Limitations on subcontracting

Among the most significant changes in the Small Business Administration’s recent proposed rule of Dec. 29 (see Jan. 9 issue of Set-Aside Alert) is the application of subcontracting limitations to one or more additional tiers of subcontractors, specialists say.

“No more than 50% of the amount paid by the government to the prime may be paid to firms, at any tier, that are not similarly situated,” Venable LLP wrote in an analysis. “In addition, any work that a similarly situated entity subcontractor further subcontracts to an entity that is not similarly situated will count toward the 50% subcontract amount.” The bottom line is that small firms must be vigilant in tracking their subcontracting limits throughout the subbing chain, Venable wrote.

Crowell & Moring attorneys said the changes are significant.

“The most important difference is that the proposed calculation would look at all tiers of subcontractors, in a manner more akin to the subcontracting calculations used by the USDOT,” they wrote.

More information: Venable: http://goo.gl/nCUNsC
Crowell & Moring: http://goo.gl/hWjBgz

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