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

For a services set-aside contract, the prime contractor 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).

This means that your firm, as the prime contractor, must perform at least 50 percent of the contract value with your own employees. The concept of a "similarly situated entity" allows you to count work performed by a subcontractor towards your 50 percent minimum, provided that subcontractor has the same small business status as your firm. For example, on an SDVOSB set-aside, an SDVOSB prime can subcontract to another SDVOSB, and that work counts towards the prime's performance requirement. If you team with a small business that does not share your specific small business status, their work would count against your 50 percent limitation. This rule ensures that the small business awarded the set-aside contract performs a significant portion of the work.