Overview
This section mandates that prime contractors on large construction projects perform a minimum percentage of work using their own internal workforce to ensure they maintain adequate oversight and interest in the project's success. It establishes the criteria for determining these percentages and prescribes the specific contract clause (FAR 52.236-1) required to enforce this rule.
Key Rules
- Minimum Threshold: The Contracting Officer (CO) must establish a minimum percentage of work the contractor must self-perform, which is ordinarily no less than 12%.
- Specialty Exclusions: Work typically handled by specialty subcontractors—such as plumbing, heating, and electrical—is generally excluded from the calculation of the self-performance percentage.
- Mandatory Use: Inclusion of the "Performance of Work by the Contractor" clause is mandatory for fixed-price construction contracts exceeding $2 million.
- Small Business Exceptions: The requirement is generally not applicable to contracts awarded under specific small business programs (e.g., 8(a), HUBZone, Service-Disabled Veteran-Owned, or Women-Owned Small Business set-asides), as those programs have their own "Limitations on Subcontracting" rules.
- Discretionary Use: For fixed-price construction contracts valued at $2 million or less, the CO has the discretion to include or omit the requirement.
Practical Implications
- Prevents "Pass-Through" Entities: The rule prevents prime contractors from acting as mere "shell" companies that subcontract 100% of the work, ensuring they provide meaningful value and supervision on-site.
- Proposal Planning: Contractors must carefully analyze their internal labor capacity against the solicitation’s specific percentage requirement to ensure they can legally perform the contract without over-relying on subcontractors for non-specialty tasks.