contractor100

Reporting subcontract awards and compensation - why does anyone do it?

23 posts in this topic

Must a subcontract initially funded at less than $25K ever be reported--either the subK details or the compensation of the subKtrs' execs? The clause says (in part):

52.204-10 © (1) Unless otherwise directed by the contracting officer, by the end of the month following the

month of award of a first-tier subcontract with a value of $25,000 or more, (and any

modifications to these subcontracts that change previously reported data), the Contractor shall

report the following information at http://www.fsrs.gov for each first-tier subcontract. (The

Contractor shall follow the instructions at http://www.fsrs.gov to report the data.)

(3) Unless otherwise directed by the contracting officer, by the end of the month following the

month of a first-tier subcontract with a value of $25,000 or more, and annually thereafter, the

Contractor shall report the names and total compensation of each of the five most highly

compensated executives for each first-tier subcontractor for the subcontractor?s preceding

completed fiscal year at http://www.fsrs.gov, if ?

(i) In the subcontractor?s preceding fiscal year, the subcontractor received ?

(A) 80 percent or more of its annual gross revenues from Federal contracts (and

subcontracts), loans, grants (and subgrants) and cooperative agreements; and

(B) $25,000,000 or more in annual gross revenues from Federal contracts (and

subcontracts), loans, grants (and subgrants) and cooperative agreements...

So, why do not all contractors award subKs for $1 then modify them to the true value, to avoid the reporting requirements?

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So, why do not all contractors award subKs for $1 then modify them to the true value, to avoid the reporting requirements?

Assuming such an approach would be consistent with the contractor's duty of good faith and fair dealing, it sounds a little petty. I also don't see how it would be possible for awards based on certified cost or pricing data. Finally, toward actually answering your question, compliance with the clause is discussed in FAR 4.1402(a) & ( c ).

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Assuming such an approach would be consistent with the contractor's duty of good faith and fair dealing, it sounds a little petty. I also don't see how it would be possible for awards based on certified cost or pricing data. Finally, toward actually answering your question, compliance with the clause is discussed in FAR 4.1402(a) & ( c ).

The reg could be written to say, "(and any

modifications to a subcontract awarded after 3/31/2011) that increases its value over $25,000,) but it's not. A lot of companies don't want to do the compensation reporting. Why is there this loophole???

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The reg could be written to say, "(and any

modifications to a subcontract awarded after 3/31/2011) that increases its value over $25,000,) but it's not. A lot of companies don't want to do the compensation reporting. Why is there this loophole???

I don't think that is a loophole.

If the parties entered into a contract for less than $25,000 with the intentions of modifying the contract to be more than $25,000, in order to avoid the reporting requirements, I would say they were not conducting themselves with the highest degree of integrity and honesty, as required by FAR 3.10.

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?Must a subcontract initially under $25K that is subsequently modified ever be reported?? Yes.

Why?

A read of the FAR and the clause suggests your interpretation of ?initial? award is off track. Applicability of the reporting requirements applies to ?all contracts with a value of $25,000 or more, except classified contracts and contracts? (Ref: FAR 4.1401(a)). Likewise the clause itself requires reporting ?any modifications to these subcontracts that change previously reported data?. Read together both the FAR and the clause suggests nothing about ?initial? awards and in my view a subcontract of less than $25K that was not reported because of its value that is subsequently modified to above $25K ?must? be reported.

Additionally I would suggest that proper contract administration by the Government and prime, especially with regard to modifications of subcontracts, would require changing of the data. The Government has many ways for monitoring this reporting including the responsibility to viewing data reported in fsrs.gov for accuracy and if I were a CO and found a subcontract not reported that I knew was over $25,000 I would direct the prime to report the sub. Other requirements ,such as reporting in esrs.gov of subcontract awards in certain instances, provides another check and balance for both the prime and the Government to report in fsrs.gov properly.

?So, why do not all contractors award subKs for $1 then modify them to the true value, to avoid the reporting requirements? ?

