Question 1

Can a large business be a subcontractor to an SDVOSB prime?

Accepted Answer

Yes. An SDVOSB prime can use large business subcontractors, but must comply with the limitations on subcontracting rule. The SDVOSB must perform the primary and vital requirements of the contract and cannot simply pass the majority of work to a large business subcontractor (the ostensible subcontractor rule). A well-structured prime-sub arrangement allows SDVOSBs to leverage large business capabilities while maintaining eligibility.

Question 2

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 3

What is the ostensible subcontractor rule?

Accepted Answer

The ostensible subcontractor rule deems a subcontractor to be an affiliate of the prime contractor if the subcontractor performs the primary and vital requirements of the contract and the prime is unusually reliant on the subcontractor. When this rule applies, the subcontractor's size is combined with the prime's to determine size standard compliance. This rule is frequently cited in size protests involving small prime/large sub arrangements.

Question 4

What is the difference between a teaming agreement and a joint venture?

Accepted Answer

A teaming agreement is a pre-proposal arrangement between a prime and subcontractor(s) for a specific bid, but the prime remains solely responsible for the contract. A joint venture creates a separate legal entity that bids and performs as the prime. JVs are more complex but offer greater flexibility for combining past performance and resources. For SDVOSB set-asides, the prime (or JV managing venturer) must be an SDVOSB — a large business cannot be the prime.

Can a large business be a subcontractor to an SDVOSB prime?

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