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13 CFR 125.6

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Hi All,

I'm new to the community and ran across an odd situation. a small business set aside is awarded to an SDV prime with an SB sub. There's no limitation on subcontracting clause in the contract, and the proposal as written has the small business sub working more than 50% of the contract cost.

Does the SDV prime need to comply with the 13 CFR 125.6?

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See FAR 19.508(e). The limitations on subcontracting clause must be included in all solicitations and contracts if any portion of the requirement is set aside for small business concerns. That would include set-asides for service disabled veteran owned small business concerns. If the procurement was set-aside for SDVOSBC's, then the clause should be in the contract.

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Vern - Actually I disagree. The correct reference for the correct clause regarding subcontractor limitations for a SDVOSB setaside is FAR 19.1407. The respective clause is then FAR 52.219-27. Also note the language of clause 52.219-27 as opposed to FAR 52.219-14 regarding JVs.

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You're right. Interesting that FAR does not clearly state that the Limitations clause does not apply to SDVOSB set-asides. The limitations are the same in terms of percentages, but the -47 clause allows the SDVOSB to use employees of other SDVOSBs in order to meet the quotas.

Thanks.

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Note that a joint Venture as an entity may fulfill the self-performed work requirement, without the SDVO small business performing the required percentage.

Under 13 CFR 125.6(B)(5): "In accordance with §125.15(B)(3), the SDVO SBC joint venture must perform the applicable percentage of work."

Under FAR Clause 52.219-27 (d)," A joint venture may be considered a service-disabled veteran owned small business concern if—

(1) At least one member of the joint venture is a service-disabled veteran-owned small business concern, and makes the following representations: That it is a service-disabled veteran-owned small business concern, and that it is a small business concern under the North American Industry Classification Systems (NAICS) code assigned to the procurement;

(2) Each other concern is small under the size standard corresponding to the NAICS code assigned to the procurement; and

(3) The joint venture meets the requirements of paragraph 7 of the explanation of Affiliates in 19.101 of the Federal Acquisition Regulation.

(4) The joint venture meets the requirements of 13 CFR 125.15(B)"

13 CFR 125.15(B) says:

(B)Joint ventures. An SDVO SBC may enter into a joint venture agreement with one or more other SBCs for the purpose of performing an SDVO contract.

(1) Size of concerns to an SDVO SBC joint venture.

(i) A joint venture of at least one SDVO SBC and one or more other business concerns may submit an offer as a small business for a competitive SDVO SBC procurement so long as each concern is small under the size standard corresponding to the NAICS code assigned to the contract, provided:

(A) For a procurement having a revenue-based size standard, the procurement exceeds half the size standard corresponding to the NAICS code assigned to the contract; or

(B ) For a procurement having an employee-based size standard, the procurement exceeds $10 million;

(ii) For sole source and competitive SDVO SBC procurements that do not exceed the dollar levels identified in paragraphs (B)(1)(i)(A) and (B) of this section, an SDVO SBC entering into a joint venture agreement with another concern is considered to be affiliated for size purposes with the other concern with respect to performance of the SDVO contract. The combined annual receipts or employees of the concerns entering into the joint venture must meet the size standard for the NAICS code assigned to the SDVO contract.

(2) Contents of joint venture agreement. Every joint venture agreement to perform an SDVO contract must contain a provision:

(i) Setting forth the purpose of the joint venture;

(ii) Designating an SDVO SBC as the managing venturer of the joint venture, and an employee of the managing venturer as the project manager responsible for performance of the SDVO contract;

(iii) Stating that not less than 51% of the net profits earned by the joint venture will be distributed to the SDVO SBC(s);

(iv) Specifying the responsibilities of the parties with regard to contract performance, source of labor and negotiation of the SDVO contract;

(v) Obligating all parties to the joint venture to ensure performance of the SDVO contract and to complete performance despite the withdrawal of any member;

(vi) Requiring the final original records be retained by the managing venturer upon completion of the SDVO contract performed by the joint venture;

(3) Performance of work. For any SDVO contract, the joint venture must perform the applicable percentage of work required by §124.510 of this chapter.

(4) Contract execution. The procuring activity will execute an SDVO contract in the name of the joint venture entity or SDVO SBC.

(5) Inspection of records. SBA may inspect the records of the joint venture without notice at any time deemed necessary.

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Carl,

The OP wrote that the acquisition was a small business set-aside awarded to an SDVOSB--not a SDVOSB set-aside. As such, it would not contain FAR 52.219-27.

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Good point, Don. I had noticed that the other day but forgot. My comments above apply to SDVOB set-asides.

Ca2cs, what type of set-aside was this?

If it was a small buisness set-aside, I think that the 52.219-14 clause, Limitation on Subcontracting is mandatory by Law. It would probably be incorporated by operation of law, anyway. I'm in California, but my folder on this topic is back home.

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All,

Thank you so much for your inputs, I appreciate it. Joel, Don, you are correct, it was a small business set aside. I agree with you Joel, concerning incorporation through the Christian Doctrine. Luckily enough, the contract fits under 13 CFR § 125.6(h)(i)

Where an offeror is exempt from affiliation under §121.103(h)(3) of this chapter and qualifies as a small business concern, the performance of work requirements set forth in this section apply to the cooperative effort of the joint venture, not its individual members.

13 CFR §121.103(h)(3) states:

(3) Exception to affiliation for certain joint ventures. (i) A joint venture of two or more business concerns may submit an offer as a small business for a Federal procurement without regard to affiliation under paragraph (h) of this section so long as each concern is small under the size standard corresponding to the NAICS code assigned to the contract, provided:

(A) The procurement qualifies as a “bundled” requirement, at any dollar value, within the meaning of §125.2(d)(1)(i) of this chapter

Since §121.103(h)(3)(A) applies, our efforts with our only sub will comply with the 50% rule, regardless of it's presence in the contract.

And thanks to everyone for taking it easy on my first post.

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Ca- a subcontractor is not a joint venture partner. You said that the Small Disabled Veteran, Small business prime contractor has a small buisness subcontractor - if I read your acronyms correctly.

Thus, 13 CFR 125.6(h)[actually, it is 125.6(i)- there is no 125.(6)(h)(i)] doesn't apply here. Neither would 13 CFR §121.103(h)(3).

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Wait wait wait.

Is this a JV or not? Is yes, is the JV populated or unpopulated? Is this a question of subcontracting to a JV entity (hense the populated/unpopulated questions)?

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Don (and Joel) - I understood the OP question that started this thread. My response regarding FAR 19.14 and clause 52.219-27 was made with specific reference to a post that Vern made not the one that OP made ergo the reason my post was addressed to "Vern" and not OP. If my post was read as addressing the OP post I apologize for the confusion.

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Carl, I see now that you were referring to the statement "That would include set-asides for service disabled veteran owned small business concerns. If the procurement was set-aside for SDVOSBC's, then the clause should be in the contract. "

As Vern did say in the first sentence, in accordance with the language of FAR 19.508(e), the limitations on subcontracting clause must be included in all solicitations and contracts if any portion of the requirement is set aside for small business concerns. I think this is a case where existing FAR coverage didn't keep up with the addition of more set-aside programs for various specific small business categories. It seems that Congress isn't consistent in drafting new categories of small business or small, disadvantaged business type set-asides.

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