Here is a quick list that relate to posts already made in this thread. ALL may or may not be applicable but remember the net for not reporting subcontract awards properly could be widely cast especially if a contractor was knowing trying to ?play? the system as you suggest. Making false statements, 18 U.S.C. 1001; False Claims Act, 18 U.S.C. 287; Mail/Wire Fraud, 18 U.S.C. 1341; 1343; Conspiracy to Defraud Govt., 18 U.S.C. 286; Major Fraud Act, 18 U.S.C. 1031; False Claims Act, 31 U.S.C. 3929-33; Anti-Kickback Act, 41 U.S.C. 51 to 58; and Forfeiture of Fraudulent Claims Act, 28 USC 2514.

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So, why do not all contractors award subKs for $1 then modify them to the true value, to avoid the reporting requirements?

Fraud is frowned upon and is an easy way to get you debarred.

FAR 9.406-2, Causes for Debarment.

"The debarring official may debar?

(a) A contractor for a conviction of or civil judgment for --

(1) Commission of fraud or a criminal offense in connection with --

(i) Obtaining;

(ii) Attempting to obtain; or

(iii) Performing a public contract or subcontract."

If you don't think it's fraud, then call it a lack of business integrity. That can get you debarred as well (FAR 9.406-2(a)(5)).

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What you are saying makes sense. But what is the antecedent of the word, "these," then. It certainly appears to refer to

contracts with a value of $25K or more." Applicability of the reporting requirements applies to ?all contracts with a value of $25,000 or more, except classified contracts and contracts? (Ref: FAR 4.1401(a)). Likewise the clause itself requires reporting ?any modifications to these subcontracts that change previously reported data?.

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Well, , , , we are a large defense contractor and are "rolling" this out in Procurement today. There are those at Corporate who have dictated that this reporting is Mandatory; as in "no data, no award"! My two major foreign suppliers (sole source) have already told me, in so many ways and words, that I must be silly to think that they would supply such information. Stay tuned.

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Well, , , , we are a large defense contractor and are "rolling" this out in Procurement today. There are those at Corporate who have dictated that this reporting is Mandatory; as in "no data, no award"! My two major foreign suppliers (sole source) have already told me, in so many ways and words, that I must be silly to think that they would supply such information. Stay tuned.

Why would a private company make this mandatory? For all procurement? It is silly.

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Oh, , , , and one thing that I missed during the "roll out", , , , that the supplier "Certify" the data!

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For foreign vendors, i think you are missing one of the "meaty" portions of the clause. Per paragraph ( c )(2) of the clause

(2) By the end of the month following the month of a contract award, and annually thereafter, the Contractor shall report the names and total compensation of each of the five most highly compensated executives for the Contractor’s preceding completed fiscal year in the Central Contractor Registration (CCR) database via https://www.acquisition.gov, if—

(i) In the Contractor’s preceding fiscal year, the Contractor received—

(A) 80 percent or more of its annual gross revenues from Federal contracts (and subcontracts), loans, grants (and subgrants) and cooperative agreements; and

(B) $25,000,000 or more in annual gross revenues from Federal contracts (and subcontracts), loans, grants (and subgrants) and cooperative agreements; and

Chances are that a major foreign supplier will not have $25 M or more in Federal Contracts or more than 80% of his business from Federal Contract. Thus he might be exempt from reporting executive cmpensation.

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Carl:

I understand you to have said that the contractor must report first-tier subcontracts that were initially less than $25,000 but that are increased to $25,000 or more by modification. What do you see in the clause that has led you to that interpretation? I don't see anything in the clause to indicate that the reporting requirement ever applies to subcontracts that were not at least $25,000 at the time of award. The reference to modifications in the clause indicates that modification of such subcontracts must be reported in they change the original data.

The current language dates to FAR 2005-44, and nothing in the background statement indicates that subcontracts initially less than $25,000 but subsequently increased to $25,000 or more must be reported. In fact, the background statement says that the reporting requirement applies to subcontract "awards" of $25,000 or more.

