Friday, December 27, 2013

Subcontract Administration - Part 1

Its been a long time since we discussed a contractor's responsibility for monitoring subcontracts (see this post from 2009 which focused on surveillance responsibilities). Over the next few days, we are going to dig a little deeper into exactly what FAR requires when it comes to the prime contractor/subcontractor relationship.

To be "responsible", a contractor (or subcontractor) must have adequate financial resources to perform the contract, or the ability to obtain them, (ii) be able to comply with the required or proposed delivery or performance schedule, taking into consideration all existing commercial and governmental business commitments, (iii) have a satisfactory performance record, (iv) have a satisfactory record of integrity and business ethics, (v) have the necessary organization, experience, accounting and operational controls and technical skills (or the ability to obtain them), (vi) have the necessary production, construction, and technical equipment and facilities or the ability to obtain them, and (vii) be otherwise qualified and eligible to receive an award under applicable laws and regulations (see FAR 9.104-1).

In the case of a prime contract, the Government must determine "responsibility" before awarding a contract (see our recent seven-part series on preaward surveys). When it comes to subcontracting however, it is the prime contractors' responsibility, not the Government's, to determine subcontractor "responsibility". In essence, everything the Government does to ensure prime contractor responsibility, the prime contractor should replicate to determine subcontractor responsibility. This is a tall order but is absolutely required by FAR 9.104-4 (unless, in rare circumstances, the Government decides to take on that responsibility itself).

The approval to subcontract out part of a Government contract is not automatic. On Monday, we will look at the "Consent to Subcontract" clause.

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