Whenever Homeland Security kicks into action as a result of a natural disaster, man-made disaster, or terrorism, it hires private companies to do whatever work has to be done. In the wake of Hurricane Katrina, Congress heard a lot of testimony on how excessive tiering of subcontractors under disaster recovery cost-reimbursement type contracts led to inflated costs (overhead and fees), and poor prime contractor oversight on subcontractor work. As a result, the Post-Katrina Emergency Management Reform Act was passed to limit the amount of subcontracts under these situations.
Homeland Security has now published a proposed FAR Supplemental regulation to implement this Act. The regulation applies to cost-type contracts (greater than $100 thousand) awarded under emergency situations and restricts the value of subcontracts to 65 percent of direct costs. When bidding on a contract, prospective contractors will be required to submit sufficient evidence to the contracting officer to permit him/her to make a determination that the offeror will or will not award subcontras that exceed 65 percent of the cost (excluding indirect costs and fee) of the contract, or any individual task or delivery order under the contract. The proposed regulation includes a process where the contracting officer can request a waiver from someone higher up in their organization. For contractors, its rarely a good strategy to request and hope for a waiver. If there are competing proposals, the contracting officer will go down the path of least resistence and award to an offeror that is not requesting a waiver.
The comment period for this proposed regulation expires on August 9th.
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