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Showing results for tags 'Limitations on Subcontracting'.
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Fed Reg Vol 81 No 104, May 31, 2016 finally implemented the “Similarly Situated Entity“ rule of the 2013 NDAA. Specific updates to 13CFR125 change the overall tenor of the Limitations on Subcontracting to a true limit on the amount that can be subcontracted rather than a prime performance requirement. Based on much of the reasoning included in that Fed Reg, the intent was to bring parity to the various programs, including the Limitations on Subcontracting. The Reg however did not change 48 CFR 52.219 and the various FAR clauses -3, -14, -27, -29, and -30 that implement the limitations on subcontracting requirements. Vern will be disappointed to see that in the 13CFR125 revision they REMOVED the definition of “Cost of contract performance incurred for personnel”, yet that term is still used in the aforementioned FAR clauses. Of particular concern, the new 13CFR125.6(a)(3) requirement identifies the limitations on subcontracting for general construction as “not pay more than 85% of the amount paid by the government to it to firms that are not similarly situated”. Similarly (a)(4) requires not more than 75% for special trade contractors. Yet the current FAR 52.219-3 (Notice of HUBZone set-aside) requires that for both types, 50% of “the cost of personnel for contract performance be spent for employees of the concern or employees of other HUBZone small business concerns” (e.g. similarly situated entities) AND requires at least 15% (general) or 25% (trade) performance by employees of the prime. So there is an inherent contradiction between the two. The 50% requirement is very difficult for HUBZone construction and trade contractors and I personally know of at least two former HUBZone contractors that have given up maintaining their HUBZone certification on that basis. It was thought that the new revised rule would bring the requirement back to 15% (general) or (25%) trade consistent with the other programs. So, 1) is there any reason why one would have precedence over the other (13CFR125 vs 48CFR52) as they are contradictory, and 2) is anyone aware of any pending changes to the FAR clauses to reconcile the discrepancies (not just this one) and bring it in-line with the new regulation? -
50 Percent Rule on a FFP contract
rae.story posted a topic in Small Business, Socioeconomic Programs
Government has released an RFP with a 100% SDVOSB set-aside. The Government has stipulated they anticipate awarding the contract strictly on a FFP basis where all Offerors will be responsible for including all costs associated with travel and ODCs into each of the specific CLINs. Does the 50 percent that is required to be performed by the SDVOSB Prime consists of only labor or is it inclusive of all costs (labor, travel, and ODCs) as a result of how the Government is anticipating on awarding the contract? -
Reference FAR 52.219-14 (and similar clauses). I've seen several threads in this forum discussing the calculation methodology for determining the “cost of performance incurred for personnel”. I found the “Is this Professor right?” thread (started by contractor100 on 3/23/12) to be particularly informative and, in my humble view, conclusive as to how I have been calculating such costs (Vern's #25, alternate method). So I need to throw a hypothetical situation out there that I may find myself in soon. On a FFP contract (with resulting FFP subcontracts) I may not have visibility into my subcontractor’s direct labor cost, only an agreed billing rate. How can I credibly calculate the “cost of performance incurred for personnel” if the only data I have from a FFP subcontractor is the total burdened cost of labor? Extending the hypothetical for just a minute, what if I didn't even have the burdened labor rate and purely a FFP subcontract total cost (labor and materials)? To put this in perspective, say I hire Vernon J. Edwards, Consultant, LLC to assist in contract performance. I pay the LLC $500/hr for services rendered. How could I account for the “cost of performance incurred for personnel” for these services if I have no further data than Vern's external billing rate? Although it may be inevitable, I don’t mean to get into the nuances of whether or not the LLC (or S-Corp where an owner is performing the work) actually pays a salary to the individual. That is a topic for a different thread.
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The Government has a requirement for physician services. It has been determined that GSA Schedule 621 I has small and large schedule holders capable of meeting the Government's requirement. To the meet the agency's small business goals, the Contracting Officer intends to set aside the acquisition for small business concerns. The estimated value of this acquisition is $300,000. The Contracting Officer is now being challenged on the set aside. Those opposed to the set aside have stated that physicians being provided by the GSA staffing firms (found on schedule 621 I) are 1099 independent contractors, and are in effect, subcontractors. As such, there is no way that the small business schedule holders could comply with the "at least 50 percent of the cost of contract performance incurred for personnel" requirement of 52.219-14 Limitations on Subcontracting. Therefore, a total small business set aside is improper; the requirement must be solicited on an unrestricted basis. The Contracting Officer contends that it is standard practice in the medical staffing industry for physicians to be 1099 employees. However, that does not automatically make them subcontractors for purposes of determining compliance with 52.219-14. Taking into account the totality of information (See 13 CFR 121.106 a)), the physician should still be considered an employee of the concern. The concern dictates where the physician reports, when and how long he or she works, and what responsibilities they will have while working. Therefore, the physicians should not be considered subcontractors for the purpose of determining compliance with 52.219-14. Thoughts?
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A recently posted NAVFAC solicitation for construction services under NAICS 237XXX as an EDWOSB set-aside identifies a 25% limitation on subcontracting. FAR 52.219-14 Limitations on Subcontracting confirms a 15% requirement for “General Construction” and a 25% requirement for “Construction by Special Trade Contractors”. Other agencies (USACE, VA) have concluded that “Special Trade Contractors” refers ONLY to NAICS 238XXX (I assume based on the Title of NAICS 238…“Specialty Trade Contractors”) and further conclude that 237XXX falls under “General Construction”. I plan to ask about this as an official question during the Q&A to the NAVFAC contracting office QUESTION 1 - Does anyone on this forum know of any definitive reference (or ruling) for determining which NAICS would fall under “general construction” vs. “special trade construction” as it applies to all of the various limitations on subcontracting clauses. QUESTION 2 - Can the CO, in ANY solicitation, supersede the FAR requirement(s) and impose a limitation on subcontracting higher than the FAR-required limitation. I ask because the FAR clause is not only incorporated by reference, but the 25% is explicitly stated in the solicitation. Of course, no mention is made of the 2013 NADA and “similarly situated entity” discussions, but I’m not really addressing those at this time. Any help that the forum can offer here would be greatly appreciated as I’m sure the answer would apply to SDVOSB and 8(a) set-aside acquisitions as well.
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As a (small) business owner, qualifying under several socio-economic programs, performing on a Federal construction contract, I am exempt from reporting requirements in accordance with Davis-Bacon. That is, whereas I have to report employees time/pay in accordance with Davis-Bacon, I am exempt from reporting wages (if any) paid to myself. How would the contracting officer (or SBA if subject to a later audit) allocate my compensation when it comes to calculating the labor portion as it relates to any applicable limitations on subcontracting? I often go without pay, if I chose to do so, for the betterment of the business. In some cases, I am the only employee performing on some small contracts. If it truly is calculated on “actual pay”, then I may not satisfy the goals even though I (owner and qualifier of the small business) may have performed a majority of the hours. More commonly, I have one or two employees performing along with me, but may not meet the 25% goal (or 15% or 50% depending on the contract/applicable FAR clause) if my own time is assumed to be worth NOTHING whether I actually paid “nothing” or not. Also, technically, as a single-owner subchapter S corporation my real “salary” is not figured until my personal and corporate taxes are filed the following year. I’ve reviewed all of the methods of calculations posted in the forums here and elsewhere, but haven’t seen how this might be addressed. Can anyone give me any insight into how the SBA (or any other auditing agency) would figure this (including any references)? Thank you in advance for your time and consideration and thank you Bob for allowing me to post this.