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FAR 44.101 Defines Subcontractor as , "any supplier, distributor, vendor, or firm that furnishes supplies or services to or for a prime contractor or another subcontractor ".

10 USC § 2474 (b) allows Depots to enter into Public-Private Partnerships (PPP) and further says that they may provide, " (A) For employees of the Center [...] (under contract, subcontract, or otherwise) work related to the core competencies of the Center, including any depot-level maintenance and repair work that involves one or more core competencies of the Center". 

 

Now, Title 10 allows the depot to enter into subcontract however the definition of "subcontractor" under FAR doesn't include, "an entity who has entered into an agreement to provide supplies and services under a prime contract". Can my depot be considered a subcontractor because they are allowed to subcontract EVEN THOUGH they are not a supplier, distributor, vendor or firm?  Or can I simply argue that a since "supplier" isn't defined it must simply be is any entity who can provide supplies or services?

 

I know this seems pretty basic and that there are established processes for PPP agreements, however I'm stuck to arguing this path.

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LucyQ, the question of what is a subcontract and who is a subcontractor is a common issue in government contracting.  The biggest problem comes from trying to apply the definition of "subcontractor" from FAR Part 44 in all circumstances.  Note that the definition in 44.101 is limited to FAR Part 44.  It does not apply to other circumstances.  From my reading of the FAR, there are at least six and maybe seven definitions of what is a subcontract.  Each of those definitions applies to a specific FAR part and does not apply to other parts.  If you have a question concerning what would be a subcontract in the context of a part that does not contain a definition of "subcontract" or "subcontractor", you generally would use the common definition or understanding of what those terms mean.  Your definition seems to meet the common understanding test.

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Seems to me that DoDOIG believes that a depot can be a subcontractor. See DODIG-2016-045, which says (in pertinent part)--

There are two primary types of PPP arrangements: a direct sales agreement (DSA) and a workshare arrangement (WSA).

  1. Under a DSA, a depot maintenance activity and a contractor enter into a contractual relationship for depot maintenance repair services. The contractor pays the depot maintenance activity for the repair services that are provided to the contractor for DoD-related work based on the depot labor hourly rate. The contractor can earn a profit on the work performed by the depot maintenance activity.
  2. Under a WSA, the contractor and the depot maintenance activity work as partners sharing the DoD-related repair work. Funding is not exchanged between the partners and the contractor does not earn a profit on the work performed by the depot maintenance activity.

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18 hours ago, LucyQ said:

Can my depot be considered a subcontractor because they are allowed to subcontract EVEN THOUGH they are not a supplier, distributor, vendor or firm?  

No, your depot would not be considered a subcontractor because it is allowed to subcontract. Your depot would be considered a subcontractor if it were under contract to a prime contractor or to a subcontractor to do work or provide supplies. Under every known definition of subcontractor, a subcontractor is an entity that is contractually subordinate to another entity.

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5 hours ago, Vern Edwards said:

No, your depot would not be considered a subcontractor because it is allowed to subcontract. Your depot would be considered a subcontractor if it were under contract to a prime contractor or to a subcontractor to do work or provide supplies. Under every known definition of subcontractor, a subcontractor is an entity that is contractually subordinate to another entity.

I forgot to mention we do have implementation agreements which serve as BPAs and then we will individually issue purchase orders for work. The PA states that it will not become a subcontract until there is an IA attached.

 

Ultimately I am doing this because there is already a contract vehicle in place and we're looking for a progress payment to get the work going. This is a small business set aside, the depot is asking for 100% pre-payment, we came to an agreement that the depot work with 1.5 yr POPs would be split into sections so our pre-payments are smaller, THEN the CO said they won't issue progress payments for the depot work even if we float the money until each smaller section is completed, and they also said we can't split the work into smaller sections to our subcontractor. Obviously other methods would have been cleaner but that's not my job, I'm suppose to make this happen with what we currently have. What we currently have is a Progress Payment clause that says I'm allowed to bill for amounts payable to subcontractors for completed work.

 

It did, however,  occur to me that payments to the Depot are made out to the US Treasury not directly to the Subcontractor. I will not be pointing that out to the CO but I'll have to prepare an answer in case they ask. If anyone knows where to start looking, help would be appreciated.

 

Thank you all!

