wording is inapt.

Please read the limitation on subcontracting text carefully.  If you are relying on the clause at FAR 52.219-14, Limitations on Subcontracting, it says in para. (e)(1) for services that Apple "will not pay more than 50 percent of the amount paid by the Government for contract performance to subcontractors that are not similarly situated entities." Is BestBuy a similarly situated entity?

See, it isn't 50% of the work.  And subcontracting to similarly situated entities is okay. Maybe there isn't really a problem? As Vern said, it is a complicated rule. You need to read the clause.

So, based on all of this, do you know for a fact (or have a reasonable basis to believe) that Apple will not comply with the limitation on subcontracting?  If YES, you might have to make a determination of nonresponsibility.  See FAR 9.103(b).  But first, you need to read para. (c) of the clause at FAR 52.219-14 to make sure the limitation is applicable.

p.s. Set-asides are not required for overseas contracts -- this title's thread indicates this is for an overseas contract. If the solicitation did not invoke FAR Part 19 clauses, which it did not have to do, you wouldn't be having this problem. See FAR 19.000(b)(1).

@ji20874Thanks! I will read that further. Appreciate the help!

Thanks

Ok @ji20874, if the (Apple) vendor submitted Past Performance and it was only information stating that the subcontractor can perform the work because they have the certified workers. Can we move forward with another vendor if Apple never addressed the Past Performance issue for their specific company? And I apologize, 52.219-14 is NOT checked off in the solicitation. Thanks

So after all that, this is not a 'limitation on subcontracting' question. It is an evaluation question and whether [Apple] can use the past performance of its proposed sub. Back to square 1.

Okay, now your solicitation does not contain a limitation on subcontracting...

If your solicitation does not contain a limitation on subcontracting, then Apple can subcontract with BestBuy to perform all, most, some, or none of the work -- because there is no limitation on subcontracting.

Whether Apple passes the LPTA criteria based on past performance is an entirely separate and wholly unrelated matter.  I don't know what your solicitation said about technical acceptability with regard to past performance.

You might want to start a new thread for that new question -- it is unrelated to this thread.

Thanks @ji20874

Jumping in here to remind PATRICK3 of the clause 52.215-23 ("Limitations on Pass-Through Charges") which is prescribed by 15.408(n)(2).

If the past performance info and the workers are all coming from the subK, then what value does the prime add to the equation?

Similarly. Situated. Entity.

Three great words that work great together.