Question 1

What are the limitations on subcontracting for SDVOSB set-asides?

Accepted Answer

For SDVOSB set-aside contracts, the prime contractor must comply with limitations on subcontracting in FAR 52.219-14. For service contracts: the SDVOSB must perform at least 50% of the cost of personnel. For supply contracts: at least 50% of the cost of manufacturing. For construction: at least 15% of the cost of the contract. Similarly situated subcontractors (also SDVOSBs) count toward these requirements.

Question 2

What is the labor hours rule for SDVOSB service contracts?

Accepted Answer

For SDVOSB service contracts, the prime must perform at least 50% of the cost of the contract incurred for personnel — meaning direct labor costs. This does not include materials, ODCs (other direct costs), or travel. The 50% is measured against the total personnel cost, not total contract value. Similarly situated subcontractors (other SDVOSBs) count toward the SDVOSB prime's 50%.

Question 3

What is the primary industry exception to limitations on subcontracting?

Accepted Answer

The primary industry exception applies when a business operates in a specialty trade industry (e.g., electrical, plumbing, HVAC) or a primary industry where it is standard practice to subcontract. In these cases, the prime may subcontract more work than the standard 50% requirement, provided the prime performs the work its business type normally performs. This exception is documented in SBA regulations and must be well-supported.

Question 4

What subcontracting requirements apply to SDVOSB set-aside contracts?

Accepted Answer

SDVOSB prime contractors must perform at least the percentage of work required by the limitations on subcontracting rule. For service contracts, at least 50% of the cost of personnel must be performed by the SDVOSB prime or its similarly situated subcontractors. For supply contracts, at least 50% of manufacturing cost must be performed in-house. Violating these rules constitutes a breach of contract and may result in penalties.

What are the limitations on subcontracting for SDVOSB set-asides?

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