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Tyler Evans is a partner in the firm’s Washington, D.C. office and a member of the government contracts group.  His practice covers multiple subject-matter areas, including research and development, non-traditional contracting, intellectual property, contract negotiations, flow-down requirements, small business issues, sourcing restrictions, costs, and compliance.

On September 9, the Biden Administration released a number of new details for its Path out of the Pandemic that will impact U.S. Government contractors and a number of other individuals and entities.  In addition to requiring most executive agency employees to receive COVID-19 vaccines, the Administration plans to mandate that executive agency contractors

The Paycheck Protection Program Flexibility Act of 2020 (the “Flexibility Act”) was signed into law on June 5, revising a number of key requirements for loan forgiveness under the Paycheck Protection Program (“PPP”).  The Program has provided support to a number of organizations negatively impacted by COVID-19 in the form of loans that can be

On May 12th, FEMA announced that it plans to invoke DPA authority which permits the President to consult with representatives of industry, business, financing,

We’ve covered several topics already this week on the U.S. Government’s varied responses to the COVID-19 outbreak and how these responses will affect contractors that do business with the government, including BARDA’s EZ-BAA for COVID-19 diagnostics, mission-essential services during the outbreak, and how excusable delay provisions may help federal contractors affected by the

A recently proposed rule would update the Federal Acquisition Regulation (“FAR”) to incorporate statutory changes to limitations on subcontracting that have been in effect since 2013. The U.S. Small Business Administration (“SBA”) has long since revised its own regulations to implement these changes, but some contracting officers have been reluctant to follow these changes in the SBA regulations because the FAR contains contradictory provisions.

The proposed rule is a sign of progress. In particular, it should add significant clarity to the current disconnect between the FAR and SBA regulations. However, the proposed rule is not perfect, and a number of recent developments highlight that outstanding questions remain.

FAR Changes to Limitations on Subcontracting

For the majority of contractors, the proposed rule is most relevant for its change to the way that limitations on subcontracting are calculated.

Specifically, the proposed rule would amend the FAR to recognize a simplified regime for contractor compliance and to expressly permit set aside recipients to subcontract any amount of performance to one or more “similarly situated” small businesses. These changes would significantly benefit small businesses that engage in teaming with other small businesses. In addition, these changes are important for contractors that do not qualify as small businesses—such as large businesses, nonprofit organizations, and certain non-U.S. entities—in that more subcontract spending under set asides can be made available to these types of entities when subcontracts to similarly situated small businesses do not count against limitations on subcontracting.

The FAR currently contains an outdated limitations on subcontracting framework, under which a small business that received a set aside was expected to track performance costs for either personnel or manufacturing, depending on whether a set aside was for services or supplies. A recipient was required to ensure that it performed work amounting to at least 50 percent of such costs, with an exclusion for materials under set asides for supplies. Similar frameworks with different percentages also applied to construction contracts.

Now, under the updated framework that has been in effect by statute since 2013 (and in SBA regulations since 2016), a small business that receives a set aside is only expected to ensure that no more than 50 percent of the amount paid under its prime award is paid to subcontractors that are not similarly situated. Corresponding updates have been made for construction contracts, and material costs continue to be excluded from limitations on subcontracting under set asides for supplies.


Continue Reading Signs of Progress with the Limitations on Subcontracting, but Outstanding Questions Remain

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