Protests Involving Limitations on Subcontracting Requirements

March 19, 2026 Sareesh Rawat, Esq.

Under the Federal Acquisition Regulation (FAR) limitations on subcontracting clause, small business contractors may not subcontract out more than a specified percentage of work to non-similarly situated entities, depending on the NAICS code assigned to the contract. For instance, the clause at FAR 52.219-14 obligates the contractor not to pay more than 50% of the amount paid to it by the government for the performance of services and supply contracts to non-similarly situated entities. In this regard, a similarly situated entity is one that, like the prime contractor, possesses the necessary socioeconomic designations required by the contract. Notably, a procuring agency’s judgment on whether a contractor can comply with the limitations on subcontracting clause is a question of responsibility, which is reviewed by the Small Business Administration (SBA). Meanwhile, the contractor’s actual compliance with the clause is a matter of contract administration. Thus, both these issues are not considered by the Government Accountability Office (GAO) under its bid protest function. However, where a proposal, on its face, should lead an agency to conclude that an offeror has not agreed to comply with the limitations on subcontracting clause, the matter is of the proposal’s responsiveness or acceptability. The GAO reviews such matters to determine whether a proposal affirmatively takes an exception to the limitations on subcontracting or otherwise demonstrates that the offeror does not intend to comply with them.

In B-423214.2; B-423214.3, a decision issued on March 13, 2025, the GAO denied a bid protest challenging the awardee’s compliance with the limitations on subcontracting clause when the protester could not demonstrate the awardee’s intent not to comply. The Army issued the underlying women-owned small business set-aside invitation for bids (IFB) for refuse collection and recycling services at Ft Moore, Georgia. The IFB included the clause at FAR 52.219-14, amended by Department of Defense (DOD) Class Deviation 2021-O0008, which required compliance with the limitations on subcontracting requirements, as applied to services contracts, by the end of the base term of the contract and again following each subsequent option period. The awardee’s bid package included its teaming agreement with its subcontractor, which stated that the team intended to divide the onsite work in a manner that complies with all regulations and FAR clauses. The agreement also stated that compliance with FAR 52.219-14 would be achieved over the life of the contract. Focusing on the latter statement, the protester argued that the awardee did not intend to comply with the contract’s limitations on subcontracting clause, which required demonstrable compliance at multiple different time periods, such as at the end of the base year and each option year, rather than just once at the end of the contract.

The Army took the position that the awardee’s bid was responsive because it acknowledged and confirmed compliance with the limitations on subcontracting requirements. The contracting officer (CO) further explained that the awardee’s promise to comply with the clause over the life of the contract was reasonably interpreted by the agency as a commitment to comply with the requirements throughout the contract, including at different time periods following the base and each option period. Given this explanation, the GAO agreed with the agency, noting that the awardee’s bid contained a clear representation that it would comply with all regulations and requirements of the solicitation, particularly with respect to the division of work. This meant that the Army reasonably concluded that the awardee would comply with the limitations on subcontracting clause. The protester’s interpretation of the language in the awardee’s bid concerning compliance over the life of the contract was rejected for ignoring express statements committing to compliance with the clause and for making assumptions not supported by the record. Thus, the GAO found that the protester failed to show that the awardee’s bid, on its face, indicated an intent not to comply with the limitations on subcontracting clause. As a result, the protest was denied as the agency’s determination concerning the acceptability and responsiveness of the awardee’s bid was found reasonable.

Meanwhile, in B-298364.6; B-298364.7, the GAO sustained the protest when the awardee’s proposal, on its face, did not meet the limitations on subcontracting requirements. The Air Force issued the request for proposals (RFP) for Aerospace research, development, test, and evaluation in support of its Flight Test Center at Edwards Air Force Base in California. The total small business set-aside RFP incorporated the clause at FAR 52.219-14 and advised offerors that at least 50% of the cost of contract performance incurred for personnel shall be expended for employees of the concern. However, the awardee’s proposal stated that only 43.2% of the cost of performance would be expended for the awardee’s employees. The GAO stated in its analysis that a proposal that fails to conform to a material term of the solicitation, such as the limitations on subcontracting, is considered unacceptable and may not form the basis for an award. Accordingly, since it was clear to the Air Force from the face of the awardee’s proposal that it would not expend 50% of the cost of performance for its own employees, the agency was required to find the proposal unacceptable and ineligible for award. It was of no consequence that the SBA had deemed the awardee responsible because the issue was one of proposal responsiveness or acceptability, rather than of responsibility. Ultimately, the GAO sustained the protest as the awardee had taken exception to the limitations on subcontracting requirements.

Depending on the applicable NAICS code, the clause at FAR 52.219-14, “Limitations on Subcontracting,” obligates prime contractors to pay no more than a specified percentage of the amount paid to them by the government for performing the contract to non-similarly situated subcontractors. Contractors should remember that the question of whether an offeror has the ability to comply with the subcontracting limitation requirements is a question of responsibility, which is not reviewed by the GAO. Similarly, the GAO does not review actual compliance with the limitations on subcontracting clause, as that is a matter of contract administration outside its bid protest jurisdiction. Instead, the GAO considers protests challenging the acceptability or responsiveness of an offeror’s proposal to the solicitation’s limitations on subcontracting requirements. In such protests, it is the protester’s burden to establish that the relevant offeror does not intend to comply with the included limitations on subcontracting clause. The protester may establish this intent not to comply by demonstrating that the relevant proposal, on its face, takes an exception to the solicitation’s limitations on subcontracting requirements, which are considered material. If established, the GAO will sustain the protest and rescind any award by finding the proposal non-responsive to a material requirement, and thus ineligible for award.

