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k5kowboy

Total Small Business Set-Aside; Services and Subcontracts

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Good day all!

Question for the experts out there. I work for a large Independent Service Organization (ISO) that maintains and repairs equipment. We have been working with a small business that subcontracts awards to us on a regular basis. My concern really revolves around the "50% rule" and 2 specific FAR clauses:

52.219-6 and 52.219-14.

52.219-6 is always "selected" or included in the Total Small Business Set-Aside solicitations, however, is it really applicable since it specifically excludes "construction or service contracts"? If service contracts are excluded, what is the point of the clause being included in the solicitation?

52.219-14 - If I understand correctly, the only time the "50% rule" is applicable is if this clause is included in solicitation, correct? Also, I know there is something about this clause is not applicable for non-manufacturers. Can you help clarify?

I guess it boils down to this. If the small business we work with is awarded a "Total Small Business Set-Aside" solicitation, can they subcontract 100% of the work to us? Are their specific restrictions that would prevent us from doing 100% of the work?

Thanks in advance.

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The limitation on subcontracting rule is in 13 CFR 125.6. The rule is implemented by FAR 52.219-14, which is prescribed by FAR 19.508(e) for use in "contracts for supplies, services, and construction, if any portion of the requirement is to be set aside or reserved for small business and the contract amount is expected to exceed $150,000."

The limitation applies if the clause is in the prime contract or if it should have been, but wasn't through oversight or violation. FAR 52.219-6 is not a contract clause. It is only a notice of a set-aside. In any case, I don't see where it "specifically" excludes construction and service contracts.

In brief, if the prime received the contract under a small business set-aside and the contract is worth more than $150,000, then they cannot subcontract 100 percent of the work to you.

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Vern,

Thanks for the response.

The excluding part I am referring to is in the last sentence under (d) Agreement which states "This paragraph does not apply to construction or service contracts". I believe that is what is referred to as the "non-manufacturer rule".

So, if I understand correctly - it really doesn't matter whether 52.219-14 was actually included in the original prime contract - if the dollar value exceeds $150,000 and it is a set-aside solicitation, then 52.219-14 applies.

That brings up another question. 13 CFR 125.6 does not specify a dollar threshold. If I am reading the CFR correctly, ANY solication that is set-aside requires the prime to perform 50% of the work (services). So which has precedence?

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Paragraph (d) does not affect this issue in your case.

Yes, if the dollar value exceeds $150,000 and the procurement is a set-aside, then FAR 52.219-14 applies anyway by operation of law.

Acquisitions under $150,000 are "reserved" for small businesses, rather than "set aside: for small businesses. See FAR 19.502-2(a) and (B). That's why the limitation on subcontracting does not apply to them. The limitation applies only to contracts awarded through a set aside. See 13 CFR 125.6(a). There is no conflict, and so no issue of precedence.

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So, if a solicitation is under the $150K threshold, it's not really a "set-aside", but rather reserved for small businesses - so it doesn't fall under 52.219-14? Do I have that right?

I guess my concern on that is the wording of 19.502-2(a). ".........automatically reserved exclusively for small businessconcerns and shall be set aside for small business....."

I know it says "reserved", but also says it "shall be set aside".........so how does that eliminate 52.219-14?

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