B08_Att_9_Limitation_on_Subcontracting_Report_Template.xlsx

Template for Contracts and Indi Report on Limitations on Subcontracting [Template - v1 - December 15, 2016]

Performance Period for This Report [Insert Date] to [Insert Date]

Type of Service General construction

Total Amount Paid by the Government to the Prime during the Performance Period

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DOI-AAAP-0067

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Microsoft_Word_Document.docx Department of the Interior Acquisition, Assistance, and Asset Policy (DOI-AAAP)

Office of Acquisition and Property Management (PAM)

FINAL

Department of the Interior

Acquisition, Assistance, and Asset Policy (DOI-AAAP)

Title

Monitor Contracts for Limitations on Subcontracting

Reference Number

DOI-AAAP-0067

Version Number

Function(s)

Acquisition, Small Business

Point of Contact

Christopher Bell

Source of this Requirement

N/A

Regulatory Reference

Federal Acquisition Regulation (FAR) Part 19, Small Business Programs;

13 Code of Federal Regulations 125.6; and

Office of Inspector General (OIG) Recovery Oversight Advisory #R00-ROA-MOA-1021-2010, Monitoring of Limitations on Subcontracting Clause on 8(a) Contracts, dated October 13, 2010

Version Detail

This section is completed in the following situations: (1) policies issued with versions greater than 01 or (2) the initial use of the DOI-AAAP to convert previous DOI Acquisition Policy Releases (DIAPR), DOI Property Policy Releases (DIPPR), or DOI Guidance (DIG) Releases.

Version Number

Date

Author

Description of update

03/17/2011

McFadden, William

Original document; DIAPR 2011-06, Limitations on Subcontracting Monitoring Tool (Subcontracting Percentage Worksheet)

11/02/2017

Olsen, Megan

DOI-AAAP-0067, v1, consolidates and updates all previous policy guidance on monitoring limitations on subcontracting and rescinds DIAPR 2011-06

07/09/2019

Christopher Bell

This version makes the effective date of this policy the same as the issuance of DOI-AAAP-0150, Class Deviation-Limitations on Subcontracting for Small Business Concerns

12/08/2021

Christopher Bell

This version clarifies the calculation of self-performance on construction and service contracts and the review of proposals for compliance with FAR 52.219-14

Purpose:

This policy describes procedures to effectively monitor and enforce FAR clauses related to limitations on subcontracting. In addition, this policy rescinds the Department of the Interior (DOI) Acquisition Policy Release document, DIAPR 2011-06, Limitations on Subcontracting Monitoring Tool (Subcontracting Percentage Worksheet).

Scope:

This policy applies to all contracts (as defined in FAR 2.101) that are awarded by the DOI, including contracts awarded on behalf of other federal agencies.

Effective date:

This policy is effective upon issuance.

Background:

FAR Subpart 19-508(e) prescribes the use of clause 52.219-14 in applicable solicitations and contracts that are set aside for small businesses or other socioeconomically disadvantaged businesses. This clause imposes limitations on subcontracting for these contracts. This policy describes actions that DOI Contracting Officers (COs) must take to monitor the contractor’s compliance with the limitations on subcontracting clause.

Action:

The limitations on subcontracting will apply to certain types of acquisitions. (See the applicability section of this policy to determine when the limitation applies.) For acquisitions where the limitation applies, the CO must take the actions listed below.

Actions Required Prior to Award

In all contracts where the limitation on subcontracting applies, there is a limit on the amount of work that can be subcontracted to businesses that are not “similarly situated” to the prime contractor. A similarly situated subcontractor is a business that would have qualified under the set-aside that was used for the acquisition. For example, if the contract is a HUBZone set-aside, then HUBZone companies would qualify as similarly situated.

The exact percentage of the limitation on subcontracting varies depending on the type of product or service that is being purchased. During acquisition planning, the CO will need to ascertain the appropriate limitation on subcontracting percentage that will apply to the acquisition. See the section on Limitation Percentage for the percentages that apply at DOI for each category of product or service.

For contracts where a combination of products and services are purchased, the CO must designate a single North American Industry Classification System (NAICS) code in the solicitation, selecting the single NAICS code which best describes the principal purpose of the acquisition. A procurement is usually classified according to the component which accounts for the greatest percentage of contract value. The CO's selection of the applicable NAICS code determines which limitation on subcontracting percentage applies, and the limitation on subcontracting shall apply only to the portion of the contract award amount that is represented by the selected NAICS (see below for an example).

When reviewing proposals where FAR 52.219-14 applies, Contracting Officers shall review the offerors proposal for compliance. If an offeror’s proposal indicates self-performance and subcontracting to similarly situated subcontractors below the Limitation Percentage for the type of product or service, then the Contracting Officer must inform the offeror of the error. The Contracting Officer must not award the contract prior to the offeror submitting a proposal compliant with FAR 52.219-14. If the offeror is unable to submit a compliant proposal the offeror is ineligible for award.

