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We are a large business and a 1st tier subcontractor to the Prime. The Prime Contract has the subject clause in it (I still have unanswered questions in regard to whether the Prime "flowed" it to us in its order, or is it only found in the "prime contract", which we have a copy of). An internal, corporate, auditor has really "stirred the pot" in our procurement group because the subject clause was not "flowed down" on the concerned Purchase Orders that were issued to our subs.

I received very unfavorable looks when I pointed out that this clause only applies between the "Government" and the "Prime Contractor" and is not a "flow down" to all subs, at all levels. Perhaps the prime should of pointed out this clause to us in its solicitation(?), but that would seem to be of no added value due to the fact that the Prime knows that we are not an "interested party" in accordance with the definitions found in Subpart 26.1.

So, is my position correct?

Thank you.

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Guest Vern Edwards

First, the clause is not a "flow down" clause. You can always tell if a clause is to be flowed down, because it will includes language such as this: "(d) The Contractor shall include the substance of this clause in all subcontracts under this contract that meet the applicability requirement of FAR 15.408(g)." The clause at FAR 52.226-1 does not contain such language.

Second, I don't know why Cajuncharlies said the clause "cannot be flowed down." I can see no reason why the prime cannot decide to flow the clause down on its own initiative. I don't know why a prime would do so, but it could if it wanted to.

The botom line is that the prime in this case is not contractually obligated to flow the clause down. Your position is correct.

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Well, , , , and, , , ,

One "big" thing about the clause is the "5% incentive payment. Getting stares here. So, if I award a sub to one of our "regular" sellers with this clause flowed down, and they then issue a sub to an "Indian organization", where is the "5%" for my sub going to come from? Not from me! And, certainly not from the Prime, and who want's to convince the KO that he should cough up the "5% for a third tier sub?

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Congressional Boondoggle!! I just read the section and it says the CO "may" place this in a contract. I never have and never will. I believe in this deficit government there are no funds available for it or the extra administrative cost of administering the payment. Guess I am just not PC tonight.

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First, the clause is not a "flow down" clause. You can always tell if a clause is to be flowed down, because it will includes language such as this: "(d) The Contractor shall include the substance of this clause in all subcontracts under this contract that meet the applicability requirement of FAR 15.408(g)." The clause at FAR 52.226-1 does not contain such language.

Second, I don't know why Cajuncharlies said the clause "cannot be flowed down." I can see no reason why the prime cannot decide to flow the clause down on its own initiative. I don't know why a prime would do so, but it could if it wanted to.

The botom line is that the prime in this case is not contractually obligated to flow the clause down. Your position is correct.

The main reason I said the clause "cannot be flowed down" is that's what was on one of our company's internal PowerPoint training slide decks. It would have been more precise to say that a prime cannot flow down the prime's eligibility for the 5% incentive payment under the FAR clause.

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Well, , , , and, , , ,

One "big" thing about the clause is the "5% incentive payment. Getting stares here. So, if I award a sub to one of our "regular" sellers with this clause flowed down, and they then issue a sub to an "Indian organization", where is the "5%" for my sub going to come from? Not from me! And, certainly not from the Prime, and who want's to convince the KO that he should cough up the "5% for a third tier sub?

In DOD the 5% comes from the Office of Small Business Programs, not from the budget used for the contract.

Again: Is the contract you asked about a DOD contract? Does it contain the DFARS clause?

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Guest Vern Edwards

The clause can be flowed down, but unless the prime has worked some kind of deal with the government the prime would have to pay the 5 percent itself. I cannot imagine why a prime would want to do that, but you never know.

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