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    I have a contractor which has a repair contract. However one of the facilities where some of the parts are held prior to the actual performing of the repair is a 3rd party logistics center. This facility is owned by the contractor, but is not operated by the contractor, and all property held within the facility is a mix of contractor property/GFP. My question is, does this qualify as a subcontractor? I guess, I am a little unsure of exactly where this type of facility would fall within the Audit. This is a rather unique situation, and haven't really seen any precedent set for this type of thing. Any insight you could provide would be appreciated! Thanks, Nick Utterback IPMS - DCMA Indianapolis, IN


    Answer

    Great question for another of what can be one of the great complexities in Property Management. 

    Assuming that the prime contractor has a contract with the contractor operating the facility (logistics center) which includes a listing identifying the Government assets provided or the subcontractor is providing a service in which the Government assets are the subject of the contract; the answer is yes, the situation you describe below, does in fact meet the definition of a subcontractor.  
     
    FAR 44.101. “Subcontractor” means any supplier, distributor, vendor, or firm that furnishes supplies or services to or for a prime contractor or another subcontractor.
     
    In regards to “where this type of facility would fall within the audit”, based on the information provided and assuming the Prime does not occupy the same facility; the review of the facility itself would be the responsibility of the Prime Contractor.  Although the actual location is owned by the prime contractor, the Government asset(s) are in the possession of the subcontractor; therefore, in accordance with FAR 52.245-1 (f)(1)(v) the Prime is under obligation to “assure that its subcontracts are properly administered and that reviews are periodically performed…”.  Government assets are always accountable to the prime contract so the responsibility still remains with the prime contractor to ensure compliance with FAR 52.245-1.  The Government Property Administrator would validate compliance through reviews of the prime contractor under applicable outcomes such as: Subcontractor Control, Records, Utilization, Physical Inventory, etc.
     
    If in fact the prime contractor is at the same location with the subcontractor, then Government inclusion of the facility within the audit would depend on how the contract between the prime and the subcontractor is written.  For example, if the subcontractor is performing a service and the subcontract identifies the usage of specific Government assets and states that the subcontractor is to follow the Prime’s processes and procedures, then the facility and Government assets under the prime contract would be included in the Government Property Administrator’s audit and not as part of a Subcontractor Control review. IMPORTANT: the responsibility for Government assets in all subcontracts should be clearly identified within the subcontract.

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