Does Far 52.219-14 Apply To Specialized Services

March 25, 2022

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Bradley Arant Boult Cummings LLP

FAR Limitation on Subcontracting Rules Are Finally Here!

Thursday, August 12, 2021

In 2016, the Small-scale Business concern Administration (SBA) updated its regulations pertaining to limitations on subcontracting. Five years later, on Baronial eleven, 2021, the Federal Conquering Regulation (FAR) Council finally followed suit by publishing 2 concluding rules that largely mirror the SBA's rules. This is a welcome development for federal contractors, as the discrepancy between the SBA rules and the FAR rules on limitations on subcontracting has been a source of unnecessary confusion for half a decade. This commodity provides a cursory overview of the new FAR rules on limitations on subcontracting.

Revision of Limitation on Subcontracting

In the kickoff final rule published by the FAR Council on August 11, 2021, the FAR Council made the post-obit "pregnant changes" from its before proposed rule on limitations on subcontracting:

The definition of "similarly situated entity." The definition of "similarly situated entity" is revised at FAR 19.001 and in FAR clause 52.219-14, Limitations on Subcontracting. It at present provides an instance of entities having the same small business program status and specifies that the entity must be small under the size standard associated with the North American Industry Classification Organization (NAICS) lawmaking that the prime contractor assigned to the subcontract.
Applicable dollar threshold. The final rule reflects the clarification that the nonmanufacturer rule and the limitations on subcontracting apply to ready-asides and sole source awards made pursuant to FAR subparts 19.eight, xix.13, 19.14, and 19.fifteen, too equally awards using the HUBZone cost evaluation preference pursuant to FAR subpart 19.13, regardless of dollar value.

HUBZone toll evaluation preference. Paragraph (due east)(2) is added to FAR 19.507, Solicitation provisions and contract clauses, to analyze that, in solicitations and contracts using the HUBZone price evaluation preference, the contracting officeholder shall insert the clause at FAR 52.219-14, Limitations on Subcontracting. Paragraph (h)(1)(two)(B) is added to specify that the contracting officer shall insert the clause at FAR 52.219-33, Nonmanufacturer Rule, in solicitations and contracts when the HUBZone price evaluation preference is used. For the FAR clauses at 52.219-14 and 52.219-33, the prescription likewise states that the contracting officer shall not insert the clause in the resultant contract if the prospective contractor waived the use of the price evaluation preference or is "an other than small business organisation."

The clause at FAR 52.219-4, Notice of Price Evaluation Preference for HUBZone Small Business Concerns, is revised to remove the proposed rule definition of "similarly situated entity," and to delete (instead of revising) the now redundant paragraphs (d) and (e), which pertain to the limitation on subcontracting.

Limitations on Subcontracting. FAR clause 52.219-14, Limitations on Subcontracting, is revised to analyze that this clause applies to contracts using the HUBZone cost evaluation preference to accolade to a HUBZone small business organization concern unless the business concern waived the evaluation preference. Additionally, to provide clarification on calculating the 50% limitation for contracts that include both services and supplies (i.e., "mixed contracts"), paragraph (e)(ane) of the clause at FAR 52.219-14 is revised to specify that when a contract is assigned a NAICS lawmaking for services, the 50% limitation shall just apply to the services portion of the contract. Paragraph (e)(2) is revised to specify that when a contract is assigned a NAICS code for supplies, the 50% limitation shall only apply to the supply portion of the contract.
Nonmanufacturer Dominion. FAR clause 52.219-33, Nonmanufacturer Rule, is revised to clarify that the clause applies to contracts using the HUBZone cost evaluation preference to accolade to a HUBZone small business business concern unless the business organization waived the evaluation preference. Paragraph (c)(2) is revised to remove text concerning an item for a kit that is non produced past small-scale business concerns in the United States or its outlying areas.
Revisions to include recent FAR changes. Prior to publication of this final rule, FAR part 19 and its associated provisions and clauses were substantially revised as a result of FAC 2020-05 (effective March 30, 2020). Equally a result, some revisions in the proposed dominion are no longer included in this final rule, because the revisions accept already been made to the FAR in FAC 2020-05. Other revisions announced in a dissimilar location due to the changed landscape of FAR part nineteen. The final rule besides contains certain revisions that were not in the proposed rule due to changes made in FAC 2020-05.

Good Faith in Small Concern Subcontracting

The second final dominion published by the FAR Quango on Baronial xi, 2021 — which made no significant changes to the FAR Council's earlier proposed dominion regarding "good organized religion in pocket-sized business organization subcontracting" — provides examples of "activities that contracting officers may consider when evaluating whether the prime contractor made a adept faith effort to comply with its pocket-size business subcontracting program." The final rule likewise provides contracting officers with "consistent and compatible examples to place and hold large prime number contractors accountable for failing to brand a skillful faith endeavour to comply with their subcontracting plans."

In add-on, the final rule "requires prime number contractors with commercial subcontracting plans to include indirect costs, with certain exceptions, in their subcontracting goals." According to the FAR Council, "[t]his volition ensure that the data reported in the summary subcontract report is consistent with the goals in the commercial subcontracting plan."

Effective Engagement

Both final FAR rules are constructiveSeptember 10, 2021, which is "30 days afterwards publication in the federal register" on August 11, 2021.

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