The statute, Pub. L. 109-282, Federal Funding Accountability and Transparency Act of 2006, requires reporting of "federal awards" and "subawards" and expressly excludes any award of less than $25,000. See Sec. 2(a)(2):

(2) Federal Award.—The term ‘‘Federal award’’—(A) means Federal financial assistance and expendi- tures that— (i) include grants, subgrants, loans, awards, cooperative agreements, and other forms of financial assistance; (ii) include contracts, subcontracts, purchase orders, task orders, and delivery orders; (B) does not include individual transactions below $25,000; and ( c) before October 1, 2008, does not include credit card transactions.

The statute is silent on reporting subawards that were initially less than $25,000 but that are subsequently increased to $25,000 or more. Nothing I see in the statute, in FAR, in FAC 2005-44, or in any other government document indicates the need to report subcontracts that were initially less than $25,000 but subsequently increased to $25,000 or more. Do you have other information?

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Vern – I understand the statute is silent but I believe the concentration on “initial” is off base as I do not read this term in the statute, the FAR and the required clause. Here is how I stated it in my previous post -“Read together both the FAR and the clause suggests nothing about INITIAL (emphasis added for this post) awards and in my view a subcontract of less than $25K that was not reported because of its value that is subsequently modified to above $25K must be reported.” For my reference to FAR it is subpart 4.14.

Or stated another way the Government wants reports on all subcontracts that have a value of $25K or more. A subcontract is awarded for $1. No report by prime. Subcontract is modified to $25,001 and now must be reported on two accounts - 1) It is a subcontract that is now more than $25K , and 2) Previous data was not reported but by operation of the clause even though there was no data to report the data is now to be updated (reported) as a result of the modification. There are two reporting triggers award and updated data based on a modification to the subcontract.

In reviewing my post further and my basis for posting the response I did raises another interesting question. What of the 3 year subcontract that was awarded for say $26,000 and then is subsequently modified to $16,000 in the first year, would I as the prime need to report annually for the next two years on this subcontract or simply “remove” it from fsrs reporting system because its value is now less than $25K? At this point I would say I would not have to continue annual reporting regarding the now modified subcontract that is less than $25K.

As an added note I did attempt to address ways the CO, in fulfilling his/her overview responsibility of the fsrs reporting by primes, could monitor what the prime is reporting and then seek correction as appropriate.

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Or stated another way the Government wants reports on all subcontracts that have a value of $25K or more. A subcontract is awarded for $1. No report by prime. Subcontract is modified to $25,001 and now must be reported on two accounts - 1) It is a subcontract that is now more than $25K , and 2) Previous data was not reported but by operation of the clause even though there was no data to report the data is now to be updated (reported) as a result of the modification. There are two reporting triggers award and updated data based on a modification to the subcontract.

Emphasis added.

You have simply repeated your earlier assertion. You still have given no rationale for your interpretation that is based on the plain language of the clause or the statute. It's true that the clause does not use the word "initial," but it does not say what you claim it says. The only reference to modifications is the phrase: "and any modifications to these subcontracts that change previously reported data," emphasis added -- i.e, modifications that change information about subcontracts that have already been reported. The pronoun "these" refers to "first-tier subcontracts with a value of $25,000 or more," and there would be no "previously reported data" for a subcontract that was initially worth less than $25,000. The phrase about modifications tells the contractor to report modifications that change previously reported data. It does not tell the contractor to report contracts that were not previously reported, but that have been increased to $25,000 or more.

I don't agree with your interpretation. Neither the language of the clause nor the statute support it. The statute says "award," which suggests initial to me. The clause says to report subcontracts of $25,000 or more and modifications that change data on those subcontracts. Perhaps the author(s) of the clause meant to say what you have interpreted the clause to mean, but they did not say it and I doubt that a CO could convince a board or court of that they did based on the plain language of the clause. We need some official interpretation in order to get your interpretation. I have looked far and wide and found nothing.

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Vern - I agree that our differing views could only be solved by some oversight review or even a claim but let me offer a little more information that lead me to my assertion. By my read information on $25K or more prime contracts is populated into fsrs by FPDS-NG. A prime contractor is then to go into fsrs and populate and update additional information with subcontract info. So using my example I believe this would happen trying to use a realistic scenario.

