Jump to content
The Wifcon Forums and Blogs

Sign in to follow this  
ThomCons

Flowdown Clauses for Commercial Items

Recommended Posts

My company recently passed our first CPSR.  However, during the audit, DCMA informed us that if our prime contract is issued under FAR Part 15, all required flowdown clauses are applicable to the procurement of commercial items under the contract, regardless of FAR 521.244-6 being included.  This requirement has resulted in many difficulties with commercial vendors accepting all of the required government flow downs contained in our prime contracts.  Their reluctance to accept these terms and conditions are causing major delays in receiving parts, thereby impacting critical program and project schedules.  Our position as to why only FAR 52.244-6 needs to be flowed down in Commercial Item Procurements is defined below:

 FAR 52.244-6(2) states “While not required, the Contractor may flow down to subcontracts for commercial items a minimal number of additional clauses necessary to satisfy its contractual obligations”.  The list that we have is not considered minimal.

 

FAR Part 44.402(b) states “The clause at 52.244-6, Subcontracts for Commercial Items, implements the policy in paragraph (a) of this section.  Notwithstanding any other clause in the prime contract, only those clauses identified in the clause at 52.244-6 are required to be in subcontracts for commercial items or commercial components.” 

 

FAR 44.402(c) states “Agencies may supplement the clause at 52.244-6 only as necessary to reflect agency unique statutes applicable to the acquisition of commercial items.”  I personally have never seen this clause modified by an Agency.  If it is a requirement to flow down all of the FAR Part 15 clauses in our prime contract, why does the government have clause 52.244-6?  Additionally, this clause states “the contractor may flow down, it does not state we shall flow down a minimal number of additional clauses.

 

FAR 44.403 states “The contracting officer shall insert the clause at 52.244-6, Subcontracts for Commercial Items, in solicitations and contracts other than those for commercial items.  This leads us to believe that the government’s intent is not for the prime contractors to  flow down all the FAR Part 15 mandatory clauses in commercial subcontracts.

 

Our commercial vendors do not want to accept all the mandatory flow down clauses from our prime contract, as they are small and cannot afford legal counsel to review and negotiate them with us.  In summary, the flow down of all of these clauses defeats the purpose of the Government purchasing commercial items. 

 

Please advise if other professionals have encountered this situation, and what steps it took to resolve the matter.  DCMA has not responded to our request for assistance and relief of this requirement.  

 

Share this post


Link to post
Share on other sites

First, congratulations to your and your firm, ThomCons. Could you please elaborate as to whether your firm does DOD work (or FAR only) and exactly how this DCMA information was communicated i.e., observation, finding, comment, significant deficiency, etc., and whether your firm has formally responded to DCMA with the arguments presented above? By the way, DFARS 252.244-7000 states as follows: "The Contractor is not required to flow down the terms of any Defense Federal Acquisition Regulation Supplement (DFARS) clause in subcontracts for commercial items at any tier under this contract, unless so specified in the particular clause."

Share this post


Link to post
Share on other sites

My firm does DOD and NASA work.  DCMA communicated it as a finding and deficiency.  We submitted the above stated language to our Lead Auditor via email, but have not received a response.  We did not formally submit it in our response, as we did not want to jeopardize receiving an approved system.  Now that we have the approved system, we are looking to receive relief from this requirement.

Share this post


Link to post
Share on other sites

My view:

1. I don't think you will be successful in obtaining any relief from DCMA because DCMA can not change your contracts. FAR Part 44 is not a prime contract provision and is instructive as to reviews.

2. FAR 52.244-6 merely including a basic list of clauses that must be flowed. However, it does not state that all other mandatory flowdown clauses included in your contract are deleted from your contract in cases where your are procuring a commercial item.

3. To be compliant with your contract, mandatory flowdowns must be flowed as indicated, whether they are FAR, NASA, DOD or some other Agency clause. This is reinforced for DOD clauses per 252.244-7000, when included in your contract.  

