Federal Acquisition Fundamentals: Limitation in subcontracting clause

The limitation in subcontracting clause, also known as 52.219-14 (and more formally Limitations on Subcontracting), applies to contracts including task orders awarded via set-aside procedures.

That is, if a contract is awarded as a small-business set-aside, that small business awardee is subject to the clause which requires that the small business prime “will “not pay more than 50 percent of the amount paid by the Government for contract performance, excluding the cost of materials, to subcontractors” that are not also small.

If the contract is set aside for another socioeconomic category, that category substitutes for small in the prior quote: the prime may not pay more than 50 percent of amount paid by government for services to subcontractors other than those in the prime’s socioeconomic category. One of the few ways around the 50% subcontracting limit is through an SBA-approved joint venture agreement.