Prime of $100,000 awarded. Contractor awards subcontract for $1. CO is monitoring, as required by fsrs standards, the primes info and notes prime has removed the prime contract from the system. All okay so far. Then CO learns, through the efforts noted in my previous assertion, that the prime has modified the subcontract to $25,001. CO goes to fsrs and notes that prime has not put the subcontract in the system (there is a way to add). Again in my view the CO should request the prime to do the add because the prime now has a contract that is more than $25K on a prime contract that is more than $25K.

This is the end of my rationale.

So to be clear, your view is that a prime could award any subcontract for $1 and subsequently modify those same subcontracts for any amount of $25K or more and never have to report the subcontracts?

Likewise what to the question I posed earlier and now specifically to you about subcontracts that were above $25K and subsequently modified to $0, is it your position that those subcontracts must be reported in fsrs and addressed annually in fsrs?

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So to be clear, your view is that a prime could award any subcontract for $1 and subsequently modify those same subcontracts for any amount of $25K or more and never have to report the subcontracts?

Likewise what to the question I posed earlier and now specifically to you about subcontracts that were above $25K and subsequently modified to $0, is it your position that those subcontracts must be reported in fsrs and addressed annually in fsrs?

My view is that the contractor must do only what the clause says it must do. That being the case, yes, a prime could award a $1.00 first-tier subcontract and then increase it to $25,001 without having to report it. However, such an action would be patently suspicious. Any contractor who did that might have to show what it was buying for $1.00 and why the price was subsequently increased by $25,000. There might be a valid explanation. If the explanation is valid, then the clause says what it says. On the other hand, a contract worth $25,000 or more could be terminated for convenience at no cost to the government for any number of reasons, which would reduce the price to $0. That modification would have to be reported, because the clause expressly says so.

You are trying reductio ad absurdum to discredit an interpretation of the clause that is contrary to your own. That doesn't work in this case. If a law yields an absurd result the fault is in the law. You cannot interpret a law to yield a more reasonable result if the interpretation is not supported by the language of the law itself. The clause does not say that a contractor must report a subcontract that was initially less than $25,000 but is subsequently increased by modification to more than $25,000. It simply does not say that.

I don't agree with your reading of the clause.

Vern

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With regard to an official interpretation I contacted the Federal Services Desk – FSD.gov – which is charged with answering questions, including those regarding policy, with regard to the FSRS system. The answer followed by the question is provided below.

Subject

---------------------------------------------------------------

Subcontract Modification

Discussion Thread

---------------------------------------------------------------

Response Via Email(John M T1) - 02/29/2012 01:33 PM

When the initial contract is modified and the threshold exceeds 25K reporting is

required beginning at that point. However, there is no report in the system because

the initial award was below 25K, so you will then add the subaward to the system.

Response Via Email(Maureen T1) - 02/29/2012 07:30 AM

"Thank you for contacting the Federal Service Desk (FSD). A response to your

question or issue will be emailed to you shortly, by an FSD Agent."

Customer By Web Form (Carl Culham) - 02/28/2012 11:24 PM

As a prime contractor I award a subcontract to a firm and the subcontract is less

than $25,000. By my read of the FSRS Contracts protocols I do not need to report

this subcontract award in FSRS because its value is less than $25,000. However

during prime contract performance I as the prime modify the subcontract where its

value is now more than $25,000. When the subcontract is modified to this new higher

value must it now be reported in the FSRS Contract system.

Question Reference #120228-001522

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So what? A court or board will interpret the language in the clause. It will not be interested in an assertion by some website wallah at the Federal Services Desk. That Q and A would not be admissible as evidence of the meaning of the clause. If I were a contractor and you were my CO and you told me to read the answer from the Federal Services Desk, i would laugh in your face and tell you to show me where it says that in the clause.

Paragraph ( c) of the clause says: "The contractor shall follow the instructions at http://www.fsrs.goc to report the data." On the home page you will find the following:

Who is required to file a FFATA report in FSRS?

The FFATA Sub-award Reporting System (FSRS) will collect data from Federal prime awardees on sub-awards they make: a prime grant awardee will be required to report on its sub-grants and a prime contract awardee will be required to report on its sub-contracts.

