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What are the limitations on subcontracting for a services set-aside contract?

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My firm is the prime on a federal services set-aside contract, NAICS 541611, Administrative Management and General Management Consulting Services. We won a competitive 8(a) award for a management consulting project with the Department of Energy. The solicitation number was DE-2024-R-0005, and it was a Request for Proposal (RFP).

We have a great team, including two subs who are also small businesses. I know there are rules about how much work we must perform ourselves as the prime contractor on a set-aside. I've looked through the Federal Acquisition Regulation (FAR) but I am still not clear on the exact percentage. What are the limitations on subcontracting for a services set-aside contract? What percentage of the work must my company perform ourselves?

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asked Keisha W. Verified vendor8(a) firm founder, staffing and training · Atlanta, GA · 557 rep

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The prime contractor on a federal services set-aside contract generally must perform at least 50 percent of the amount paid by the Government for contract performance. This requirement is found in FAR 52.219-14(e)(1), which states that the prime will not pay more than 50 percent of the amount paid by the Government to subcontractors that are not similarly situated entities.

Since your contract is a competitive 8(a) award for services, your firm, as the prime, must ensure that at least 50 percent of the contract value is performed by your own employees or by subcontractors that qualify as similarly situated entities. Similarly situated entities are those small businesses that have the same small business status as the prime contractor for the specific set-aside. In your case, that means other 8(a) small businesses.

This rule prevents a prime contractor from acting as a mere pass-through for a larger business or a non-similarly situated small business. You need to track the work performed by your firm and your subs to stay compliant.

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answered Luis A. Verified vendorSDVOSB founder, court reporting and legal support · San Antonio, TX · 565 rep

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Sign up to answerCite the FAR clause or procurement code where you can.

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