Nothing in this policy supersedes the requirements of FAR 15.403-4(a)(1) for requesting cost and pricing data which states that “The contracting officer shall obtain certified cost or pricing data only if the contracting officer concludes that none of the exceptions in FAR 15.403-1(b) applies.” Contracting Officers should not request cost or pricing data to determine compliance with FAR 52.219-14 when an exception applies.

For Indefinite Delivery Vehicles that involve any type of services that are awarded by DOI where the limitation on subcontracting applies, the CO for the Indefinite Delivery Vehicle (IDV) shall make a determination prior to releasing the solicitation for the IDV as to whether the limitation on subcontracting will apply to each order or to the IDV as a whole. This determination must be documented in the contract file for the IDV. It does not need to be a separate determination and can be included as part of an existing document, for example, the acquisition plan. (See below for an example of the impact of this determination.) This determination is not required for IDVs for products or supplies.

Actions Required Post-Award

The contractor is responsible for ensuring compliance with the Limitation on Subcontracting for all applicable acquisitions. Nothing in this policy shall be interpreted as altering that responsibility. However, for certain types of acquisitions, this policy requires the DOI CO to take certain steps to monitor the contractor’s performance in this area, as described in the subsequent paragraphs.

For contracts that involve any type of services (including all types of construction), where the limitation on subcontracting applies, and that have a total period of performance that exceeds six months, the CO must review the contractor’s performance to monitor compliance with the limitations on subcontracting rules at the end of each performance period, including optional periods, and at the end of the total period of performance. The CO’s review shall be documented in the contract file using the Limitation on Subcontracting Report Template. (Note: There are two templates, one for IDVs and one for other awards. The templates are on two different tabs of the spreadsheet.) The CO’s review must be considered as part of the decision to exercise or not exercise options in accordance with FAR 17.207(f). This policy requirement does not apply to purchases of supplies.

For indefinite delivery vehicles (see definition below), the CO must use the following additional guidelines.

Orders against IDVs that are awarded by other agencies. If the CO is placing an order against an IDV that was not issued by DOI, the CO must review for compliance with limitations on subcontracting for each individual order at the end of each performance period and at the end of the total period of performance.

Orders against IDVs that are awarded by DOI. All COs who place orders against the IDV shall comply with IDV CO’s determination as to whether the limitation on subcontracting shall be calculated for each order or for the contract as a whole:

· If the IDV CO determined that the limitations on subcontracting must be calculated for each order, then the CO for each order must perform the review for their orders at the end of each performance period and at the end of the total period of performance and document the file for each task order.

· If the IDV CO determined that the limitation on subcontracting shall be calculated for the IDV as a whole, then the IDV CO must collect information about all orders at the end of each performance period for the IDV and conduct the review and document the IDV file. (See example below.)

Regardless of the contract type, the limitation on subcontracting is calculated based on the total amount of prices paid, either the amount paid by the Government or the amount paid by the prime contractor to subcontractors. COs do not need to collect cost and pricing data or information other than cost and pricing data in order to analyze contract costs and prices. The CO’s review shall be based on the total amount paid.

If the CO’s review finds that the contractor is not in compliance for any performance period, the CO shall notify the contractor in writing and request corrective action. Penalties for failure to comply are described in 13 CFR 125.6(h). The CO must consult with the Office of the Solicitor prior to taking any action related to penalties.

Applicability

The limitation on subcontracting will apply in accordance with requirements of the FAR. The current FAR requirements are detailed below as of the date of this policy for convenience. However, if there is a conflict between this document and the FAR related to applicability of the limitations on subcontracting, the FAR will be controlling.

· The limitations on subcontracting applies to:

· all contracts which are set aside for small businesses with a total value greater than the simplified acquisition threshold; and

· all contracts of any dollar amount which are set aside for socioeconomically disadvantaged businesses, including 8(a), woman-owned small businesses (WOSB), economically-disadvantaged woman owned small businesses (EDWOSB), businesses located in historically-underutilized business zones (HUBZones), and service disabled veteran owned small businesses (SDVOSB).

· For Indian Economic Enterprises (IEE), and Indian Small Business Economic Enterprises (ISBEE) set-asides COs must follow the procedures detailed in the Department of Interior Acquisition Regulations Supplement (DIAR) 1480.601.

· For partial set-asides, the limitation applies to the portion of the contract that is set aside, but does not apply to the portion which is not set aside.

· If an IDV is set-aside in whole or in part, and the total value meets the dollar threshold that is applicable for the type of set-aside, then the limitation on subcontracting applies to all orders against the IDV.

· If an IDV is not set aside, the limitation on subcontracting applies to any order that is set aside that meets the dollar threshold.

