Avoiding CAS Applicability

[Don Mansfield]

Is there any rule that prohibits a prime contractor from splitting subcontracts to avoid the application of CAS to those subcontracts?

Consider the following scenario:

In order to avoid the application of CAS to a subcontract, a prime contractor awards two $5 million subcontracts to the same subcontractor instead of one $10 million subcontract. The subcontractor has no CAS-covered contracts in its preceding or following accounting period. What rule did the prime violate?

[Jacques]

Don,

I thought the clause flowed down regardless, but the subcontractor's obligations depended on whether the subcontract was determined to be covered by CAS, which is NOT ultimately determined by the parties but by the courts or boards. See DCAA Contract Audit Manual 8-103.7.

[Retreadfed]

Jacques, if you are thinking about 52.230-2 or -3, they are not required to be inserted in subcontracts that meet one or more exemptions for CAS coverage.

[here_2_help]

Don,

Works for me! Unfortunately, at the Prime's next CPSR do you wonder if the functional specialists might think a federal law was violated? I'm NOT saying it was, but I am asking if they might allege that it was. So: Kind of a risky move, by people commonly known for risk aversion.

H2H

[Don Mansfield]

H2H,

I don't know what a functional specialist might allege. While they may not be able to cite a specific rule that has been violated, I think that a practice is not in the Government's interests and should factor in to the Government's assessment of the prime's purchasing system.

[here_2_help]

Don,

Should we call that the "unwritten adequacy criterion" with respect to DFARS 252.244-7000?

H2H

[Don Mansfield]

H2H,

We can say that it's in the penumbra of DFARS 252.244-7000. Or do you think that the clause needs to specifically needs to say "no splitting subcontracts to avoid thresholds"?