FAR 52-219-14 applies to contracts, orders, and parts of a multiple-award contract that are set aside or reserved for small businesses (SB) or 8(a) companies.
The intent of the clause is to ensure the majority of work under a small business set aside (SBSA) is actually DONE by the SB.
This clause does not apply to the unrestricted portion of a partial set-aside.
The clause states that by submitting an offer or executing a contract, you agree that in the performance of the contract for:
a. Services (other than construction). At least 50 percent of the cost of contract performance incurred for personnel shall be expended for employees of the concern.
b. Supplies (other than procurement from a non-manufacturer of such supplies). The concern shall perform work for at least 50 percent of the cost of manufacturing the supplies, not including the cost of materials.
c. General construction. The concern will perform at least 15 percent of the cost of the contract, not including the cost of materials, with its own employees.
d. Construction by special trade contractors. The concern will perform at least 25 percent of the cost of the contract, not including the cost of materials, with its own employees.
If you normally subcontract out more than the applicable percentages of the work, this will change your business practices. Do you have enough employees? What is the cost to hire enough personnel to meet this requirement? Does your plant have the capacity to perform 50% of the manufacturing labor? If you can’t meet these restrictions, should you submit a proposal? If you can’t, what actions will you take to mitigate risk and explain to the government that you can meet this requirement after award? These are decisions that need to be made early in the proposal preparation process – they could affect your technical approach and price significantly.
Bottom line is you need to be aware of the limitations in this clause before responding to an RFP that contains these restrictions.