Subcontracting Limit

Per
the
Standard Specification
, Section
 8.2.1, “Construction Contracts and Federally Funded Maintenance Contracts”, ensure that the Contractor, including DBE-certified prime contractor, performs at least 30% of the total original contract amount (25% if the Contractor is a Small Business Enterprise on a wholly State- or local-funded Contract), less any specialty items, with the Contractor's own organization. The percentage of work subcontracted is calculated for first-tier subcontractors only; do not apply the subcontracting limitations to second or third-tier subcontractors. All DBEs must self-perform 30% of the work in order to perform a Commercially Useful Function (CUF).
The Contractor’s own organization only includes:
  • workers employed and paid directly by the contractor or wholly owned subsidiary
  • equipment owned by the contractor or wholly owned subsidiary
  • rented or leased equipment operated by the Contractor’s employees or wholly owned subsidiary employees
  • materials incorporated into the work if, the majority of the value of work involved in incorporating the material is performed by the Contractor’s own organization, including a wholly owned subsidiary’s organization
  • labor provided by leasing firms licensed under Chapter 91 of the Texas Labor Code for non-supervisory personnel if the Contractor or wholly owned subsidiary maintains direct control over the activities of the leased employees and includes them in the weekly payrolls (Payrolls may be submitted by either the contractor or the licensed staff leasing firm).
Allow the Contractor to subcontract any specialty items contained in the contract. Specialty items are work items not commonly found in contracts for similar work and may include:
  • removing an underground storage tank on a widening project
  • plumbing on a widening project
  • electronic work on a typical road construction project
  • work designated as specialty work in the contract.
Per the
23 CFR 635.116
“Subcontracting and Contractor Responsibilities”, the Contractor is to perform the work defined in the contract by installing the pay items, not to provide contract administration oversight (which is not a pay item and not part of their contract). The prime contractor must perform at least 30% of the contract work using their own company resources. Mobilization does not count towards performing 30% of the contract.