Why the 50 Percent Rule Deserves 100 Percent Attention

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Small business prime contractors and their team members should pay careful attention to how the "50 Percent Rule" applies to their proposals and contracts. Some recent GAO bid protest decisions reveal that the 50 Percent Rule is being interpreted differently after the Small Business Act was amended by the 2013 National Defense Authorization Act (NDAA). As a result, small businesses must clarify with their agency customers how the 50 Percent Rule will be applied to the cost of labor and materials under their contracts. Failure to do so could expose small businesses to serious consequences, including proposal rejection, contract termination, fines, penalties, or worse.

In a recent GAO case, MindPoint Group, LLC, B-409562 (May 8, 2014), protester MindPoint challenged the DOJ's award of a contract set aside for economically disadvantaged, woman-owned small business (EDWOSB) concerns. The DOJ successfully argued that MindPoint was not an interested party to the protest because MindPoint, on the face of its proposal, took exception to the requirement that its employees perform at least 50 percent of the cost of contract performance incurred for personnel – also known as the "50 Percent Rule." The GAO agreed and dismissed the protest on those grounds.

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Topics:  Bid Protests, Contractors, Federal Contractors, Fifty Percent Rule, GAO, NDAA, SBA, Small Business

Published In: Government Contracting Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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