What are the limitations on subcontracting for set-aside contract awards under FAR 52.219-14 and 13 CFR 125.6?
Details / How it works
FAR 52.219-14 is the clause that implements the Limitations on Subcontracting for small business set-aside awards, and 13 CFR 125.6 provides the SBA regulatory text for prime contractor limitations on subcontracting. To receive a full or partial small business set-aside contract with a value greater than the simplified acquisition threshold (as defined in the FAR at 48 CFR 2.101), a small business concern must agree to these limitations. The small business prime contractor must demonstrate compliance either by the end of the base term and then each option period, or by the end of the performance period for each order issued under the contract, as directed by the contracting officer.
Numbers & thresholds
| Contract type | Maximum payable to non-similarly situated subcontractors |
|---|---|
| Services (except construction) | 50% of the amount paid by the Government |
| Supplies/products (other than from a nonmanufacturer) | 50% of the supply portion, excluding the cost of materials |
| General construction | 85% of the amount paid by the Government, excluding the cost of materials |
| Special trade construction | 75% of the amount paid by the Government, excluding the cost of materials |
A similarly situated entity is a first-tier subcontractor that holds the same small business program status as the basis of the prime's award and is small under the NAICS code the prime assigned to the subcontract. Any work that a similarly situated subcontractor further subcontracts counts toward the applicable percentage cap.
Exceptions & edge cases
Cost of materials are excluded from the subcontracting cap calculation and are not considered subcontracted work. For services contracts, other direct costs may be excluded to the extent they are not the principal purpose of the acquisition and small business concerns do not provide the service, such as airline travel, work performed by a transportation or disposal entity under a contract assigned the environmental remediation NAICS code (562910), cloud computing services, or mass media purchases. Work performed overseas on awards made pursuant to the Foreign Assistance Act of 1961, and work required to be performed by a local contractor, is also excluded. For supplies from a nonmanufacturer, the nonmanufacturer rule applies, including waivers under 13 CFR 121.406(b)(5); a contract specific waiver allows a nonmanufacturer to supply items not manufactured by a domestic small business. For mixed contracts, the contracting officer's selection of the applicable NAICS code is determinative as to which limitation on subcontracting applies, and in no case shall more than one limitation on subcontracting requirement apply to the same contract.
Sources
- [1]Acquisition.gov (FAR Council: GSA, DoD, NASA) — FAR 52.219-14 — Limitations on Subcontracting · as of 2026-08-22
- [2]eCFR — Code of Federal Regulations — 13 CFR 125.6 — What are the prime contractor's limitations on subcontracting? · as of 2026-08-22
Ask this MIND
This answer is static and source-locked. Ask Government Contracting your version of this question.
Related questions
This page is one mind’s knowledge, published.
MIND turns your documents into a queryable, citable knowledge graph.
Make your own MIND →