FAR 52.219-14 (c) (1) Limitations on Subcontracting - "Services (except) construction). At least 50% of the cost of the contract performance incurred for personnel shall be expended for employees of the concern.

13 CFR 125.6.(a)(1) : in the case of contract for services (except construction), it will not pay more than 50% of the amount paid by the government to it to firms that are not similarly situated. Any work  that is a similarly situated subcontractor further subcontracts will count towards the 50% subcontract amount that cannot be exceeded."

Does the cost of the contract performance incurred for personnel by subcontractors include the fee paid to subcontractors? Or is only based on direct labor and indirect loads?

I'm not sure where to look for further clarification on this issue. Thank you for any insight.

 

 

 

Houston, we have a problem here.  The statutory limitations on subcontracting were changed around 2010 or 12.  The statutory changes included the use of similarly situated subcontractors on all set aside contracts.  The SBA took several years to implement those statutory changes in 13 CFR 125.6.  However, the FAR has not been updated to reflect the changes to the law and the SBA rules.  The FAR still imposes the limitation on subcontracting that was in place prior to the change in the law.  To understand how terms were defined then, you need to look at the version of 13 CFR 125 that was in effect in 2012.  Those rules state that you do not consider fee or profit in determining compliance with the limitation on subcontracting.

1 hour ago, dmuir said:

Does the cost of the contract performance incurred for personnel by subcontractors include the fee paid to subcontractors? Or is only based on direct labor and indirect loads?

See the following definitions from 13 CFR 125.6 (2012):

Quote

(e) Definitions. The following definitions apply to this section:

(1) Cost of the contract. All allowable direct and indirect costs allocable to the contract, excluding profit or fees.

(2) Cost of contract performance incurred for personnel. Direct labor costs and any overhead which has only direct labor as its base, plus the concern’s General and Administrative rate multiplied by the labor cost.

(3) Cost of manufacturing. Those costs incurred by the firm in the production of the end item being acquired. These are costs associated with the manufacturing process, including the direct costs of fabrication, assembly, or other production activities, and indirect costs which are allocable and allowable. The cost of materials, as well as the profit or fee from the contract, are excluded.

(4) Cost of materials. Includes costs of the items purchased, handling and associated shipping costs for the purchased items (which includes raw materials), off-the-shelf items (and similar proportionately high-cost common supply items requiring additional manufacturing or incorporation to become end items), special tooling, special testing equipment, and construction equipment purchased for and required to perform on the contract. In the case of a supply contract, the acquisition of services or products from outside sources following normal commercial practices within the industry are also included. 

 

Thank you!
 

On 4/26/2017 at 11:47 AM, dmuir said:

Does the cost of the contract performance incurred for personnel by subcontractors include the fee paid to subcontractors? Or is only based on direct labor and indirect loads?

On 4/26/2017 at 1:03 PM, Vern Edwards said:

(2) Cost of contract performance incurred for personnel. Direct labor costs and any overhead which has only direct labor as its base, plus the concern’s General and Administrative rate multiplied by the labor cost.

The definition is crystal clear...but....how do you determine fee on a loaded labor rate? It seems to assume certified C&P data.