· The limitation on subcontracting also applies to any sole-source contract or direct award that is awarded under one of the socio-economic programs, include 8(a), WOSB, SDVOSB, etc.

Limitation Percentage

The exact percentage of the limitation on subcontracting varies depending on the type of product or service that is being purchased. In DOI, the percentages in the Federal Acquisition Regulation are controlling. These percentages are listed below as of the date of this policy for convenience. However, if there is a conflict between this document and the FAR related to the percentages, the FAR will be controlling.

Services (except construction). The prime contractor shall not pay more than 50 percent of the amount paid by the Government for contract performance to firms that are not similarly situated. Any work that a similarly situated subcontractor further subcontracts will count towards the 50% subcontract amount that cannot be exceeded. When reviewing compliance on service contracts Contracting Officers must subtract the value of materials when determining whether the contractor self-performed the work.

Supplies (other than procurement from a nonmanufacturer of such supplies). The prime contractor shall not pay more than 50 percent of the amount paid by the Government for contract performance, not including the cost of materials, to firms that are not similarly situated. Any work that a similarly situated subcontractor further subcontracts will count towards the 50% subcontract amount that cannot be exceeded.

General construction. The prime contractor shall not pay more than 85% of the amount paid by the Government for contract performance, excluding the cost of materials, to firms that are not similarly situated. Any work that a similarly situated subcontractor further subcontracts will count towards the 85% subcontract amount that cannot be exceeded. When reviewing compliance on construction contracts Contracting Officers must subtract the value of materials when determining whether the contractor self-performed the work.

Construction by special trade contractors. The prime contractor shall not pay more than 75% of the amount paid by the Government for contract performance, excluding the cost of materials, to firms that are not similarly situated. Any work that a similarly situated subcontractor further subcontracts will count towards the 75% subcontract amount that cannot be exceeded. When reviewing compliance on construction contracts Contracting Officers must subtract the value of materials when determining whether the contractor self-performed the work.

IDV Example

This example is provided to help illustrate the difference between calculating the limitation on subcontracting for the IDV as a whole and calculating for each task order. The CO who awards the IDV determines which approach to take for the contract.

Scenario: An IDV for professional services that was set aside for Women-Owned Small Businesses and awarded by DOI with three task orders during the base period.

Orders

Prime and Similarly Situated Subcontractors

Other Subcontractors

Total

Task Order 1

$5,000

$20,000

$25,000

Task Order 2

$70,000

$5,000

$75,000

Task Order 3

$80,000

$120,000

$200,000

Total IDV

$155,000

$145,000

$300,000

In this example, the outcome is different depending on the method of calculation that has been determined by the IDV CO.

· If the limitation is calculated for each order, then Task Order 1 and Task Order 3 are significantly non-compliant, because the prime contractor and similarly situated subcontractors are performing less than 50% of the contract.

· If the limitation is calculated for the contract as a whole, then the contractor is compliant. The prime contractor and similarly situated subcontractors are performing more than 50% of the total contract when all task orders are added together.

NAICS Code Example

This example is provided to illustrate the impact of selecting a NAICS code for acquisitions that include a mix of products and services.

Scenario: Consider a contract with a total value of $400,000, which is composed of $300,000 of non-construction services and $100,000 of related supplies. In this case, the CO must assign a single NAICS for the contract. Since services represent the majority of the value of the contract, the CO would select the most appropriate NAICS for the services portion of the contract. The limitation on subcontracting percentage that applies would be 50%, because the NAICS is for non-construction services.

Type of Products / Services

Prime and Similarly Situated Subcontractors

Other Subcontractors

Total

Non-Construction Services

$150,000

$150,000

$300,000

Supplies

$0

$100,000

$100,000

Total

$150,000

$250,000

$400,000

When determining whether the contractor is in compliance with the limitation on subcontracting, the CO would consider only portion of the contract that represents services, $300,000. In the example above, the contractor is in compliance with the limitation on subcontracting, even though 63% of the total contract value has been subcontracted to non-similarly situated subcontractors. The $100,000 in supplies do not factor into the calculation. The CO will look at the portion of the contract that falls under the NAICS, and in this case, the contractor and similarly situated subcontractors are performing more than 50% of that work.

Definitions and References:

Indefinite Delivery Vehicle (IDV). The term IDV in this policy includes all contract types listed in FAR 16.5 and Blanket Purchase Agreements (including those awarded in accordance with FAR 13.303 and those issued against Federal Supply Schedules under FAR 8.405-3). The term includes vehicles that are awarded by DOI and those awarded by other agencies.

Similarly Situated Subcontractor (SSS). A SSS is a small business concern subcontractor that is a participant of the same SBA program that qualified the prime contractor as an eligible offeror and awardee of the contract as defined in 13 CFR 125.6

Attachments:

Limitation on Subcontracting Report Template

Approval Signature:

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