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I have a R&D, CR contract with an educational institution. Therefore, it is subject to OMB Circular A-21. A-21 limits to $25,000 the amount of subcontracts that the educational institution can charge F&A costs on. The contractor is using other companies to perform non-commercial work under this contract--sample testing, biological supplies and testing, that kind of thing.

My office has taken the position that this is a subcontract, and therefore subject to the $25,000 limitation imposed by A-21. The institution is asserting this to be a 'vendor agreement' (or supplier contract), as they use these services on more than just this one contract, and thinks that they are properly included in the MTDC of the contract.

A-21 does not distinguish between vendors and subcontractors. The contractor is relying on the fact that A-133 makes the distinction. We believe that as they thought to distinguish in A-133, the silence in A-21 is intentional and that they would both be subject to the $25,000 restriction in A-21.

I know that some of this depends on the work-they are performing direct work/supplies on the contract (as opposed to a general supplier contract for pencils, for example, which someone might grab to make notes on something under the contract).

So my questions are:

Does the proper application of A-21 differentiate between subcontracts and vendor agreements, specifically for the purposes of G.2?

In the scenerio given, would this be considered a vendor or a subcontractor? Which definition of 'vendor' or 'subcontractor' applies?

Is there a ruling (GAO case, FAR clause, Court of Federal Claims case, etc) that I could look to? I've found a few things that lightly dance around the issue, but nothing that addresses it directly. The smokier the gun the better.

As a side note, we asked the people who established the indirect cost rates to begin with whether they included these 'vendor agreements' in the MTDC. Their response was a mind-blowing 'your guess is as good as ours' (paraphrased). And because it is CR, the contract doesn't stipulate one way or the other (though in the future we will!)

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The term "subcontract" has many different definitions in Federal regulations. Vern did an article on the topic last year.

You won't find an answer certain.

Hope this helps.

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Guest Vern Edwards

This is a matter of contract and regulatory interpretation. Unfortunately, the term "subcontract" is problematic and a source of uncertainty in government contracting.

OMB Circular A-21 does not define subcontract. OMB Circular A-133 does not define subcontract. FAR Part 16, which prescribes the use of FAR 52.216-7, the Allowable Cost and Payment clause, does not define subcontract. FAR Part 31, which prescribes the application of OMB Circular A-21, does not define subcontract. There is no definition of subcontract in FAR Part 2 that applies throughout the regulation. According to FAR 2.000( b ), the definitions of subcontract in other FAR parts and subparts, including the all-encompassing definition in FAR 44.101, apply only to those parts and subparts. See also FAR 1.108(a). So the definitions in other FAR parts and subparts do not apply to issues under the Allowable Cost and Payment clause or FAR Part 31. Finally, your contract does not define subcontract. According to FAR 1.108(a), when FAR does not define a term the CO should consult a "common dictionary." Some such dictionaries include agreements with suppliers or vendors of supplies and services in the definition of subcontract (Webster's Third) and some do not (American Heritage). Some technical dictionaries make an express distinction between subcontracts and agreements with suppliers and vendors (RS Means Illustrated Construction Dictionary). You have not described the work, so we cannot check to see if there is an industry-specific usage.

If a contract is ambiguous, the general rule is to interpret it against the interests of the party that wrote it. Your contract does not define the term. The contractor says that the agreements in question are vendor agreements, and not subcontracts. It can probably marshall some support for its position, if from nothing else than a common dictionary of its choice. You say that they are subcontracts. So, probably, would most government acquisition personnel, because they think in terms of the definition in FAR 44.101, which does not apply in your case. If there is a dispute, you will have to prove the reasonableness of your position. Can you prove it?

I could find no case law resolving the issue in the context of OMB Circular A-21.

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Side note: this is not the first issue we have had with A-21. Does anyone know of an email address or website that we can go to to ask questions like this? Always better to get the guidance from the people who wrote the policy (in theory, anyway). The contact numbers and snail-mail address seem useless in terms of getting a question answered...

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