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

For a supplies set-aside contract, the prime contractor cannot pay more than 50 percent of the amount paid by the Government, excluding the cost of materials, to subcontractors that are not similarly situated entities. This rule is found in FAR 52.219-14(e)(2).

This means that your firm, as the prime, must perform at least 50 percent of the value of the contract, excluding the direct cost of the materials you are providing. The rule recognizes that for supplies contracts, the cost of materials can be a significant portion of the total contract value, so it excludes that from the calculation. You will need to track the costs associated with your work versus the work performed by your non-similarly situated subcontractor to ensure compliance. If you are also certified in other categories, like HUBZone, similar limitations on subcontracting apply for those set-asides as well, with different percentages for services or construction contracts. Always check the specific solicitation for any additional requirements.