CONTRACTS

In accordance with Federal Acquisition Regulation clause 52.204-10 (Reporting Executive Compensation and First-Tier Sub-contract Awards), Prime Contractors awarded a federal contract or order are required to file a FFATA sub-award report by the end of the month following the month in which the prime contractor awards any sub-contract greater than $25,000. This reporting requirement will be phased-in (see below):

Phase 1: Reporting sub-contracts under federally-awarded contracts and orders valued greater than or equal to $20,000,000, reporting started July 8, 2010.

Phase 2: Reporting sub-contracts under federally-awarded contracts and orders valued greater than or equal to $550,000, reporting started October 1, 2010.

Phase 3: Reporting sub-contracts under federally-awarded contracts and orders valued greater than or equal to $25,000, reporting starts March 1, 2011.

Although the requirement to report sub-awards is being phased-in at certain dollar levels, if you would like to start reporting prior to the start date for your sub-contracts, the system is available to you for reporting.

GRANTS

In accordance with 2 CFR Chapter 1, Part 170 REPORTING SUB-AWARD AND EXECUTIVE COMPENSATION INFORMATION, Prime Awardees awarded a federal grant are required to file a FFATA sub-award report by the end of the month following the month in which the prime awardee awards any sub-grant equal to or greater than $25,000. The reporting requirements are as follows:

  • This requirement is for both mandatory and discretionary grants awarded on or after October 1, 2010.
  • All sub-award information must be reported by the prime awardee.
  • For those new Federal grants as of October 1, 2010, if the initial award is equal to or over $25,000, reporting of sub-award and executive compensation data is required.
  • If the initial award is below $25,000 but subsequent grant modifications result in a total award equal to or over $25,000, the award will be subject to the reporting requirements, as of the date the award exceeds $25,000.
  • If the initial award equals or exceeds $25,000 but funding is subsequently de-obligated such that the total award amount falls below $25,000, the award continues to be subject to the reporting requirements of the Transparency Act and this Guidance.

Emphasis added.

Note that under the discussion of grants it says: "If the initial award is below $25,000 but subsequent grant modifications result in a total award equal to or over $25,000, the award will be subject to the reporting requirements, as of the date the award exceeds $25,000." But it does not say that for contracts. (I don't know why.) The website mirrors guidance issued by OMB, which says to follow the FAR. I scanned the FAQ section at the website and found nothing, but I might have missed something. I also scanned the user guide and found nothing, but again, I might have missed something. I did not look at the user training materials. I'm busy and don't have a lot of time to devote to this.

Am I being unreasonable in concluding that if they had wanted that rule to apply to subcontracts they would have said so in the FAR clause or at the website? If I am a contractor, I don't want to report any more than I absolutely have to, because it costs me money. I have no legal or moral obligation to read a requirement into a contract clause that does not appear in the clause. And I have no legal or moral obligation to ask a question about the contract clause unless the clause were patently ambiguous, which I do not think it is.

Regulation and clause writers must clearly say what they mean.

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Not fully unreasonable but I am concerned that our discussion could compel a contractor to laugh in a CO' s face. Sorting out for the good of all, if possible, is my goal. To that end I have made the effort do further due diligence and will post info if and when received. I will say that in the spirit of full disclosure that the wedsite that you quote, and which I have read through as well, says "For Help: Federal Service Desk" which is where I went to get the answer from the wallah on policy as provided by the way a question is be posted and not a "website" one as you have stated.

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Carl

I think your goal is a good one. But as contracting folk we know that the deal between the parties is set forth in the contract, and the courts and boards, led by the Federal Circuit, rely on the "plain language" of the clauses. They will not admit extrinsic evidence to support a contract interpretation unless the text of the contract is ambiguous. The clause in this case is very badly written, but I don't think it is ambiguous with respect to the issue that we have been discussing. Frankly, I wouldn't care if you produced a letter signed by the President, the Senate Majority Leader, and the the Speaker of the House to the effect that contractors must report contracts initially worth less than $25,000 when modified to be $25,000 or more. If the clause doesn't say it a contractor doesn't have to do it.

