Limitations on Subcontracting Pre-Bid Calculator
Federal law strictly caps the percentage of labor small business primes may subcontract to non-similarly situated entities on set-aside contracts exceeding $250,000. Use this statutory calculator to guarantee proposal responsiveness, verify self-performance floors, model certified similarly situated subcontractor credits, and generate an audit-ready compliance narrative for Volume I / IV proposals.
1. Contract & Procurement Category
Select statutory classification2. Work Breakdown & Cost Allocation Schedule
Values incur in direct dollars ($)Prime In-House Labor (100% Self-Performance Credit)
Subcontracted Labor (13 CFR § 125.6 Similarly Situated Entity Rules)
Direct Materials, Equipment & Other Direct Charges
Statutory Compliance Confirmed
Your prime team self-performance satisfies the mandatory statutory threshold under 13 CFR § 125.6.
Proposal Compliance Narrative
Ready for RFP Volume I (Technical/Management) or Volume IV (Cost)Small Business Limitation on Subcontracting Rules (13 CFR § 125.6 & FAR 52.219-14)
The Small Business Administration (SBA) and Federal Acquisition Regulation (FAR) impose statutory limitations on subcontracting to prevent "pass-through" front arrangements on set-aside procurements. Failure to comply can result in bid rejection, contract termination for default, and liability under the False Claims Act.
Similarly Situated Entity Exception
A subcontractor qualifies as a Similarly Situated Entity (SSE) if it is a registered small business concern under the NAICS code assigned to its subcontract AND holds the exact same socioeconomic designation that qualified the prime (e.g., SDVOSB prime subcontracting to an SDVOSB sub).
Under 13 CFR 125.6, work performed by certified SSEs counts 100% toward the prime's self-performance requirement. Work that an SSE further subcontracts to lower-tier non-SSE firms is excluded from credit.
Specialty Construction 25% Rule
For contracts assigned a specialty trade construction NAICS code (e.g., Electrical 238210, Plumbing 238220, Roofing 238160, Painting 238320), the prime and similarly situated entities must perform at least 25% of the total labor cost.
Cost of materials and equipment is expressly excluded from the statutory denominator and is not considered subcontracting under FAR 52.219-14(e)(4).
General Construction 15% Rule
For general building and civil engineering construction contracts (e.g., NAICS 236220, 236116, 237310), the prime and certified SSE partners must perform at least 15% of the total labor cost.
Non-similarly situated subcontractors may perform up to 85% of labor. Direct materials and heavy equipment purchases are excluded from the test.
Civil Penalties & Audit Liability
Contractors who fail to maintain required self-performance ratios or falsely certify compliance are subject to severe administrative and statutory penalties under the Small Business Act (15 U.S.C. 645(d)).
Penalties include statutory fines equal to the greater of $500,000 or the total dollar amount expended on non-similarly situated subcontractors in excess of the statutory limitation, plus debarment from federal contracting.