 

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I'd like to know other's opinions on the application of FAR 44 for what contractors like to label as "consultants".  

My Agency has a number of CPFF completion type contracts providing services that can generally described as specialized technical advice or service-type work taking place overseas.  The contractor's staffing to perform the work will generally include employees directly employed with the contractor (and they could be Americans, local nationals where the work is taking place, or third country nationals) but will also include individuals on short/long-term basis who cannot be directly considered employee of the organization but have "consultancy contracts" with our prime contractor to perform specific work.

Some contractors have argued that short/long-term consultants retained by them do not fall under the definition of "subcontractor" and thus do not fall under consideration of the consent requirements of FAR 44.  To me, consultants fall pretty clearly into the definition of subcontractor as laid out in the definition:

"44.101 Definitions. Subcontract” means any contract as defined in Subpart 2.1 entered into by a subcontractor to furnish supplies or services for performance of a prime contract or a subcontract. It includes but is not limited to purchase orders, and changes and modifications to purchase orders.
“Subcontractor” means any supplier, distributor, vendor, or firm that furnishes supplies or services to or for a prime contractor or another subcontractor."

What are your interpretations of FAR 44 and subcontractor as it would apply to this case of the use of "consultants"?

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Don't ask the question unless you can stand the answer...

Let me ask you two questions, for comparison:

(1)  A Government prime contractor obtains services from a second firm to perform discrete portions of the work of the prime contract, and the relationship with the second firm only exists because of the prime contract.  Is the second firm a subcontractor for purposes of FAR Part 44?

(2)  A Government prime contractor obtains services from a third firm to perform back-office bookkeeping services, and the relationship with the third firm existed before and will exist after the prime contract.  Is the third firm a subcontractor for purposes of FAR Part 44?

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10 hours ago, AA Scholar said:

Some contractors have argued that short/long-term consultants retained by them do not fall under the definition of "subcontractor" and thus do not fall under consideration of the consent requirements of FAR 44.  To me, consultants fall pretty clearly into the definition of subcontractor as laid out in the definition:

If I were a contractor, I would argue as follows: Under the definition in FAR Part 44, a subcontractor is a firm or individual that is hired "to furnish supplies or services for performance" of some part of the prime contract work. To furnish... for performance means that the subcontractor produces all or part of a deliverable. Thus, if a consultant is hired to produce all or part of a deliverable, then it is a subcontractor pursuant to the definition. But if the consultant is hired to consult, i.e., to advise the contractor with respect to performance, but does not produce any part of a deliverable, then it is not a subcontractor.

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11 hours ago, AA Scholar said:

What are your interpretations of FAR 44 and subcontractor as it would apply to this case of the use of "consultants"?

The full definition of "subcontractor" at FAR 44.101 reads:

Quote

“Subcontractor” means any supplier, distributor, vendor, or firm that furnishes supplies or services to or for a prime contractor or another subcontractor.

Consulting could meet that definition - "a...firm that furnishes...services to...a prime contractor" - the services in this case being consulting.  "Furnish" has a few definitions, American heritage dictionary defines it as "to provide" (https://ahdictionary.com/word/search.html?q=furnish) - based on that definition, "to provide"/"furnish" services would not necessarily require the production of a tangible item or deliverable.

What argument do you want to make and what can you use to support it?

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AA Scholar, the use of the word "consultant" can lead to problems other than whether the person or entity is a subcontractor.  Because you are dealing with cost reimbursement contracts, look at FAR 31.205-33 which deals with consultant costs.  These are the type of costs that DCAA likes to go for and frequently questions because of the requirements of subsection (f).

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16 hours ago, Vern Edwards said:

If I were a contractor, I would argue as follows: Under the definition in FAR Part 44, a subcontractor is a firm or individual that is hired "to furnish supplies or services for performance" of some part of the prime contract work. To furnish... for performance means that the subcontractor produces all or part of a deliverable. Thus, if a consultant is hired to produce all or part of a deliverable, then it is a subcontractor pursuant to the definition. But if the consultant is hired to consult, i.e., to advise the contractor with respect to performance, but does not produce any part of a deliverable, then it is not a subcontractor.

