--- title: "Similarly situated entities: subcontracting without breaking the 50% rule" canonical: "https://teamingindex.com/knowledge/similarly-situated-entities" lastReviewed: "2026-11-08" markdown_url: "https://teamingindex.com/knowledge/similarly-situated-entities.md" topic: "Small business programs" summary: "Who counts as a similarly situated entity under 13 CFR 125.1, how their work counts toward the prime’s share under FAR 52.219-14, how to verify status and size, and what to put in the subcontract." --- # Similarly situated entities: subcontracting without breaking the 50% rule > Who counts as a similarly situated entity under 13 CFR 125.1, how their work counts toward the prime’s share under FAR 52.219-14, how to verify status and size, and what to put in the subcontract. - Topic: Small business programs - Last reviewed: 2026-11-08 - Canonical URL: https://teamingindex.com/knowledge/similarly-situated-entities The [Limitations on Subcontracting](https://teamingindex.com/knowledge/limitations-on-subcontracting) rule does not force a small prime to do everything itself. Work it subcontracts to a **similarly situated entity** is treated as if the prime performed it, so a team of small businesses with the right status can share a set-aside contract without breaking the cap. Getting the classification right for every subcontractor is the most important input to a compliant set-aside team. ## The definition Under **13 CFR 125.1**, a similarly situated entity is a **first-tier subcontractor**, including an independent contractor, that: 1. Has the **same small business program status** as the status that qualified the prime for the award, and 2. Is **small for the NAICS code the prime assigned to the subcontract** the subcontractor will perform. Both conditions must hold. A firm with the right status that is too large under the subcontract's NAICS code is not similarly situated, and neither is a small firm without the program status the set-aside requires. | The prime won on a | A similarly situated subcontractor is | | --- | --- | | Small business set-aside | Any small business that is small under the subcontract's NAICS code | | 8(a) award | An 8(a) Program participant that is small under the subcontract's NAICS code | | HUBZone set-aside or award | A certified HUBZone small business that is small under the subcontract's NAICS code | | SDVOSB set-aside or award | A certified SDVOSB that is small under the subcontract's NAICS code | | WOSB or EDWOSB set-aside or award | A WOSB Program participant (for an EDWOSB award, an EDWOSB) that is small under the subcontract's NAICS code | ## Only the first tier counts The benefit stops at the first tier. If your similarly situated subcontractor passes work to its own subcontractors, those amounts count toward your limit (13 CFR 125.6). Ask every similarly situated partner how much of its share it expects to subcontract, and to whom, before you finalize workshare. ## The subcontract NAICS code decides size The prime, not the subcontractor, assigns the NAICS code that best describes the subcontracted work (13 CFR 121.410). It may differ from the prime contract's code. A partner can be small under the code for engineering services and other than small under the code for computer systems design, so pick the code that genuinely describes the subcontract and document why. Choosing a code just to make a partner qualify invites a challenge. > **Example:** On an SDVOSB set-aside for services, the Government pays $8 million. The SDVOSB prime performs $3.2 million of the work. A certified SDVOSB subcontractor, small under the NAICS code assigned to its subcontract, receives $2.4 million and passes $0.4 million to a large lower-tier firm. A large subcontractor receives $2.4 million. The amount that counts against the 50% limit is $2.4 million plus $0.4 million, or 35% of the total: compliant. ## How to verify status Self-description is not verification. For each partner you plan to treat as similarly situated: - Check the **SAM.gov entity record**: the socioeconomic representations, the NAICS codes listed and whether SAM shows the firm as small under the subcontract's code. - For **8(a), HUBZone, SDVOSB and WOSB** status, confirm the certification with SBA's records, not only the SAM.gov representation. - Get a **written representation** in the subcontract that the firm holds the status and is small under the assigned code, with a duty to tell you if either changes. - Re-verify before proposal submission, before signing the subcontract and before each option period. ## What to put in the teaming agreement and subcontract - [ ] The NAICS code assigned to the subcontract and the subcontractor's size representation under it - [ ] The program status the subcontractor represents and its certification details - [ ] Prompt notice of any change in size or status, such as a merger, an acquisition or a program exit - [ ] A cap or reporting duty on the subcontractor's own lower-tier subcontracting - [ ] Cooperation with the prime's Limitations on Subcontracting tracking and any Government request for data - [ ] The prime's right to rebalance workshare if the subcontractor stops qualifying ## Common pitfalls - **Assuming any small business qualifies.** On a program set-aside, the subcontractor needs the same program status. A small business without 8(a) status is not similarly situated on an 8(a) contract. - **Using the prime contract's NAICS code by default.** The assigned subcontract code can differ, and size is measured against it. - **Overlooking program exits.** 8(a) participants graduate, certifications lapse and firms grow out of size standards. A partner can stop qualifying mid-contract. - **Forgetting independent contractors.** Individual consultants are subcontractors; they count against the limit unless they are themselves similarly situated. - **Not documenting the check.** If a competitor or the agency asks, you will need to show what you verified and when. ## How TeamingIndex helps - Search for partners who are likely similarly situated by combining status and size, for example [HUBZone firms small under NAICS 541330](https://teamingindex.com/directory?socio=HUBZONE&smallfor=541330). - Profiles show SAM.gov socioeconomic statuses and the NAICS codes each firm is small under, with the sync date. - The [Team Builder](https://teamingindex.com/teams) labels each member similarly situated, not similarly situated or undetermined for your set-aside, explains why, and lets you record the NAICS code assigned to each subcontract. - See how size standards and affiliation work in [NAICS size standards](https://teamingindex.com/knowledge/naics-size-standards). ## Official sources - [13 CFR 125.1: Definitions (similarly situated entity)](https://www.ecfr.gov/current/title-13/section-125.1) - [13 CFR 125.6: Prime contractor performance requirements (limitations on subcontracting)](https://www.ecfr.gov/current/title-13/section-125.6) - [FAR 52.219-14: Limitations on Subcontracting](https://www.acquisition.gov/far/52.219-14) - [13 CFR 121.410: Size standards for subcontracting](https://www.ecfr.gov/current/title-13/section-121.410) - [SAM.gov: entity registrations](https://sam.gov/) Not legal advice. TeamingIndex guides are general information to help you plan, not legal advice. Regulations, clauses and program rules change and solicitations can tailor them: always work from the current regulation and the clauses in your solicitation, and confirm decisions with your contracting officer or counsel.