Policymakers should write clauses that say what they mean.

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Carl, I notice that your correspondent at the help desk says: "...so you will then add the subaward to the system." Perhaps he is actually referring to a subgrant, as he says "subaward" not "subcontract"?

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Quote

Who is required to file a FFATA report in FSRS?

The FFATA Sub-award Reporting System (FSRS) will collect data from Federal prime awardees on sub-awards they make: a prime grant awardee will be required to report on its sub-grants and a prime contract awardee will be required to report on its sub-contracts.

CONTRACTS

In accordance with Federal Acquisition Regulation clause 52.204-10 (Reporting Executive Compensation and First-Tier Sub-contract Awards), Prime Contractors awarded a federal contract or order are required to file a FFATA sub-award report by the end of the month following the month in which the prime contractor awards any sub-contract greater than $25,000. This reporting requirement will be phased-in (see below):

Phase 1: Reporting sub-contracts under federally-awarded contracts and orders valued greater than or equal to $20,000,000, reporting started July 8, 2010.

Phase 2: Reporting sub-contracts under federally-awarded contracts and orders valued greater than or equal to $550,000, reporting started October 1, 2010.

Phase 3: Reporting sub-contracts under federally-awarded contracts and orders valued greater than or equal to $25,000, reporting starts March 1, 2011.

Although the requirement to report sub-awards is being phased-in at certain dollar levels, if you would like to start reporting prior to the start date for your sub-contracts, the system is available to you for reporting.

GRANTS

In accordance with 2 CFR Chapter 1, Part 170 REPORTING SUB-AWARD AND EXECUTIVE COMPENSATION INFORMATION, Prime Awardees awarded a federal grant are required to file a FFATA sub-award report by the end of the month following the month in which the prime awardee awards any sub-grant equal to or greater than $25,000. The reporting requirements are as follows:

  • This requirement is for both mandatory and discretionary grants awarded on or after October 1, 2010.
  • All sub-award information must be reported by the prime awardee.
  • For those new Federal grants as of October 1, 2010, if the initial award is equal to or over $25,000, reporting of sub-award and executive compensation data is required.
  • If the initial award is below $25,000 but subsequent grant modifications result in a total award equal to or over $25,000, the award will be subject to the reporting requirements, as of the date the award exceeds $25,000.
  • If the initial award equals or exceeds $25,000 but funding is subsequently de-obligated such that the total award amount falls below $25,000, the award continues to be subject to the reporting requirements of the Transparency Act and this Guidance.

I believe the material quoted from the website, see above, refers to the initial grant from the agency, not the subgrant. It is not clearly written, but here this is from the OMB guidance.

For those new Federal grants as of October 1, 2010, if the initial award is equal to or over

$25,000, reporting of subaward and executive compensation data is required. If the initial award is below $25,000 but subsequent grant modifications result in a total award equal to or over

$25,000, the award will be subject to the reporting requirements, as of the date the award exceeds $25,000. If the initial award equals or exceeds $25,000 but funding is subsequently de- obligated such that the total award amount falls below $25,000, the award continues to be subject to the reporting requirements of the Transparency Act and this Guidance.

The statute says" Federal awards" must be reported and the definition of Federal awards excludes "individual transactions" below $25K. See below. So, the exclusion should be identical for the federal contract or grant and the subaward issued below it?

If so:

1. What if a contract is awarded below $25K and subsequently increased by mod to greater than $25K? Does 52.204-10 have to be added by mod, or does it kick in automatically if a mod increases the value of the K? I cannot tell from the FAR

2. If no to above question, why does OMB stipulate that the statute applies for grants that get new money?

3. Shouldn't subcontracts/grants be treated exactly the same as contracts/grants?

(2) F

EDERAL AWARD.—The term ‘‘Federal award’’—

(A) means Federal financial assistance and expenditures

that—

(i) include grants, subgrants, loans, awards,

cooperative agreements, and other forms of financial

assistance;

(ii) include contracts, subcontracts, purchase

orders, task orders, and delivery orders;

(B) does not include individual transactions below

$25,000; and

© before October 1, 2008, does not include credit

card transactions.

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