4. The "may flow additional clauses" language in 52.244-6 and 252.244-7000 refers to clauses other than mandatory flowdown clauses. It says "may" because it is up to you whether you wish to be in breach of contract or not. Example: Your end item starts out as an automobile, your prime states that all end items must be made in the USA (and is not a mandatory flowdown clause), and your end item automobile is qualified as made in the USA. if your end item under this contract eventually is a spare end steering wheel which itself never qualified as made in the USA, you may be in breach of contract for purchasing it and delivering it to the Government under this contract.            

Share this post


Link to post
Share on other sites

Neil, I'm not quite sure I follow your point 2. when you state that FAR 52.244-6 "does not state that all other mandatory flowdown clauses included in your contract are deleted from your contract in cases where your are procuring a commercial item."  Are you saying that clauses in the prime contract that by their terms are to be included in subcontracts must be included in subcontracts for commercial items even if they are not a clause listed in 52.244-6?

Share this post


Link to post
Share on other sites
16 minutes ago, Neil Roberts said:

yes, Retreadfed.

Neil,

See FAR 44.402( b ):

Quote

The clause at 52.244-6, Subcontracts for Commercial Items, implements the policy in paragraph (a) of this section. Notwithstanding any other clause in the prime contract, only those clauses identified in the clause at 52.244-6 are required to be in subcontracts for commercial items or commercial components.

 

Share this post


Link to post
Share on other sites

To explain. My yes is most clearly the case for DFARS flowdown clauses per 252.244-7000. FAR clauses, less clear. However, as a procurement system business model, I would not choose the risk of a breach of contract claim for failing to do so. Also, what would you do if DFARS 252.244-7000 and FAR 52.244-6 are included in the same prime? Would you go so far as to say that 52.244-6 takes precedence and nullifies 252.244-7000 and that only the specified FAR clauses in 52.244-6 are required to be flowed?     

Share this post


Link to post
Share on other sites

Neil, isn't that statement a little overly broad?  Some mandatory flowdown clauses, such as 52.215-2 are not authorized for use in contracts for commercial items but do not contain language that says the clause is not required in subcontracts for commercial items.

Share this post


Link to post
Share on other sites

Neil, my reading of 252.244-7000(a) is that the other DFARS clause in the prime contract must specify that it is to be included in subcontracts for commercial items in order for it to be inserted in such subcontracts.  It is narrower than a requirement to include all DFARS flowdown clauses from the prime contract into subcontracts for commercial items.

Share this post


Link to post
Share on other sites
15 minutes ago, Don Mansfield said:

Neil,

See FAR 44.402( b ):The clause at 52.244-6, Subcontracts for Commercial Items, implements the policy in paragraph (a) of this section. Notwithstanding any other clause in the prime contract, only those clauses identified in the clause at 52.244-6 are required to be in subcontracts for commercial items or commercial components.

 

Don, This language is not included in the contract. Also, how do you see the flowdown situation when DFARS 252.244-7000 is also included in the prime?  

Share this post


Link to post
Share on other sites
On 5/10/2017 at 2:25 PM, ThomCons said:

DCMA informed us that if our prime contract is issued under FAR Part 15, all required flowdown clauses are applicable to the procurement of commercial items under the contract, regardless of FAR 521.244-6 being included. 

What you say that DCMA told you is patently false. I do not believe that DCMA told you that. I think you misunderstood them.

Share this post


Link to post
Share on other sites
13 minutes ago, Neil Roberts said:

Don, This language is not included in the contract. Also, how do you see the flowdown situation when DFARS 252.244-7000 is also included in the prime?  

So what? Any contracting officer requiring a prime to include clauses other than those identified in FAR 52.244-6 in subcontracts for commercial items or commercial components would be deviating from FAR 44.402(b).

If the contract contained DFARS 252.244-7000, then the prime would not be required to flow down any DFARS clauses in subcontracts for commercial items unless the DFARS clause specifically stated that it was to be included in subcontracts for commercial items.

Share this post


Link to post
Share on other sites
2 hours ago, Don Mansfield said:

So what? Any contracting officer requiring a prime to include clauses other than those identified in FAR 52.244-6 in subcontracts for commercial items or commercial components would be deviating from FAR 44.402(b).