 

In this interpretation, if a consultant is hired to consult, wouldn't that still be classified as a subcontractor if they are not hired formally to be a member of the company on their payroll, regardless of the scope of the work of the consultant (whether an individual or a consultant firm)?  Or is there a third classification for "Consultant" that exists somewhere between "Employee" and "Subcontractor" that separates it from applicability of FAR 44?

Due to the above confusion, I lean toward the more strict definition of "“Subcontractor” means any supplier, distributor, vendor, or firm that furnishes supplies or services to or for a prime contractor or another subcontractor." which I can then use to classify any firms or individuals contracted to support the contract as a subcontractor if they don't fall into the "employee" category and thus applyFAR 44.

In terms of argument, I would argue that there are just the two categories: "employee" or "subcontractor" in the FAR.  The FAR 31.205-33 which deals with consultant cost allowability is to me only clarifying the instances where this particular type of subcontract may be considered allowable.  So what I would like to do is clearly advise contractors whether "consultants" would be considered subcontractors or not, and therefore FAR 44 and certain consent requirements may apply.  Right now, it's a bit vague for both myself and the contractors on applicability of FAR 44 for what contractors propose as "consultants".

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AA, I think you are getting hung up on labels.  To answer your question think about the function being performed.  For example, you indicated that your contracts are being performed overseas.  The contractor may hire a consultant to advise it on general business practices and customs in the foreign country.  This may facilitate contract performance, but, unless these services fulfill a contract requirement, they likely would not be considered subcontract work because it is not directed toward contract performance.  On the other hand, if the contract is for assistance in agricultural development, hiring a subject matter expert on local agricultural practices to assist in providing recommendations for improvements could be considered subcontract work depending on the wording of the contract and expert engagement.

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On August 17, 2016 at 9:54 PM, AA Scholar said:

What are your interpretations of FAR 44 and subcontractor as it would apply to this case of the use of "consultants"?

 

5 hours ago, AA Scholar said:

I lean toward the more strict definition of "“Subcontractor” means any supplier, distributor, vendor, or firm that furnishes supplies or services to or for a prime contractor or another subcontractor." which I can then use to classify any firms or individuals contracted to support the contract as a subcontractor if they don't fall into the "employee" category and thus applyFAR 44.

I guess I don't know what you mean by "consultant."

A firm hired to advise a contractor with respect to its performance is not the same as a firm hired to do part of the performance. The purpose of requiring consent to subcontract is to protect the government's interests. The government's principal considerations are listed in FAR 44.202-2. If I have to do a job for an agency, and I need to know something in order to do that job, the firm from which I seek that information is not doing the job, it's just answering my questions. The government couldn't care less about consenting to my selection and use of that firm. It's concerned only with the work that is being done. Since the consulting firm is not doing that work, but only providing me with information, that I will use or not use based on my own judgement and ability, the government has no interest. It's only interest is in what I decide to do or not do.

As a consultant, I would not consider myself either your employee or a subcontractor (i.e., an under-contractor responsible for doing part of the prime contract work). And if you wanted to hire me and tell me that I'm a subcontractor and must accept a bunch of clause flowdowns, I'd tell you to get lost (nicely, in case you came to your senses later).

Check your Shakespeare, Hamlet, 1.5.167-8. The FAR does not address or answer all questions.

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I'm not going to post anything about that time when DCAA alleged that the company's account with Southern California Edison, to supply electricity for the entire plant, was a subcontract. I'm not going to post anything about the need to provide a contractual agreement with the "subcontractor." Nope. On the bright side, they didn't allege SCE was a consultant, the way they did with our environmental remediation provider, who had been cleaning up a former site for the past 20 years.

H2H

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46 minutes ago, here_2_help said:

I'm not going to post anything about that time when DCAA alleged that the company's account with Southern California Edison, to supply electricity for the entire plant, was a subcontract.

I'd love to see/hear the rationale behind DCAA's allegation, if that's something you could share.

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38 minutes ago, Matthew Fleharty said:

I'd love to see/hear the rationale behind DCAA's allegation, if that's something you could share.

Well, I could share the auditors' rationale, if it existed. But unfortunately they had none. Or at least nothing that I can recall. It was far from the most egregious finding they "found" that year.

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3 hours ago, here_2_help said:

I'm not going to post anything about that time when DCAA alleged...

