FAR 52.215-22—Limitations on Pass-Through Charges-Identification of Subcontract Effort.
Plain-English Summary
FAR 52.215-22 is a solicitation provision used to collect information about subcontracting effort so the Government can evaluate whether an offer includes excessive pass-through charges and whether the prime contractor or higher-tier subcontractors are contributing meaningful added value. It works together with FAR 52.215-23, which defines key terms such as added value, excessive pass-through charge, subcontract, and subcontractor, and it requires offerors to identify the total cost of work performed by the offeror and by each subcontractor. The provision also triggers additional disclosure when the offeror plans to subcontract more than 70 percent of the total cost of work, or when a proposed subcontractor plans to subcontract more than 70 percent of its own subcontracted work to lower-tier firms. In those cases, the offeror must disclose the indirect costs and profit/fee associated with the subcontracted work and explain the added value provided by the offeror or subcontractor. In practice, this provision is intended to help contracting officers assess whether the proposed contracting structure is efficient and whether the prime is doing enough substantive work to justify its role and markup. It is especially important on large, complex, or heavily subcontracted acquisitions where the Government wants visibility into who is actually performing the work and what value each tier adds.
Key Rules
Exclude excessive pass-through charges
The proposal must not include excessive pass-through charges. The provision ties this requirement to the definitions in FAR 52.215-23, so the offeror must structure its pricing and subcontracting approach to avoid unsupported markups on work largely performed by others.
Identify total work by tier
The offeror must identify the total cost of the work it will perform and the total cost of the work each subcontractor will perform under the contract, task order, or delivery order. This gives the Government a clear picture of how the effort is distributed across the team.
Disclose when subcontracting exceeds 70 percent
If the offeror plans to subcontract more than 70 percent of the total cost of work, it must identify the amount of its indirect costs and profit/fee attributable to the subcontracted work and describe the added value it provides. This requirement is designed to show whether the prime is doing enough work to justify its overhead and profit.
Disclose lower-tier heavy subcontracting
If any proposed subcontractor will subcontract more than 70 percent of its own subcontracted work to lower-tier subcontractors, the offeror must provide the same type of disclosure for that subcontractor. The Government can therefore examine pass-through risk not only at the prime level but also deeper in the supply chain.
Use solicitation-stage information
This is a solicitation provision, so the disclosure is required in the proposal stage rather than after award. The information helps the contracting officer evaluate the offer before making an award decision.
Apply to contracts and orders
The provision applies to the contract, task order, or delivery order, so the required analysis may be needed at the base contract level or at the order level depending on how the acquisition is structured.
Responsibilities
Offeror
Prepare a proposal that excludes excessive pass-through charges, identify the total cost of work it will perform and the total cost of each subcontractor’s work, and provide the required indirect cost, profit/fee, and added-value information when subcontracting exceeds the 70 percent threshold.
Prime Contractor
If selected, ensure the proposed subcontracting structure and pricing are supportable, and be prepared to justify the value it adds to subcontracted work if the Government questions the level of pass-through charges.
Subcontractor
When a proposed subcontractor will itself subcontract more than 70 percent of its work, provide the information needed for the offeror to disclose that subcontractor’s indirect costs, profit/fee, and added value.
Contracting Officer
Review the proposal’s subcontracting breakdown and added-value explanations to assess whether excessive pass-through charges are present and whether the proposed arrangement reflects meaningful contractor performance.
Agency
Use the provision in appropriate solicitations as prescribed by FAR 15.408(n)(1) and evaluate the resulting disclosures to support fair pricing and efficient use of contractor and subcontractor resources.
Practical Implications
Offerors should be ready to map the entire workshare by cost, not just by labor categories or percentages, because the rule focuses on total cost of work performed.
A proposal that is heavily subcontracted is not automatically improper, but it will trigger extra scrutiny and a need to explain real added value beyond simple management or billing.
The 70 percent threshold is a key trigger point; contractors should monitor both first-tier and lower-tier subcontracting to avoid missing required disclosures.
Failure to provide the required breakdown or added-value explanation can create proposal evaluation problems, pricing questions, or concerns about excessive pass-through charges.
Contracting officers should look for unsupported overhead and profit on work largely performed by others, especially where the prime’s role appears limited to coordination or contract administration.
Official Regulatory Text
As prescribed in 15.408 (n)(1) , use the following provision: Limitations On Pass-Through Charges-Identification Of Subcontract Effort (Oct 2009) (a) Definitions . Added value, excessive pass-through charge, subcontract, and subcontractor, as used in this provision, are defined in the clause of this solicitation entitled "Limitations on Pass-Through Charges" (FAR 52.215-23 ). (b) General . The offeror’s proposal shall exclude excessive pass-through charges. (c) Performance of work by the Contractor or a subcontractor. (1) The offeror shall identify in its proposal the total cost of the work to be performed by the offeror, and the total cost of the work to be performed by each subcontractor, under the contract, task order, or delivery order. (2) If the offeror intends to subcontract more than 70 percent of the total cost of work to be performed under the contract, task order, or delivery order, the offeror shall identify in its proposal- (i) The amount of the offeror’s indirect costs and profit/fee applicable to the work to be performed by the subcontractor(s); and (ii) A description of the added value provided by the offeror as related to the work to be performed by the subcontractor(s). (3) If any subcontractor proposed under the contract, task order, or delivery order intends to subcontract to a lower-tier subcontractor more than 70 percent of the total cost of work to be performed under its subcontract, the offeror shall identify in its proposal- (i) The amount of the subcontractor’s indirect costs and profit/fee applicable to the work to be performed by the lower-tier subcontractor(s); and (ii) A description of the added value provided by the subcontractor as related to the work to be performed by the lower-tier subcontractor(s). (End of provision)