 

The contracting officer does not know whether or if a prime will be procuring commercial items. The prime contract in my experience, necessarily includes the clauses needed or required per the prescription for each clause corresponding to the contract work, contract type, etc. Those clauses in the prime are not necessarily limited to only the clauses in FAR 52.244-6. Including those clauses is not a deviation from FAR 44.402(b). Some of those required clauses may include mandatory flowdowns.      

Share this post


Link to post
Share on other sites
1 hour ago, Neil Roberts said:

The contracting officer does not know whether or if a prime will be procuring commercial items. The prime contract in my experience, necessarily includes the clauses needed or required per the prescription for each clause corresponding to the contract work, contract type, etc. Those clauses in the prime are not necessarily limited to only the clauses in FAR 52.244-6. Including those clauses is not a deviation from FAR 44.402(b). Some of those required clauses may include mandatory flowdowns.      

Emphasis added.

Absolutely wrong.

The prime contract clauses tell the prime what it must flow down. But the prime contract must be read as a whole and in light of policy. FAR 44.402(b) and 52.244-6 are unequivocal about clauses the government requires the prime to flow down to subcontracts for commercial items, and they override individual clause flowdown prescriptions. They implement statutory policy--41 U.S.C. § 3307. According to FAR 44.402(b):

Quote

Notwithstanding any other clause in the prime contract, only those clauses identified in the clause at 52.244-6 are required to be in subcontracts for commercial items or commercial components.

How is that not clear?

FAR 52.244-6 allows the prime to flowdown additional clauses at its own initiative so that it can meet its obligations to the government, but it does not require flowdown of any clauses except in accordance with its terms.

As for what the CO knows about the nature of a subcontract--commercial or noncommercial--the determination of whether a subcontract is for a commercial item is a matter of contract interpretation and is subject to claim and dispute. If the CO thinks that a subcontract is not commercial and that clauses other than those listed in 52.244-6 should have been flowed down he or she can file a government claim.

Share this post


Link to post
Share on other sites
7 hours ago, Retreadfed said:

Neil, my reading of 252.244-7000(a) is that the other DFARS clause in the prime contract must specify that it is to be included in subcontracts for commercial items in order for it to be inserted in such subcontracts.  It is narrower than a requirement to include all DFARS flowdown clauses from the prime contract into subcontracts for commercial items.

Retreadfed, I respect your reading of 252.244-7000(a), but I think the clause is ambiguous and I feel it to be too risky to adopt your view at this time. My reading is that the Contractor is not required "to flow...unless so specified." My reading of "so specified" is that any mandatory flowdown is required to be flowed because it is specified. It doesn't have to specify that it be flowed in commercial items. Would be receptive to your reading if there was some definitive guidance other than our opinions. I have not had time to research this further. In my experience, those that I would flow can be challenged by the subcontractor and deleted during negotiations if warranted as inoperative/inapplicable.  

Share this post


Link to post
Share on other sites
On 6/1/2017 at 10:22 PM, Neil Roberts said:

Retreadfed, I respect your reading of 252.244-7000(a), but I think the clause is ambiguous and I feel it to be too risky to adopt your view at this time. My reading is that the Contractor is not required "to flow...unless so specified." My reading of "so specified" is that any mandatory flowdown is required to be flowed because it is specified. It doesn't have to specify that it be flowed in commercial items.

DFARS 252.244-7000 (JUN 2013) says:

Quote

SUBCONTRACTS FOR COMMERCIAL ITEMS (JUN 2013)

      (a)  The Contractor is not required to flow down the terms of any Defense Federal Acquisition Regulation Supplement (DFARS) clause in subcontracts for commercial items at any tier under this contract, unless so specified in the particular clause.

      (b)  While not required, the Contractor may flow down to subcontracts for commercial items a minimal number of additional clauses necessary to satisfy its contractual obligation.

      (c)  The Contractor shall include the terms of this clause, including this paragraph (c), in subcontracts awarded under this contract, including subcontracts for the acquisition of commercial items.

