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I'm interested in feedback from other practitioners.  I am mindful of para. (c) of the clause at FAR 52.219-14, Limitations on Subcontracting, and similar provisions in other clauses.  For example, para. (c)(1) of the clause says...

 

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 (c) Limitations on subcontracting. By submission of an offer and execution of a contract, the Contractor agrees that in performance of the contract in the case of a contract for—

           (1) Services (except construction). At least 50 percent of the cost of contract performance incurred for personnel shall be expended for employees of the concern.

 

 

But what if the Government directs a large portion of the subcontracting, so that it will be impossible for the prime contractor to comply with this limitation on subcontracting -- for example, we want to contract with a firm to manage a long list of repairs for a depot where most of the repairs will be sole-source to OEMs who are not small business concerns.  Has anyone ever seen or drafted a special contract requirement wherein the parties agree that the limitation on subcontracting applies to the prime contractor's management efforts and not to pass-through repair work that is handled as subcontracts?

A small business can do the tracking and so forth, and I want to do a set-aside if possible.  

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2 hours ago, ji20874 said:

But what if the Government directs a large portion of the subcontracting

I am guessing this means sole-source contracts for needed repairs from OEM/large businesses?

2 hours ago, ji20874 said:

A small business can do the tracking and so forth, and I want to do a set-aside if possible. 

You can award a contract for the services alone, but if the subcontracting limitations can't be complied with, then you can't funnel the other orders through it. 

If I am missing the intent of the questions, please let me know. 

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In a situation where a small business certainly could do the work of keeping track of all the items in maintenance, and the repair work is really really pass-through where the contractor has no discretion in choosing subcontractors, maybe it makes sense not to treat the repair work as subcontracting for the purpose of the clause?  The repair work will be cost-reimbursement-no-fee, so the contractor will only provide the management services.  At least, this is the thought.  

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Could you create two line items—an FFP CLIN for management and a cost-reimbursement no fee CLIN (repair as-directed) for the repair work, then apply the limitations on subcontracting clause to the FFP CLIN but not the CR CLIN, with an explanatory memo to file? Treat it as a one-time FAR deviation, if necessary, in order to make a viable set-aside opportunity?

Who would complain?

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11 hours ago, ji20874 said:

maybe it makes sense not to treat the repair work as subcontracting for the purpose of the clause?

9 hours ago, Vern Edwards said:

Could you create two line items—an FFP CLIN for management and a cost-reimbursement no fee CLIN (repair as-directed) for the repair work, then apply the limitations on subcontracting clause to the FFP CLIN but not the CR CLIN, with an explanatory memo to file?

I can get behind the sub-contracting limitations being applied to only one CLIN (FFP), based on the circumstances. Hybrid (CR/FFP) = fun. With that, I am assuming that both CLINs are commercial in nature based on a traditional view. If this is the case, are we getting into an area where we have to apply a non-commercial designator to the CR CLIN? 

FAR 16.301-3(b) - "The use of cost-reimbursement contracts is prohibited for the acquisition of commercial items (see parts  2 and 12)."

I mean, it does does say CR contract and not CR CLIN. . .

Are we really talking about an acquisition strategy resulting in a "FFP (50%)/CR (50%) - Commercial items (50%)/Non-Commercial (50%) Contract?"

Forgive the new guy - here to learn. 

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Curious - what would be the role of the prime contractor under this arrangement, both before and after awarding subcontracts or orders for repairs? I wonder how the prime’s effort would be fixed price other than having a standing team on board to manage the subcontracted work.

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The discussion sounds like jerry rigging to me rather than being aligned with the guiding principles of FAR 1.102.    Especially where in the FAR provides an avenue - individual deviation FAR 1.403.  Otherwise it would seem that Vern Edwards' comment (below) rings true when considering the procedures of FAR  FAR Part 10.

17 hours ago, Vern Edwards said:

Can you set a contract aside for small businesses if the terms of the contract would be such that no small business contractor could comply with the limitations on subcontracting?

 

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There is nothing untoward here -- just exploration.  I have no objection to an individual deviation to apply the limitations on subcontracting only to the management portion of the work (the work that is actually performed by the contractor), rather than the pass-through subcontracting where the prime contractor has no discretion.

If we don't do something differently, then we'll have to do this as an unrestricted acquisition even though small businesses certainly can do the management work -- and that is the reason for this discussion.  We want to set the terms of the contract so that small businesses can comply with the limitations on subcontracting.

Maybe I'm breaking new ground, but I am hopeful someone has dealt with this -- maybe in a prime vendor arrangement, for example -- or any example where there is heavy Government involvement in directed subcontracting.

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24 minutes ago, ji20874 said:

I have no objection to an individual deviation to apply the limitations on subcontracting only to the management portion of the work (the work that is actually performed by the contractor)

Then aren't we talking about a partial set aside?

FAR 19.507(e) - "The contracting officer shall insert the clause at 52.219-14, Limitations on Subcontracting, in solicitations and contracts for supplies, services, and construction, if any portion of the requirement is to be set aside for small business and the contract amount is expected to exceed the simplified acquisition threshold."

Make multiple awards. However many needed to the OEM(s) and one to the small business to manage the repairs/services ordered. 

Hmmm - almost sounds like contracting out the COR's duties when I put it like that. 

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25 minutes ago, Constricting Officer said:

Then aren't we talking about a partial set aside?

  *    *    *

Make multiple awards.

Partial set-aside won't work, because partial set-aside contemplates multiple awards.  Through this thread, we have been talking consistently about a single award to a prime contractor with directed subcontracting.  If possible, we would like to do it as a set-aside.

