Limitation on Subcontracting (50% Rule) Calculator
Verify whether your federal set-aside teaming arrangement complies with statutory subcontracting limits. Calculate prime contractor and similarly situated entity labor shares instantly.
Contract Compliance Calculator
Select your contract category, enter your labor breakdown, and verify pass/fail compliance before submitting your proposal or invoice.
Prime: $180,000 + Similarly Situated Sub: $30,000
50% of $300,000 performance personnel cost
Safe buffer for performance phase
Maximum allowed to non-qualifying subs: $150,000
Your proposed labor distribution satisfies the statutory limitation on subcontracting. Ensure that your agreement with similarly situated subcontractors explicitly references their qualifying socioeconomic certification and mandates separate job-costed invoicing.
🎯 Architect Compliant Teaming & Joint Ventures
BidGovAI automatically computes Limitation on Subcontracting ratios across all subcontractor teammates, monitors joint venture compliance under 13 CFR 125.6, and generates unassailable proposal narratives for Contracting Officers.
The 4 Golden Rules of FAR 52.219-14 Compliance
1. Similarly Situated Entities
Work assigned to a first-tier subcontractor counts toward the prime contractor's percentage if that subcontractor has the exact same small business program status (e.g. an 8(a) sub on an 8(a) set-aside). The sub must be small under the NAICS code assigned to its subcontract.
2. Personnel Costs vs Total Price
Under SBA regulations (13 CFR 125.6), the 50% rule for services is evaluated strictly on the cost of contract performance incurred for personnel. You do not count materials, supplies, equipment, cloud hosting fees, or travel expenses.
3. Period of Performance Tracking
Compliance is generally evaluated across the base term and each option period separately (or over the entire order for IDIQ task orders). A contractor cannot perform 10% in Year 1 and promise to perform 90% in Year 5.
4. Mandatory Statutory Penalties
Under 15 U.S.C. 645, knowingly violating subcontracting limits triggers statutory penalties of $50,000 or the total amount paid to unauthorized subcontractors, contract termination for default, and potential civil False Claims Act liability.
Frequently Asked Questions
Does the 50% rule apply to full-and-open contracts?
No. FAR 52.219-14 applies strictly to small business set-asides (Total Small Business, 8(a), HUBZone, SDVOSB, and WOSB) and sole-source awards over the Simplified Acquisition Threshold ($250,000). Full and open competitions require large businesses to submit a Small Business Subcontracting Plan under FAR 52.219-9 instead.
Can a subcontractor hire another subcontractor?
Work performed by second-tier and lower-tier subcontractors does NOT count as being performed by a similarly situated entity, even if that second-tier entity has the same socioeconomic status. Only first-tier subcontractors qualify under 13 CFR 125.6.
What documentation should small businesses keep?
Contractors must retain certified payroll reports, job-costed general ledger reports, subcontractor invoices, and written teaming agreements demonstrating continuous compliance during audits by the SBA or agency Inspector General.