FAR 36.205 Cost Limitations: What to Ask Your Prime GC
When pricing federal construction projects, trade subcontractors and small general contractors frequently focus on production rates, crew sizes, and material expenses. However, federal procurement statutes enforce strict statutory spending ceilings that can disqualify an entire proposal before evaluation even concludes. Under FAR 36.205, statutory cost limitations place hard boundaries on specific line items and total project awards. To safeguard your pricing and ensure compliance, use this guide to ask the prime general contractor the right questions before bid cutoff.
1. Are Any Scopes Governed by Separate Cost Limitation Schedules?
Your first step when reviewing project requirements is discovering whether the federal agency has isolated particular scopes under statutory expenditure caps. Solicitations containing one or more items subject to statutory cost limitations are required by FAR 36.205(b)(1) to state the applicable cost limitation for each affected item in a separate schedule. Furthermore, federal rules dictate that an offer failing to include separately-priced schedules will not be considered for award.
If you are submitting trade numbers for interior packages such as drywall, framing, or acoustic ceilings, ask the prime GC whether your scope falls under an isolated schedule. Providing a single bundled number when the government mandates separated schedules can cause the prime proposal to be rejected outright. Checking these requirements early against your bid day checklist prevents last-minute formatting oversights.
2. Has the Contracting Agency Issued Written Waivers or Exemptions?
Federal procurement regulations strictly restrict contracting officers from awarding contracts that exceed statutory boundaries. Under FAR 36.205(a)(1), contracts for construction shall not be awarded at a cost to the government in excess of statutory cost limitations unless applicable limitations can be and are waived in writing for the particular contract.
Moreover, FAR 36.205(c) establishes that the government shall reject an offer if its prices exceed applicable statutory limitations, unless governing laws or agency procedures provide pertinent exemptions. Ask the prime contractor whether any formal written waiver has been executed or if an exemption applies. Without a written waiver, the published limitation represents an immovable cap that your combined pricing cannot exceed.
3. How Are Direct Costs, Allocable Indirect Costs, and Profit Distributed?
When bids must be split into separate schedules to meet statutory ceilings, contractors cannot simply shift administrative markups or margins away from capped scopes. FAR 36.205(b)(3) mandates that the price on each schedule shall include an approximate apportionment of all estimated direct costs, allocable indirect costs, and profit.
Ask the prime GC how they are apportioning project overhead, supervision, and shared site costs across schedules. Clear communication ensures your subcontractor pricing carries an equitable share of markups without unfairly overloading a capped line item. Setting these parameters clearly within your bid exclusions and clarifications helps protect your bid from arbitrary markups during prime leveling.
4. Does the Solicitation Authorize the Award of Separate Contracts?
Exceeding a statutory limit on a single schedule does not always mean the entire procurement collapses, provided the agency included appropriate solicitation terms. FAR 36.205(c) states that if it is in the government's interest, the contracting officer may include a provision in the solicitation permitting the award of separate contracts for individual items whose prices are within or subject to applicable statutory limitations.
Ask the prime contractor if the solicitation includes this split-award language. If the agency reserves the right to award items independently, a compliant bid on an interior or finish package might still result in contract work even if another prime schedule exceeds its statutory limitation.
5. Is the Entire Pricing Proposal Free of Materially Unbalanced Pricing?
Estimators might assume they can help a prime GC sneak under a statutory cap by underpricing a restricted item and making up the margin on an unrestricted item. Federal rules explicitly prohibit this strategy. FAR 36.205(d) requires the government to reject an offer if its prices fall within statutory limitations only because it is materially unbalanced.
Under the regulation, an offer is considered unbalanced if its prices are significantly less than cost for some work and overstated for other work. Subcontractors should ask the GC how trade numbers are being compiled to ensure no trade scope is artificially suppressed or inflated. Attempting to disguise true costs to beat a statutory ceiling invites outright rejection from the contracting officer.
6. Do Allowances for Government Contingencies and Overhead Breach the Ceiling?
Even when a contractor's proposed price rests below a statutory threshold, additional government-side additions can still disqualify the award. Under FAR 36.205(a)(2), contracts shall not be awarded at a cost to the government which, with allowances for government-imposed contingencies and overhead, exceeds the statutory authorization.
Ask the prime contractor whether the agency disclosed its contingency allowances or if the team is leaving an adequate buffer beneath the statutory authorization. Leaving no buffer against agency contingencies can lead to a canceled procurement at final award.
Inquiry Checklist for Subcontractors and Small GCs
- Does the solicitation establish separate schedules with statutory cost limitations under FAR 36.205?
- Has the contracting agency provided a written waiver or cited specific statutory exemptions for capped items?
- Does each schedule reflect an approximate apportionment of direct costs, allocable indirect costs, and profit?
- Has the contracting officer inserted language permitting the award of separate contracts for individual items?
- Are all trade figures balanced against actual costs, avoiding underpriced or overstated line items?
- Does the total bid, combined with government-imposed contingencies and overhead, remain within statutory authorization?
Sources
36.205 Statutory cost limitations. | Acquisition.GOV
Published October 29, 2026. No affiliate links on this page. Facts come from the sources linked above; check them for updates.