Wednesday, September 16, 2015

Responsibility Determinations of Prospective Subcontractors

When submitting proposals to the Government, there are two things a prospective contractor must concern itself when proposing subcontract costs; cost/price reasonableness and subcontractor "responsibility". This post is about the latter, subcontractor responsibility.

Prospective prime contractors are responsible for determining the responsibility of their prospective subcontractors (see FAR 9.104-4). Determinations of prospective subcontractor responsibility may affect the Government's determination of the prospective prime contractor's responsibility. Accordingly, a prospective contractor's deficient subcontractor responsibility determination procedures and practices may influence the Government's responsibility determination of the prime contractor. The logic goes something like if the prime cannot or will not determine whether its proposed subcontractors are responsible, then how can the prime contractor be responsible since FAR requires such determinations. Sometimes, the Government will require a prospective contractor to provide written evidence of proposed subcontractor's responsibility. If that happens, prime contractors must be prepared to furnish such evidence and not wait until requested before compiling such evidence.

So how does a contractor (or prospective contractor, or higher-tier subcontractor, or higher-tier prospective subcontractor) go about determining a subcontractor's "responsibility". Essentially, the prime contractor must perform the same steps that the Government performs when determining whether the prime contractor is responsible. These seven considerations are also found in FAR at 9-104.1. To be determined responsible, a prospective subcontractor must

  1. Have adequate financial resources to perform the contract, or the ability to obtain them.
  2. Be able to comply with the required or proposed delivery or performance schedule, taking into consideration all existing commercial and governmental business commitments.
  3. Have a satisfactory performance record.
  4. Have a satisfactory record of integrity and business ethics.
  5. Have the necessary organization, experience, accounting and operational controls, and technical skills, or the ability to obtain them.
  6. Have the necessary production, construction, and technical equipment and facilities, or the ability to obtain them.
  7. Be otherwise qualified and eligible to receive an award under applicable laws and regulations.

Sometimes contractors (or prospective contractors) succumb to the temptation to perform superficial responsibility determinations. We've seen some that take the form of negative assurance, i.e. nothing came to our attention that would lead us to believe the prospective subcontractor is not responsible. After all, it takes a lot of time and effort to request supporting data and document the review steps and conclusions. And, in many cases, the Government never asks for the data anyway. While such a gamble may have been worth the risk up until a few years ago, contracting officers are coming under increased scrutiny (by the Inspector Generals and other oversight) to document their own responsibility determinations and that will include steps to ensure that prospective contractors have performed their own required responsibility determinations.

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