Since this is a cost type contract, would the government require an approved accounting system or is this an issue that Northrop Grumman needs to initiate?
As the Government, our contractual relationship is with the prime contractor. If the prime contractor has an approved purchasing system, then unless specifically designated in FAR 52.244-2 Subcontracts, the prime contractor does not have to get consent to subcontract with the subcontractor. Even if the prime does not have an approved purchasing system, and must request consent to subcontract, the considerations for contracting officer approval do not specifically refer to the subcontractor being required to have a Government approved accounting system.
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Bottom-line, the prime contractor is required to demonstrate that they have a sound basis for selecting the small business subcontractor and determining that the subcontractor is responsible. For the given situation, it appears that there is not a requirement for the Government to review the subcontractor’s accounting system; however, the prime may need their own insight into the subcontractor’s accounting practices to determine subcontractor responsibility.