8(a) limitations on subcontracting

What the limit is for

The 8(a) program is supposed to develop the Participant, which means the Participant has to actually perform a meaningful part of the contract. The limitation on subcontracting is the rule that enforces this in dollar terms. Section 124.510(a) of the 8(a) regulation says the percentage of an 8(a) contract award amount that may be spent on subcontractors is limited, and that the prime contractor recipient of an 8(a) contract must comply with the limitations in section 125.6. This page combines the two sections as published in the eCFR, current as of October 29, 2026.

The four percentages

Section 125.6(a) applies the rule to a prime that is awarded a small business set-aside, 8(a), SDVOSB, VOSB, HUBZone, WOSB or EDWOSB contract above the simplified acquisition threshold. It states four limits, each framed as the share of the amount paid by the government to the prime that may go to firms that are not similarly situated. For services other than construction it is 50 percent. For supplies or products, other than from a nonmanufacturer, it is also 50 percent. For general construction it is 85 percent, and for special trade contractors it is 75 percent. Work that a similarly situated subcontractor further subcontracts counts toward the limit, so passing work down a chain does not escape it.

Notice what "similarly situated" does. The limit restricts payments to firms that are not similarly situated, so payments to firms that are similarly situated are not what it restricts. The sections read here use the phrase without defining it, and this page does not supply a definition, so confirm who counts as similarly situated before relying on a teaming arrangement.

What is excluded

For services, 125.6(a)(1) says other direct costs may be excluded to the extent they are not the principal purpose of the acquisition and small businesses do not provide the service. The examples named are airline travel, work performed by a transportation or disposal entity under a contract assigned the environmental remediation NAICS code (562910), cloud computing services, and mass media purchases. Work performed overseas on awards made under the Foreign Assistance Act of 1961, or work required to be performed by a local contractor, is also excluded. For supplies, general construction and special trade contracts, the cost of materials is excluded and not considered subcontracted.

Where a contract mixes services, supplies and construction, paragraph (b) says the contracting officer selects the appropriate NAICS code under section 121.402(b), and that selection determines which limitation applies. The relevant limit applies only to that portion of the award amount, and never more than one limitation applies to the same contract.

Supplies from a nonmanufacturer

Paragraph (a)(2)(ii) is a different rule altogether. A nonmanufacturer supplying products must supply the product of a domestic small business manufacturer or processor unless a waiver is granted. For a multiple item procurement without waivers, more than 50 percent of the value of the products to be supplied must be products of domestic small business manufacturers or processors. Where waivers are granted for some items, compliance is measured by combining the value of items from small manufacturers with the value of waived items, which together must be at least 50 percent. The same small business may act as both manufacturer and nonmanufacturer on a multiple item procurement. The calculator on this page covers the 50 percent supplies limit for non-nonmanufacturers only.

Indefinite delivery contracts and multiple award vehicles

Section 124.510(b) adds a rule for indefinite delivery or indefinite quantity 8(a) awards. The Participant cannot subcontract more than the required percentage to firms that are not similarly situated for each performance period, meaning the base term and then each option period. The contracting officer may, in his or her discretion, require the Participant to meet the limit, or comply with the nonmanufacturer rule, order by order. That discretionary approach applies to multiple award contracts set aside or partially set aside for 8(a) Participants. For orders set aside for eligible 8(a) Participants under full and open contracts or reserves, the Participant must meet the applicable limit and any nonmanufacturer rule for each order.

How the calculator works

The tool takes the amount the government pays you, subtracts the costs you identify as excluded, applies the percentage for your contract type, and compares the result to what you plan to pay firms that are not similarly situated. This is an assumption on one point: the regulation says the cap is a share of the amount the government pays the prime, and says certain costs are excluded, but the text read does not spell out whether the exclusion is removed from the base before the percentage is applied. The tool removes it. If your contracting officer measures differently, use their method.

Worked example

A services contract pays you $2,000,000, of which $200,000 is airline travel that qualifies as an excluded other direct cost. The base is $1,800,000 and the 50 percent cap is $900,000. If you plan to pay firms that are not similarly situated $950,000, you are $50,000 over the limit. If you instead pay $900,000, you are exactly at the limit, which is allowed because the rule says not more than 50 percent. If it were a general construction contract with $2,000,000 paid to you and $500,000 of materials excluded, the base would be $1,500,000 and the 85 percent cap $1,275,000.

What this page does not decide

It does not decide whether a subcontractor is similarly situated, how a given contracting officer treats an item as an other direct cost, or what happens if you miss the limit. The regulation's consequences sit elsewhere. SBA's 8(a) program has also been the subject of policy and rule changes in 2025 and 2026 that may not be in the eCFR text read, so confirm the current clause in your contract. Treat the output as a planning check, not compliance advice.

Sources

• 13 CFR 124.510 (eCFR, current as of October 29, 2026): What limitations on subcontracting apply to an 8(a) contract? Read November 2, 2026.
• 13 CFR 125.6 (eCFR, current as of October 29, 2026): What are the prime contractor's limitations on subcontracting? Read November 2, 2026.

Edition read: 13 CFR part 124 as published in the eCFR, current as of October 29, 2026 (read November 2, 2026). The 8(a) program has been the subject of policy and rule changes, and regulations change; this page states only the eCFR text read on that date and may be out of date, so check the current eCFR text and SBA's program pages. This page explains the regulation in plain language and does not replace it. Review needed: business-law YMYL page, not yet reviewed by a qualified professional.