The Federal Register published the new proposed rule to match the statute regarding mandatory performance of work set forth in a 2013 statute and which tracks the SBA’s 2016 mandatory performance regulation. Here is an excerpt from the Federal Register, with a link to the full cite at the bottom of the page. Please note, that even though this except does not contain it, there are changes to the manufacturing rule as well.
These important changes give small businesses greater flexibility on how they choose to comply with the limitations on subcontracting. Under the current FAR clauses, there is only one way for a small business to comply with the limitations: It must spend the required amount on work performed in-house. As proposed in this rule, there will be more than one way to comply with the limitations, and the small business will be able to choose how to comply. For example, a small business that is in compliance with the existing FAR clause will be able to comply with the new limitations on subcontracting.
Alternatively, a small business can decide to subcontract more than it did before, and it will be able to comply with the new limitations where it would not have complied before, as long as the amount spent on subcontracts does not exceed 50 percent of the price of the prime contract, for other than construction contracts; different percentages apply for construction contracts. Finally, a small business can decide to subcontract work to a similarly situated entity, in any amount of its choosing, that it previously subcontracted or performed in-house, and it will be in compliance with the new limitations on subcontracting because work performed by a similarly situated entity is counted as if it were performed by the prime contractor. In short, the new rules will make it easier for prime contractors to do business with Federal agencies by giving them more, and less burdensome, options for pursuing and winning larger contracts than before. Limitations on Subcontracting Rule