The Limitations on Subcontracting Rule: DOD Makes Immediate Change; FAR Council Issues Proposed Rule

The Department of Defense (DOD) has issued a class deviation that resolves the inconsistency between the Small Business Administration (SBA) regulations and the clause at Federal Acquisition Regulation (FAR) 52.219-14 related to the Limitations on Subcontracting Rule (LOSR). The FAR Council has also issued a proposed rule to amend FAR 52.219-14 to fully resolve this issue for all small businesses. Government contractors should be aware of these new changes and proposed changes, and should also know that they can make public comments on the FAR Council’s proposed rule on or before February 4, 2019.

Generally, the LOSR prevents small business prime contractors from subcontracting the majority of the work under a prime contract to large businesses. The LOSR is intended to ensure that small businesses get the benefit of the set-aside prime contract. The government does not want a small business to get an award, perform only a small portion of the work, and then subcontract out everything else to large businesses.

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