FAR 52.219-14 — Limitations on Subcontracting

Limitations on subcontracting define how much of a set-aside contract you can pass to other firms. It is the clause most often used to challenge a set-aside award, because teaming structures built for capability frequently violate it.

Clause: FAR 52.219-14
Applies to: Small business set-aside contracts
Flows down to subs: Yes, in effect through workshare compliance
Primary risk: Ineligibility and protest exposure

Key takeaways

Read the clause as incorporated in your contract — tailoring and alternates change obligations.
Flowdown obligations are your responsibility; a noncompliant subcontractor is your problem.
Document compliance contemporaneously; after-the-fact reconstruction rarely satisfies auditors.
When a clause is unclear, ask the contracting officer in writing before award, not after.

What the clause requires

For services, no more than 50% of the amount paid may be spent on subcontractors that are not similarly situated entities. For supplies, the same 50% rule applies to the cost of contract performance incurred for personnel. General construction is capped at 85% and specialty trade construction at 75%, excluding materials.

How to comply in practice

Model workshare in dollars before you sign a teaming agreement, and track actuals monthly against the limit. Use similarly situated entities — subcontractors with the same set-aside status — because their share counts toward your compliance rather than against it.

Common mistakes

The classic failure is a small prime fronting for a large subcontractor that performs most of the work. Also common: forgetting that the calculation is dollar-based rather than task-based, and ignoring option years where the mix shifts as work matures.

FAQ

What is a similarly situated entity?

A subcontractor with the same small business program status as the prime for the applicable set-aside, whose work counts toward the prime's performance percentage.

Are materials included?

For construction, material costs are excluded from the calculation; for services, the rule applies to amounts paid to subcontractors.

What happens if I exceed the limit?

You risk termination, False Claims exposure, and size or status protests.