(End of clause)

The language at issue between Neil and Retread is highlighted. The sentence in which it appears is not ambiguous. An illustration of "specified in the particular clause" can be seen in DFARS 252.223-7008 (JUN 2013), paragraph (d):

Quote

 (d)  Subcontracts.  The Contractor shall include the substance of this clause, including this paragraph (d), in all subcontracts, including subcontracts for commercial items, that are for supplies, maintenance and repair services, or construction materials.

Absent the highlighted phrase, there is no mandatory flowdown under DFARS 252.244-7000 (JUN 2013). This is clear if you follow the development of DFARS 252.244-7000 in the Federal Register since the earliest version of the current clause.

At present 18 DFARS clauses contain the highlighted language. All are dated on or after "JUN 2013," the date of the current version of 252.244-7000. See, e.g., DFARS 252.247-7023 (APR 2014):

Quote

(h) In the award of subcontracts for the types of supplies described in paragraph (b)(2) of this clause, including subcontracts for commercial items, the Contractor shall flow down the requirements of this clause as follows:

(1) The Contractor shall insert the substance of this clause, including this paragraph (h), in subcontracts that exceed the simplified acquisition threshold in part 2 of the Federal Acquisition Regulation.

(2) The Contractor shall insert the substance of paragraphs (a) through (e) of this clause, and this paragraph (h), in subcontracts that are at or below the simplified acquisition threshold in part 2 of the Federal Acquisition Regulation.

See also DFARS 252.237.7010 (JUN 2013):

Quote

(c) Subcontracts. The Contractor shall include the substance of this clause, including this paragraph (c), in all subcontracts, including subcontracts for commercial items, that may require subcontractor personnel to interact with detainees in the course of their duties.

 

Share this post


Link to post
Share on other sites
On 6/1/2017 at 2:56 PM, Neil Roberts said:

Also, what would you do if DFARS 252.244-7000 and FAR 52.244-6 are included in the same prime? Would you go so far as to say that 52.244-6 takes precedence and nullifies 252.244-7000 and that only the specified FAR clauses in 52.244-6 are required to be flowed?   

 

On 6/1/2017 at 3:18 PM, Neil Roberts said:

Also, how do you see the flowdown situation when DFARS 252.244-7000 is also included in the prime?  

Contracts awarded by DOD that are for other than commercial items must include both FAR 52.244-6 and DFARS 252.244-7000. See the respective clause prescriptions. The FAR clause refers to FAR clauses. The DFARS clause refers to DFARS clauses. There is no conflict between them.

Even though FAR 52.244-6 does not include the sentence, "Notwithstanding any other clause in the prime contract, only those clauses identified in the clause at 52.244-6 are required to be in subcontracts for commercial items or commercial components"  from FAR 44.402(b), a CO must interpret the FAR as a whole and integrate its parts. FAR 44.402(b) is binding on COs and prohibits them from interpreting FAR 52.244-6 differently.

Share this post


Link to post
Share on other sites

Good comments by contributors above which can serve you well in your defense. It is all about risk to me. I would rather reduce or eliminate: (a) customer allegations that a prime contract clause requirement was breached and harmed the customer (is anyone aware of any federal case, statute or FAR regulation holding a prime contractor insulated from all prime contract liability caused by furnishing the customer with a commercial item which was not compliant with a prime contract clause?) (b) risk to an approved procurement system due to DCMA allegations of flowdown deficiency or (c) receiving mid-course allegations by a customer that the subcontractor goods or services are not commercial. My experience is that when the customer perceives that a prime contractor caused a serious or possibly embarrassing problem, people just run to the contract and look at the plain words in the four corners of the document. During negotiations with a commercial item subcontractor, it's objection to clauses can be examined by the prime contractor for risk and deleted if the prime contract risk is acceptable. Also, the subcontractor can view many flowed clauses as little risk due to it being inapplicable. They should have no objection to its inclusion.All clauses that help satisfy the prime contractor's contractual obligation to the customer should be flowed.        