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Just now, ji20874 said:

Partial set-aside won't work, because partial set-aside contemplates multiple awards.  Through this thread, we have been talking consistently about a single award to a prime contractor with directed subcontracting.  If possible, we would like to do it as a set-aside.

Me thinks Not...19.502-3 Partial set-asides of contracts other than multiple-award contracts.

 

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59 minutes ago, ji20874 said:

There is nothing untoward here

Did not say that did not imply that.   I implied - artless, rough and tumble, etc. - or in other words not using the art of the FAR to do it and meet the guiding principles.

 

1 hour ago, ji20874 said:

then we'll have to do this as an unrestricted acquisition even though small businesses certainly can do the management work

Splitting a procurement to avoid a threshold?   It has already been stated that it is one need.   Just exploration!

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1 hour ago, ji20874 said:

Partial set-aside won't work, because partial set-aside contemplates multiple awards.

Yes it does. 

1 hour ago, ji20874 said:

Through this thread, we have been talking consistently about a single award to a prime contractor with directed subcontracting.

Talking about a way to do a single award and avoiding a limitation to do so. I pointed out a process that will address both the need and the subject services being set aside. 

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21 hours ago, Vern Edwards said:

Can you set a contract aside for small businesses if the terms of the contract would be such that no small business contractor could comply with the limitations on subcontracting?

 

16 hours ago, Vern Edwards said:

Could you create two line items—an FFP CLIN for management and a cost-reimbursement no fee CLIN (repair as-directed) for the repair work, then apply the limitations on subcontracting clause to the FFP CLIN but not the CR CLIN, with an explanatory memo to file? Treat it as a one-time FAR deviation, if necessary, in order to make a viable set-aside opportunity?

Who would complain?

Inasmuch as the limitations on subcontracting are statutory requirements, I’m curious whether a waiver would be allowed/approved.

If it would, then I guess that only the primes share of the contract should be counted toward any goals or achievement of small business awards. 

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28 minutes ago, joel hoffman said:

Inasmuch as the limitations on subcontracting are statutory requirements, I’m curious whether a waiver would be allowed/approved.

The statutory limitations may be interpreted to allow some variations in application. I wouldn't be worried about it. I might check with SBA. Then again, I might not.

Why work overtime to find reasons why the agency should not find a way to facilitate a set-aside?

Look for solutions.

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I read ji's post yesterday and thought about how I might do what he proposed. Then, I got busy with something else and forgot about it. Strangely enough, I had a dream last night that I stood up in front of a room full of people and explained how I would put a special definition of "cost of contract performance" in Section H that would exclude pass-through costs to the OEM subcontractors. ji, who I've never met in person, was in the crowd nodding his head in agreement. 

When I woke up, I thought "that's a pretty good idea".

True story.

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8 hours ago, Vern Edwards said:

The statutory limitations may be interpreted to allow some variations in application. I wouldn't be worried about it. I might check with SBA. Then again, I might not.

Why work overtime to find reasons why the agency should not find a way to facilitate a set-aside?

Look for solutions.

Actually, even if it was unrestricted, the prime wouldn’t self-perform any more work than a small business prime, right?  So the often held opinion that a small business or small disadvantaged prime is gaining an advantage or is acting as a “front” isn’t applicable here.

I think that was a reason why the limitation on subcontracting was instituted for the privilege of set-asides.

So go for a waiver to apply the clause to that effort which the prime can self-perform? Better yet, perhaps require the prime to self-perform all the work that the prime is responsible to perform...?

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9 hours ago, Vern Edwards said:

@joel hoffman I'm sure ji20874 appreciates your input.

I’m agreeing with him that this would be a good SB opportunity.

As for one reason for the LOS clause, I was in charge of a District office for seven years, which, among many other things, negotiated all sole source and conducted all non-IFB, set-aside source selections for construction contracts.

I know from direct experience that what I said was not an uncommon occurrence. If some large businesses or majority owned businesses couldn’t get awards which were sole source or set-asides, they associated with firms that could. It was pretty transparent when it was a “front” arrangement.

I even had a majority owned firm once call me by accident, thinking I was a subcontractor on a sole source team for an Highway overpass project in a small town in Mississippi. The call was from the proposed primary sub on the sole source team. It was a firm that I was familiar with from numerous other projects.

My office had been unable to negotiate anywhere near reasonable price with the sole source firm that the SBA had proposed. We had just converted it to an unrestricted IFB acquisition.

The guy told me that the government was “now bidding out the job”. Then he asked me if I was “still interested in the job” and encouraged me to submit a subcontract bid to his company.

Needless to say, he stammered and stuttered after I told him who I was and then quickly hung up.

The contract was awarded to a small business for about 2/3 of the best price offered during the sole source negotiations.

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17 hours ago, Don Mansfield said:

I read ji's post yesterday and thought about how I might do what he proposed. Then, I got busy with something else and forgot about it. Strangely enough, I had a dream last night that I stood up in front of a room full of people and explained how I would put a special definition of "cost of contract performance" in Section H that would exclude pass-through costs to the OEM subcontractors. ji, who I've never met in person, was in the crowd nodding his head in agreement. 

When I woke up, I thought "that's a pretty good idea".

True story.

Without detail I now wonder if mixed contracts apply - 13 CFR 125.6 (b)

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ji, you are referencing a version of the LOS clause that predates the current statutory and SBA guidance on how compliance with the clause is determined.  Because this clause is based on older SBA guidance, I would look at how the SBA addressed this issue.  In this regard, see the 2012 version of 13 CFR 125.6(e)(7).

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