What are the limitations on subcontracting on an SDVOSB set-aside, and do my subs count?

The limitations on subcontracting for your SDVOSB set-aside services contract mean that your firm, as the prime, will not pay more than 50 percent of the amount paid by the Government to subcontractors that are not similarly situated entities, as outlined in FAR 52.219-14(e)(1). Your SDVOSB subcontractor will count as a similarly situated entity, so payments to them do not count against your 50 percent limitation. Payments to your non-veteran firm subcontractor, however, will count towards that 50 percent.

Priya is correct about the 50 percent limitation for services contracts, but the contracting officer will check your compliance with the limitations on subcontracting during contract performance, not just at award. The clause at FAR 52.219-14 requires the prime contractor to provide a report on its compliance with the limitations on subcontracting at the end of the contract performance period, or at earlier intervals if the contracting officer requests it. This report typically details the percentage of work performed by the prime and by each subcontractor, and identifies which subcontractors are similarly situated entities.