Nothing disgusts me more than a government contractor who is easily intimidated by an absurd stance taken by some damned auditor. If you enter into government contracts, know the facts, know the rules, know your contract, be ready to make rational arguments, and be ready to go to the mattresses. If you can't do that, then get a job selling cotton candy to children at county fairs. And try not to let the kids beat you up and take your goods.

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1 hour ago, Vern Edwards said:

Nothing disgusts me more than a government contractor who is easily intimidated by an absurd stance taken by some damned auditor. If you enter into government contracts, know the facts, know the rules, know your contract, be ready to make rational arguments, and be ready to go to the mattresses. If you can't do that, then get a job selling cotton candy to children at county fairs. And try not to let the kids beat you up and take your goods.

Not sure if that was directed at me or a general yelling at clouds, but in case it was directed at me, we were not intimidated. The company hired some expensive attorneys who filed 4 separate claims at the CoFC, and settled them for what was felt to be reasonable amounts. It's a bit fuzzy now but I don't think we even had to go through discovery to get to the settlements.

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4 hours ago, here_2_help said:

Not sure if that was directed at me or a general yelling at clouds....

It was not directed at you, but it was prompted by your post, which seemed to me to be some kind of cautionary tale. I don't think caution is appropriate in such cases. When confronted by blockheaded bureaucratic stupidity, I prefer forthright and firm rejection based on a response that is well argued and thoroughly documented. No pussyfooting. No retreat, unless based on rational persuasion.

And I didn't yell. THIS IS YELLING.

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On 8/19/2016 at 8:46 PM, Vern Edwards said:

 

I guess I don't know what you mean by "consultant."

A firm hired to advise a contractor with respect to its performance is not the same as a firm hired to do part of the performance. The purpose of requiring consent to subcontract is to protect the government's interests. The government's principal considerations are listed in FAR 44.202-2. If I have to do a job for an agency, and I need to know something in order to do that job, the firm from which I seek that information is not doing the job, it's just answering my questions. The government couldn't care less about consenting to my selection and use of that firm. It's concerned only with the work that is being done. Since the consulting firm is not doing that work, but only providing me with information, that I will use or not use based on my own judgement and ability, the government has no interest. It's only interest is in what I decide to do or not do.

As a consultant, I would not consider myself either your employee or a subcontractor (i.e., an under-contractor responsible for doing part of the prime contract work). And if you wanted to hire me and tell me that I'm a subcontractor and must accept a bunch of clause flowdowns, I'd tell you to get lost (nicely, in case you came to your senses later).

Check your Shakespeare, Hamlet, 1.5.167-8. The FAR does not address or answer all questions.

 

Thanks Vern for this comment.  In weighing the pros/cons of how to appropriately categorize "consultant" and whether it fall under "subcontractor", I think an argument could be made for consultants to be a subcontract but agree that the FAR doesn't specifically define or specify if this must be the case.

In considering the type of work that my Agency (USAID) performs overseas, it often generally includes a heavy reliance on "consultants" who are hired by the prime contractor to then help perform the SOW in activities such as providing expert advice to a foreign government or organization, providing consultants to do the data collection or indicators of progress, etc.  Since the mechanism used is often a CPFF completion-type, and a large portion of costs incurred in these contracts relate to labor costs for consultants plus travel, I believe it prudent to exercise a level of oversight, despite the administrative burden, in mandating approvals for the usage of the "consultants" but don't believe it necessary that all the flow-down clauses are necessary.

Given the above considerations for the work and types of contracts, I think the best way forward is to leave the ambiguous "consultant" category undefined as a third category outside the employee or subcontractor categories and administer it with a special requirement in the contract for CO or COR advance written approval for each consultant mobilization with requirement of the contractor providing the objective of each consultant, period, and the total cost for review in the approval requests.  

Thanks!

 

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If the firm is actually doing contract work, as opposed to whispering in the prime contractor's ear, then the arrangement is a subcontract.

There is no third ambiguous consultant category -- the firm is either a subcontractor or it isn't.

Let me ask you:  Is the purpose of the effort "to furnish supplies or services for performance of a prime contract?"  YES    NO 
The answer to that question will solve your problem.

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3 hours ago, ji20874 said:

If the firm is actually doing contract work, as opposed to whispering in the prime contractor's ear, then the arrangement is a subcontract.

Bingo. If you don't understand that AA Scholar, then I don't think we can help you further.

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