Sign In
  • Question

    How far down a clause flow down between contractor, if the prime still responsible for each sub contract?


    Answer

    There are basically two types of "flow-down" clauses, mandatory and necessary.  But, before discussing that subject, it's important to remember that the government has no "privity of contract" with anyone other than the prime contractor.  This means there is no legal relationship between the government and a subcontractor.  This does not mean we don't care how primes work with their subs, just that we cannot directly involve ourselves with the prime/sub-contractor relationship.  With that said, primes need to be aware that their failure to flow down some "non-mandatory" clauses may open them up to serious financial risk. 

    For example, the government may require cost data from a contractor, which includes sub-contractor data.  If the subs are unwilling to cooperate, the prime may be held accountable for the lack of requested data.  This could lead to action being taken by the government against the prime, due to the sub not cooperating.  Inclusion of certain clauses in the subcontract could serve to alleviate this problem.  Prime contractors need to carefully consider which clauses need to be "flowed-down" when awarding sub-contracts for government work, as they retain responsibility for compliance with government requirements.  The prime may also include additional clauses as they see necessary to ensure proper performance.
     
    To determine which clauses are mandatory flow-down, simply read each clause. For example, FAR 52.203-6 states that contractors must incorporate the clause in all subcontracts.  There are many clauses that are mandatory due to being required by law, such as FAR 52.224-2 "Privacy Act".  Additionally, there are clauses that may not be mandatory, but are "necessary".  For example, FAR 52.215-10 provides for price reductions in cases of defective pricing.  This is a clause that applies to both the prime and any subcontractors.  If the prime does not include a requirement for the sub-contractor to provide cost or pricing data, the prime may be at risk.
     
    Flow-down clauses also identify if they are applicable to first tier subcontracts or to all tiers.  FAR 252.225-7006 states the clause is to be in “first tier" subcontracts.  Other clauses just state to include in subcontracts.  Again, it's up to the prime contractor to decide what to flow-down.
     
    Be sure to also read FAR 44, a short but important FAR part that deals with subcontracting.

    Open full Question Details