FAR Problem

[Don Mansfield]

A DoD contractor has a noncommercial time-and-materials contract above the simplified acquisition threshold. The contractor intends to enter into a fixed-price subcontract that exceeds both the simplified acquisition threshold and 5% of the estimated cost of the contract. Is the contractor required to provide advance notification before awarding the subcontract?

[Navy_Contracting_4]

A DoD contractor has a noncommercial time-and-materials contract above the simplified acquisition threshold. The contractor intends to enter into a fixed-price subcontract that exceeds both the simplified acquisition threshold and 5% of the estimated cost of the contract. Is the contractor required to provide advance notification before awarding the subcontract?

Does the prime contract include FAR 52.244-2? Does the prime contractor have an approved purchasing system?

[napolik]

A DoD contractor has a noncommercial time-and-materials contract above the simplified acquisition threshold. The contractor intends to enter into a fixed-price subcontract that exceeds both the simplified acquisition threshold and 5% of the estimated cost of the contract. Is the contractor required to provide advance notification before awarding the subcontract?

Interesting question.

If the prime has an approved purchasing system, FAR 44.201-1 (a) requires consent for subcontracts specifically identified by the contracting officer in the Subcontracts clause of the contract - FAR 52.244-2. The Subcontracts clause expands the requirement for consent and establishes a requirement for advance notification when consent is required.

Paragraph (e) (1) of the Subcontracts clause says that ?The Contractor shall notify the Contracting Officer reasonably in advance of placing any subcontract or modification thereof for which consent is required under paragraph (, ©, or (d) of this clause??

Paragraph ( of the clause says

?( When this clause is included in a fixed-price type contract, consent to subcontract is required only on unpriced contract actions (including unpriced modifications or unpriced delivery orders), and only if required in accordance with paragraph © or (d) of this clause.?

Since the prime contract is a T&M contract, paragraph ( does not apply.

Paragraph © says

?c) If the Contractor does not have an approved purchasing system, consent to subcontract is required for any subcontract that-

(1) Is of the cost-reimbursement, time-and-materials, or labor-hour type; or

(2) Is fixed-price and exceeds?

(i) For a contract awarded by the Department of Defense, the Coast Guard, or the National Aeronautics and Space Administration, the greater of the simplified acquisition threshold or 5 percent of the total estimated cost of the contract?.

So, if the prime does not have an approved purchasing system, it must provide advance notification per clause paragraph (e) (1).

Paragraph (d) says

?(d) If the Contractor has an approved purchasing system, the Contractor nevertheless shall obtain the Contracting Officer?s written consent before placing the following subcontracts:

________________________________________________________________________

________________________________________________________________________

_______________________________________________________________________?

So, consent would be required if the contracting officer required consent of a fixed-price subcontract that exceeds both the simplified acquisition threshold and 5% of the estimated cost of the contract. If consent is required, clause paragraph (e) (1) requires advance notification.

To summarize, consent would be required either if the contracting officer required consent in clause paragraph (d) or if the prime contractor does not have an approved system as described in clause paragraph ©. If consent is required per paragraphs © or (d), clause paragraph (e) (1) requires advance notification.

[Don Mansfield]

Does the prime contract include FAR 52.244-2? Does the prime contractor have an approved purchasing system?

Yes, the contract includes the clause. No, the contractor does not have an approved purchasing system.

[Don Mansfield]

napolik nailed it and Navy was on the right track. The key to the problem is knowing to look in the clause. If you were to look at the rules in Part 44 pertaining to advance notification, you may not reach the same conclusion. This is from FAR:

44.201-2 Advance notification requirements.

Under cost-reimbursement contracts, the contractor is required by statute to notify the contracting officer as follows:

(a) For the Department of Defense, the Coast Guard, and the National Aeronautics and Space Administration, unless the contractor maintains an approved purchasing system, 10 U.S.C. 2306 requires notification before the award of any cost-plus-fixed-fee subcontract, or any fixed-price subcontract that exceeds the greater of the simplified acquisition threshold or 5 percent of the total estimated cost of the contract.

( For civilian agencies other than the Coast Guard and the National Aeronautics and Space Administration, even if the contractor has an approved purchasing system, 41 U.S.C. 254( requires notification before the award of any cost-plus-fixed-fee subcontract, or any fixed-price subcontract that exceeds either the simplified acquisition threshold or 5 percent of the total estimated cost of the contract.

If one were to only read the rule and not the clause, they may think that advance notification requirements only apply to cost-reimbursement contracts.

Good job, napolik.