What is a Subcontract? (Who Knows)

There has always been a lot of confusion over the definition of a subcontract - and with good reason. FAR (Federal Acquisition Regulations) does not contain an overarching definition of "subcontract". Instead, it contains several definitions of those words, each of which has specific application in the context of the rules. Here are some examples:

• FAR 3.502-1 (Subcontractor kickbacks) - "Subcontract" means a contract or contractual action entered into by a prime contractor or subcontractor for the purpose of obtaining supplies, materials, equipment or services of any kind under a prime contract.
• FAR 12.001 (Commercial items) - "Subcontract" as used in this part, includes, but is not limited to, a transfer of commercial items between divisions, subsidiaries, or affiliates of a contractor or subcontractor.
• FAR 15.401 (Contract pricing) - "Subcontract" also includes a transfer of commercial items between divisions, subsidiaries, or affiliates of a contractor or a subcontractor.
• FAR 19.701 (Small business subcontracting program) - "Subcontract" means any agreement entered into by a Government prime contractor or subcontractor calling for supplies and/or services required for performance of the contract, contract modification, or subcontract.
• FAR 22.801 (Equal employment opportunity) - "Subcontract means any agreement or arrangement between a contractor and any person (in which the parties do not stand in the relationship of an employer and an employee) (i) for the purchase, sale, or use of personal property or non personal services that, in whole or in part, are necessary to the performance of any one or more contracts or (ii) under which any portion of the contractor's obligation under any one or more contracts is performed, undertaken, or assumed.
• FAR 44.101 (Notice and consent to subcontract: purchasing system review) - "Subcontract" means any contract as defined in Subpart 2.1 entered into by a subcontractor to furnish supplies or services for performance of a prime contract or a subcontract. It includes but is not limited to purchase orders, and changes and modifications to purchase orders.
• FAR 52.204-10 (Reporting subcontract awards) - "Subcontract" as used in this clause, means any contract as defined in FAR Subpart 2.1 entered into by the Contractor to furnish supplies or services for performance of this contract. It includes, but is not limited to, purchase orders and changes and modifications to purchase orders, but does not include contracts that provide supplies or services benefiting two or more contracts.

Its no wonder then that the Government and contractors often bicker over what constitutes a subcontract. From a purchasing system perspective, it makes a difference. The policies and procedures for subcontracting are significantly different than those for purchasing raw materials or purchased parts.