HANDYMAN 
Handyman Insurance, Manner of Calculating Percentage
As explained above, under the old rule, compliance differed based on the type of set-aside at issue, and varied based on whether the acquisition was for services, supplies, general construction, or specialty trade construction. Some self-performance requirements were calculated using “the cost of the contract incurred for personnel.” Others used “the cost of the contract (not including the costs of materials)” or “the cost of manufacturing the supplies or products (not including the costs of materials).” These small differences between the manner of calculation could cause much confusion. It often proved very difficult for contractors to figure out exactly what, exactly, they had to do, or what work they had to perform, in order to be compliant. Self-performance calculation questions were the some of the most common questions posed by our small business clients.
The revised regulation is much simpler. First of all, it eliminates the differences between the different small business programs: the same rules apply to small business, 8(a), WOSB/EDWOSB, SDVOSB and HUBZone set-asides. Second, regardless of whether the contract is one for services, supplies, or construction (general or specialty), the subcontracting limitations are described in terms of “the amount paid by the government to [the prime contractor]” That said, construction contractors will still have to exclude costs of materials from their calculations. Even so, this revision will make it much, much simpler to determine exactly how much you can subcontract and still be compliant.
The final rule also provides some clarification regarding “mixed contracts” – i.e. those contracts that contain elements of both supply and service contracts, to which several different subcontracting limitations could therefore apply. The rule explains that “the CO must first determine which category, services or supplies, has the greatest percentage of the contract value, and then assign the appropriate NAICS code.” The corresponding limitations on subcontracting will then apply “only to that portion of the requirement identified as the primary purpose of the contract.” The SBA further explained:
Therefore, where a procurement combines supplies and services, the limitations on subcontracting apply only to subcontracts that correspond to the principal purpose of the prime contract. For a contract principally for services, but which also requires supplies, this means that the prime contractor or its similarly situated subcontractors cannot subcontract more than 50 percent of the services to other than small concerns. However, the prime contractor can subcontract all of the supply components to any size business.
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