15 U.S.C. § 657s — Limitations on subcontracting

(a) In general. If a covered small business wins a contract under section 637(a), 637(m), 644(a), 657a, or 657f, it (1) may not spend more than 50% of the amount paid under a services contract on subcontractors; (2) for a supplies contract, other than supplies from a regular dealer, may not spend more than 50% of the amount paid minus material costs on subcontractors; (3) for a mixed services-and-supplies contract, must identify which category is the larger percentage, determine that category’s award amount, and may not spend more than 50% of that amount on subcontractors; and (4) for a contract mainly for supplies from a regular dealer, not mainly for services or construction, must supply a domestic small-business manufacturer’s or processor’s product. The Administrator may waive that requirement after a contracting officer finds no reasonably expected qualifying product, or after finding that no qualifying manufacturer or processor is available for the product or class. (b) Similarly situated entities. Spending on a subcontractor that is a similarly situated entity does not count as subcontracting for subsection (a) or (d) limits. (c) Modifications. After notice and public comment, the Administrator may change a percentage in subsection (a)(1)-(4) if needed to reflect normal industry practices of concerns below that industry’s numerical size standard. (d) Other contracts. (1) For contract categories not covered by subsection (a), the Administrator may by rule, after notice and comment, set a maximum percentage of contract payments that a covered small business may spend on subcontractors. (2) The rule must apply to all covered small businesses. (3) Through public rulemaking, the Administrator must set similar requirements for general and specialty construction and other categories not otherwise covered; each percentage is set under paragraph (1). (e) Definitions. A “covered small business concern” is, for section 637(a), an eligible small business; for section 637(m), a women-owned and controlled small business, including one at least 51% owned by economically disadvantaged women without regard to community-property law; for section 644(a), a small business; for section 657a, a qualified HUBZone concern; and for section 657f, a service-disabled-veteran-owned and controlled small business. A “similarly situated entity” is a subcontractor that has the same applicable qualifying status as the prime: a small business, section 637(a) concern, women-owned concern, economically disadvantaged women-owned concern, HUBZone concern, or service-disabled-veteran-owned concern.