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Fara Fasat

flowdown question

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Interesting twist on subcontract flowdown. Prime has a contract with several line items. Prime will buy some of those via subcontracts. The subs will be providing them complete and will probably drop ship to customer.

What FAR and DFARS clauses go in the subcontract? On the one hand, it is a subcontract, so only the appropriate subcontract clauses should go in (mandatory plus recommended). On the other hand the sub is delivering end items, so should the subcontract have all prime contract clauses in it?

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There is no easy method for identification of solicitation provisions and contract clauses that flow down to subcontractors or their subcontracts. The best discussion of the topic, including an identification of flow down requirements, appeared in a version of the FAR published by Vern Edwards. I believe it is now out of print. If one does not have the Edwards FAR, one must read the texts of the provisions and clauses to determine which provisions and clauses flow down.

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Guest Vern Edwards
What FAR and DFARS clauses go in the subcontract? On the one hand, it is a subcontract, so only the appropriate subcontract clauses should go in (mandatory plus recommended). On the other hand the sub is delivering end items, so should the subcontract have all prime contract clauses in it?

There are only two reasons for a prime to flow a clause down to a sub: (1) the clause says that it must be flowed down or (2) the prime must flow the clause down in its own interests, in order to ensure that its can fulfill its obligations to the government.

The first reason is pretty straightforward. As for the second reason, that depends on the prime's analysis of its obligations and of the sub's role in the prime's fulfillment of its obligations. Thus, if the prime thinks it might receive a change order from the government that will impact the sub's deliverable, the prime will want to flow the changes clause down to the sub.

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Don,

One reason whether something is an "end item" may make a difference is if the prime needs to comply with a Buy American Act or Trade Agreements Act clause. Those clauses require the prime to deliver compliant "end products." So, if the sub is providing the "end item," a/k/a "end product," the prime needs to make sure the sub complies and would want to include the appropriate clause in the subcontract. If the sub is only providing a component that goes into the end item/product, the prime doesn't necessarily need the sub to provide a compliant item and doesn't necessarily need to include the clause (although very often the prime includes it anyway on the "better safe than sorry" theory).

OLG

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OLG,

Good point. I was thinking about mandatory flow-downs when I posed the question (Vern's category 1), not nonmandatory flow-downs that the prime includes to protect its own interests (Vern's category 2). I have never seen a requirement in the FAR for a mandatory flow down that is conditioned upon whether the subcontractor would be delivering an end item. The Buy American Act (52.225-1) and Trade Agreements (52.225-5) clauses don't contain such a requirement.

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Is there any instance, where the Prime can remove a mandatory flow down clause cited in 52.244-6 Subcontracts for Commercial Items? Specifically Affirmative Action requirements under commercial services. One-time action fixed price for $100k

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Guest Vern Edwards

The only way that the contractor can leave it out of a subcontract is if the clause prescription [see FAR 52.101( c)] does not require its inclusion, prohibits its inclusion, or permits its exclusion. Otherwise, leaving the clause out of the subcontract would be a breach of the prime's contract with the government.

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