Thursday, December 21, 2017

Consent to Subcontract - Important Reminder

This is an update to previously published postings on the importance of obtaining consent to subcontract when required by regulations and a reminder to contractors of the consequences of ignoring or shorting the requirements.

Advance notification and consent are required before the award of subcontracts if the prime contractor does not have an approved purchasing system, where the Government is assuming a large portion of the contract risk and  therefore, has a vested interest in knowing and controlling costs with the contract. There are relatively few contractors with approved purchasing systems and therefor, the advance notification and consent requirements have broad application. Keep in mind however that even if a contractor has an approved purchasing system, the contracting officer retains the discretion to require advance notification and approval.

When advance notification is required, a contractor must notify the ACO reasonably in advance of placing certain subcontracts. The contractor must incorporate an appropriate lead time into its purchasing process to ensure the information required by FAR 52.244-2 is obtained and provided to the ACO for review prior to placing an award.

The ACO is required to review the information in a timely manner to ensure that it complies with the requirements of the clause (i.e. 52.244-2) and to notify the contractor immediately if the notification package is incomplete or insufficient.

The ACO's consent approval is required to be in writing and will include a statement that it is not a determination of allowability or acceptability of costs.

Failure to obtain advance consent could result in disallowance of all subcontract costs, as it did in the case of Technology Systems, Inc. (see Failure to Obtain Consent to Subcontract - All Subcontract Costs Disallowed).

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