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Prime contractors who intend to subcontract more than 70% of the total cost of work to be performed under a contract are subject to the Limitations on Pass-Through Charges clauses set forth at 52.215-22 or 52.215-23. Each clause requires that the prime contractor identify to the Government the indirect cost and profit applied to the subcontracted effort and describe the value added to the subcontracted effort by the prime to justify that indirect cost rate or profit. Any rate or profit deemed “excessive” will be deemed unallowable under the contract.

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