Explaining The Rules For Subcontracting Small Business Contracts
Forget the rumors, myths, and misconceptions surrounding getting a contract and subcontracting the entire thing. The short and sweet answer to the ever so popular question, “Can I just sub out the entire contract?” is NO.
Knowing how to play the game and the rules of the game allows you to be successful. This is one of those rules you need to know and be aware of. However, you can get creative with how to abide by this, which is provided in the video below.
But how exactly do you avoid getting in trouble with subbing? Knowing FAR Clause 52.219-4 Limitations on Subcontracting.
First, let’s be clear that this rule only applies if you are the prime contractor. The rule is, as a prime contractor, if you provide a service, you must do 50% of the work. If you provide supplies, other than, “from non-manufacturer of supplies,” you also need to do 50% of the work.
For example, if the government puts out a quote for iPads, this doesn’t apply because you are a “non-manufacturer.” Since most of us aren’t the manufactures, this doesn’t apply. But if the government needed shirts and you’re making shirts for the government, then you’d need to make 50% of the shirts.
The 50% includes services like janitorial transportation, logistics, accounting, legal services and construction. However, construction has its own rules.
Construction has two criterions. If it’s general construction, which falls under North American Industry Classification System (NAICS) 236, you have to self-perform 15% of the work. If it’s specialty construction, which falls under NAICS 238, then 25% of the work is what you have to perform. Specialty trades are air conditioning, electrical, plumbing, etc.
On the other hand, there is general construction or the overall contractor. When you’re given a big project by the government, which has a lot of components, it falls under NAICS 235. This means you only need to complete 15% of the work. In this case, you could sub out the majority of the work.
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As long as you follow these rules and abide by the section that applies to you, you are in the clear.
For complete visual representations and examples on how these percentages can be legally broken down, refer to the video below.
To find out more about government contracting, visit the GOVCON GIANTS YouTube page.