This Bid Protest Insight is provided as a general summary of the applicable law in the practice area and does not constitute legal advice. Contractors wishing to learn more are encouraged to consult the TILLIT LAW PLLC Client Portal or Contact Us to determine how the law would apply in a specific situation.

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Post-Award Protests Due to Latent Ambiguities

March 19, 2024 Sareesh Rawat, Esq.

A basic tenet of the U.S. federal public procurement system is a fair and competitive bid process. This means federal agencies must provide potential contractors with sufficiently detailed solicitations that are clear and concise so they may compete intelligently and on a relatively equal basis. However, sometimes, issues arise when the solicitation itself contains hidden pitfalls. These are known as latent ambiguities. A latent ambiguity in a bid protest arises when a defect in the solicitation is not initially visible but only becomes apparent with the introduction of additional evidence, such as additional technical specifications, past performance evaluations, or discussions. Latent ambiguities may be differentiated from patent ambiguities, which are apparent solicitation defects or errors evident on the face of the solicitation.

A latent ambiguity may arise due to various reasons, including poorly drafted solicitation provisions, inconsistent or conflicting solicitation language, a lack of adequate clarification or guidance from the agency in response to offeror queries, or just a change in circumstances since the issuance of the solicitation. To demonstrate the presence of a latent ambiguity, the protestor should demonstrate that the ambiguity is not readily resolvable by referencing the solicitation or any applicable regulations. Furthermore, the protestor must prove that the latent ambiguity is genuine and material. To prove materiality, contractors can demonstrate that the latent ambiguity ultimately had a bearing on the source selection decision. The protestor must also show reliance on its reasonable interpretation of the latent ambiguity and competitive prejudice stemming from that reasonable reliance. In other words, the protestor must show that the latent ambiguity could have two or more reasonable interpretations and that the protestor relied on its own reasonable interpretation of the latent ambiguity in drafting its proposal. Finally, the protestor’s reliance on its own reasonable interpretation should have resulted in competitive prejudice.

Post-Award Protests Involving Awardee’s Failure to Satisfy Material Solicitation Requirements

November 22, 2024 Sareesh Rawat, Esq.

Bid protest adjudicative forums such as the Government Accountability Office (GAO) have consistently held that a proposal that fails to meet a material solicitation requirement is considered technically unacceptable and cannot form the basis of an award. When included in the solicitation as mandatory, a prospective contractor’s adherence to the government’s small business participation requirements may be considered a material solicitation requirement. In such solicitations, an adequate response to a mandatory small business participation requirement not only addresses the requirement in the relevant proposal section but is also consistent across all sections of the offeror’s proposal, including its pricing. When an offeror fails to adequately respond to a solicitation’s mandatory small business participation requirement, its proposal contains a material defect. Such a proposal defect is typically only correctable when the government opens discussions, permitting offerors to submit revised proposals. Thus, if the procuring agency fails to open discussions to resolve the material proposal defect, it may not then properly award the contract to an offeror that failed to meet the solicitation’s mandatory requirements.

Filing Protests in Acquisitions with Higher Ranked Intervening Offerors

October 2, 2025 Sareesh Rawat, Esq.

In order to have the necessary standing to file a protest at the Government Accountability Office (GAO), a protester must qualify as an interested party. The GAO’s bid protest regulations define an interested party as an actual or prospective bidder or offeror whose direct economic interest would be affected by the award of a contract or by the failure to award a contract. A protester may challenge the procuring agency’s evaluation of the awardee’s proposal as an interested party when there is a reasonable possibility that its proposal would be next in line for award if the protest is sustained. In post-award protests with an intervening offeror between the awardee and the protester, the protester’s economic interest may be considered too remote to qualify as an interested party to raise certain challenges against the awardee’s proposal. This is because when there is an intervening offeror that would be next in line for award should the protester’s protest be sustained, that intervening offeror is deemed to have a greater economic interest in the procurement. To establish standing in such procurements, the protester must challenge the agency’s evaluation of the intervening offeror to either show that it possesses the necessary economic interest to raise the pertinent challenges or otherwise demonstrate that its competitive position is subject to change based on the errors it identifies in the government’s evaluation.

Challenging Waiver of First Article Testing Requirements

February 26, 2026 Sareesh Rawat, Esq.

Government contracts often include first article testing (FAT) requirements to ensure the contractor can supply a product that meets the contract requirements for acceptance. Such contracts incorporate the clause at FAR 52.209-3 (Contractor Testing) or FAR 52.209-4 (Government Testing) to impose FAT requirements on the contractor. Both clauses allow the government to waive the FAT requirements where the contractor has previously furnished supplies of identical or similar items that the government has accepted. An improper waiver of the FAT requirements that is inconsistent with the relevant FAR clause may be grounds for protest. In such protests, it is the procuring agency’s burden to establish that its decision to waive the FAT requirements was reasonable and in accordance with applicable procurement law and regulation. In addition to prior successful performance, if the agency can demonstrate that the contractor in question previously received FAT approval for the same items being procured, the Government Accountability Office (GAO) will typically not sustain the protest challenging the FAT waiver, unless the protester can present countervailing evidence that the item being supplied will not meet material solicitation requirements.

Protests Involving Limitations on Subcontracting Requirements

TILLIT LAW Bid Protest Insights