Share this post


Link to post
Share on other sites

Neil:

I am not aware of any action by the Government against a prime contractor based on failure to to flow down a clause, but I have not researched it properly.

DCMA might hold it against you for needlessly flowing down clauses to commercial items contractors. They might think that it inhibits such contractors from  working under Government prime contracts or subcontracts, which the Government is desperate for them to do. As an ACO, I might complain that needlessly flowing down noncommercial clauses to commercial items contractors might raise their prices.

I agree that all clauses that help satisfy the prime contractor's obligation to the customer should be flowed, which is why clauses should not be needlessly flowed contrary to statute and regulation. FAR 52.244-6 is a mandatory flowdown clause.

Government prime contractors should know the regulations and the clauses in their contracts well enough to know what they must do, must not do, and need not do.

Basically, you're telling us that because your company is not sure about the proper interpretations of FAR and of its contracts it is engaging in what it considers to be risk reducing behavior, but it is also cost increasing behavior. Putting needless clauses into subcontracts requires the prime to take responsibility for enforcing them and for subcontractor noncompliance. Remember, if a sub does not comply the government usually goes after the prime.

 

Share this post


Link to post
Share on other sites
19 hours ago, Vern Edwards said:

What you say that DCMA told you is patently false. I do not believe that DCMA told you that. I think you misunderstood them.

I think you place too much confidence in the DCMA reviewers. Contractor horror stories about bogus deficiencies abound. As the OP noted, contractors will tend to agree to anything, no matter how patently wrong, if their business system approval is on the line. That mandatory 5% payment withhold is draconian.

Share this post


Link to post
Share on other sites

Although this quote from FAR 1.102-2 is directed toward contracting officers, it should be considered by prime contractors in their relationships with subs "To achieve efficient operations, the System must shift its focus from “risk avoidance” to one of “risk management.” The cost to the taxpayer of attempting to eliminate all risk is prohibitive. The Executive Branch will accept and manage the risk associated with empowering local procurement officials to take independent action based on their professional judgment."

Share this post


Link to post
Share on other sites
8 hours ago, here_2_help said:

I think you place too much confidence in the DCMA reviewers.

No. I don't.

I think that people who represent companies that do business with the government should know the business. No excuses.

Share this post


Link to post
Share on other sites

Vern, I agree with your last sentence.  However, I hope you will agree that the big problem today is not contractors' lack of knowledge concerning government procurement, but an all too common lack of knowledge by both contractors and government personnel.  As H2H indicated, there are numerous horror stories that contractors can tell concerning CPSRs where the government personnel were absolutely clueless.  The same can be said for PCOs, ACOs, property administrators, and auditors.  A prime example of this was the ASBCA's decision in http://www.asbca.mil/Decisions/2016/59508, 59509 Lockheed Martin Integrated Systems, Inc. 12.20.16.pdf. where the Board said ""In this case, we are presented with a claim based on a legal theory, originated by an auditor, . . . [The government] has gone forward with a claim for over $ 100,000,000 that is based on nothing more than a plainly invalid legal theory."

Share this post


Link to post
Share on other sites

If I have read correctly conclusions of this thread is that DCMA may not be doing an adequate job of understanding and providing advice on implementation of the FAR with regard to clauses and contractors should know and understand the FAR in the conduct of government business.  Raised as well is whether the FAR in and of itself provides less than adequate and clear advice on the specific matter of flow down of clauses to subcontracts for commercial items/components.

As illustration of the latter consider the wording in FAR 52.224-2 Privacy Act at paragraph (a)(3) and balancing the Privacy Act  clause with FAR 52.244-6,especially that at paragraph (d), and the language of FAR 44.402(b)? 

FAR 52.224(a)(3)....... Include this clause, including this subparagraph (3), in all subcontracts awarded under this contract which requires the design, development, or operation of such a system of records.

Shall a prime contractor include or not include FAR 52.224-2 in all subcontracts or not? 

Share this post


Link to post
Share on other sites
Guest
This topic is now closed to further replies.
Sign in to follow this  

×