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Hello:  We are the prime on a contract and have an interesting subcontracting issue being presented.  The assigned CO has a professional friendship with, or affinity for, one of our subcontractors.  Out of the 12 funded positions we have been awarded, 11 of those positions are staffed by the subcontractor's personnel at the CO's specific request.  As the prime, we have one position that is filled by our FT employee in XX role, but that employee is about to go out on maternity leave.  The CO relayed that even though the XX role is funded, there is not enough work for the XX role, so the CO does not want it backfilled.  This would essentially leave no prime employees on the contract.  We are where we are, but this does not sit right.  I understand that the prime needs to exercise control over the contract.  Does anyone know of any FAR provisions or other regulations that come into play here?   If we can site to some regulations that prohibit subcontractors from controlling prime contracts or that prohibits some of the other behavior that is essentially 'pushing' out the prime, I would be very grateful!  I looked in the contract but I don't see anything particularly helpful for this issue.

Many thanks!  

 

 

 

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Forgoing the FAR research for now, questions such as is your company a small business, and was the competition a small business set-aside would be helpful?  If so, there may limitation of subcontracting issues. What type of contract is it?   What type of service is the contract providing? The fact that the CO is directing you to subcontract out positions, could be indicative of a personal services type arrangement that the federal agency may or may not have the authority to pursue.  You are responsible, as the Prime, to perform the work as you see fit.  There should not be a Government person directing you to hire from a subcontractor, unless whatever work the subcontractor is doing is specifically called out for the subcontractor to perform.  That's my stream of consciousness for now.

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 Small Business Setaside?   If so FAR 52.219-14 would be in the contract.

Other than SB Setaside.  Suggest a review of FAR part 44 and consider any 52.244-XX clauses that might be in the contract.

Beyond my thoughts and those of others that will post, and based on the limited info in your post yet the implications it suggests, my gut reaction was - ethical matter.  In the worst case (so to speak) bringing the matter to the attention of the agency's Inspector General could be a possibility. 

 

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I hope you are keeping good records of all of the contracting officer’s decision-making and direction.  If he or she gives it orally, maybe you should follow-up with a confirming e-mail.  Maybe he or she is just giving helpful recommendations, and you are interpreting them as direction?  

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Hello:  Yes, this is a small business set aside contract and time and materials (I should have mentioned this previously!).  I know there are potential implications from a small business affiliation perspective (e.g., for purposes of this contract, both the prime and sub can be deemed affiliates).  Putting that aside, I was hoping there is something I could solidly point the CO to, as an indication that bounds are being overstepped. 

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The prime is responsible for its subcontractors. It sound like the CO, not the subcontractor, is controlling the the prime contract! I am not familiar with the world of "funded positions," however, it seems like the prime directed the subcontractor to assign certain employees to work. I would be very surprised if anyone found a regulation that "prohibits subcontractors from controlling prime contracts."   

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As to your disclosure that the prime and subcontractor are affililiates, if the affiliation is that your firm is controlled by a 3rd party and the 3rd party has a minority interest in the subcontractor, I don't see how you can say the affiliate controls your firm in any respect.

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Mr. Roberts is referring to FAR 42.202(e)(2). 
 

Quote

 

The prime contractor is responsible for managing its subcontracts. The CAO’s review of subcontracts is normally limited to evaluating the prime contractor’s management of the subcontracts (see Part 44). Therefore, supporting contract administration shall not be used for subcontracts unless --

(i) The Government otherwise would incur undue cost;

(ii) Successful completion of the prime contract is threatened; or

(iii) It is authorized under paragraph (f) of this section or elsewhere in this regulation.

 

Does one of the qualifications for the government to manage you subs apply? 

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On 7/1/2019 at 11:51 AM, lawyergirl said:

Out of the 12 funded positions we have been awarded, 11 of those positions are staffed by the subcontractor's personnel at the CO's specific request.  As the prime, we have one position that is filled by our FT employee in XX role, but that employee is about to go out on maternity leave. 

Lawyergirl, have you advised your client about the limitations on subcontracting clause? 

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On 7/1/2019 at 8:51 AM, lawyergirl said:

I looked in the contract but I don't see anything particularly helpful for this issue. 

lawyergirl, 52.215-22/23 were not included in the contract, correct?

Edited by Neil Roberts
extraneous line deleted

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There are numerous issues here, including ethical and possible conflicts of interest on the part of the contracting officer. 

We don’t know if this was a sole source, negotiated contract or a competitively negotiated, set aside contract.

We don’t know when or how the KO requested that the 11 personnel positions be filled by the subcontractor.

On 7/1/2019 at 10:51 AM, lawyergirl said:

Hello:  We are the prime on a contract and have an interesting subcontracting issue being presented.  The assigned CO has a professional friendship with, or affinity for, one of our subcontractors.  Out of the 12 funded positions we have been awarded, 11 of those positions are staffed by the subcontractor's personnel at the CO's specific request...

We don’t know if the subcontractor was involved as prime or a sub in a previous contract or if the employees were working for that firm. 

We do know that the KO has been and is deliberately ignoring the public policy and statutes concerning limitations of subcontracting and possibly, pass-through arrangements (if the pass-through provision / clause(s) are in the contract)  and is deliberately flaunting the requirements for the prime contractor’s inherent responsibility to supervise and manage its subcontractor(s). Looks like a contract arrangement to employ a specific firm as a sub. 

Although this is described as “one of our subcontractors”, so far, there is only one subcontractor performing any work. 

Looks like a possible government led “front” contract arrangement or worse.  

And, if one or or both of 52.215-22 or 23 are in the contract, the prime could be in trouble if there were some outside investigation of the “requested” staffing arrangement. 

 

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1 hour ago, joel hoffman said:

We do know that the KO has been and is deliberately ignoring the public policy and statutes concerning limitations of subcontracting and possibly, pass-through arrangements (if the pass-through provision / clause(s) are in the contract)  and is deliberately flaunting the requirements for the prime contractor’s inherent responsibility to supervise and manage its subcontractor(s).

I'm not so sure -- maybe, but maybe not -- we've only heard one person's perspective.  Maybe the prime contractor's managers are so desperate to get a good CPARS that they obsequiously abdicate their responsibilities to the contracting officer and let him or her make their decision for them -- such as, "For this position, we could bring in Mary, Juan, or Tom," and the contracting officer picked Tom.  We have heard from the prime contractor's attorney -- but we haven't heard from the prime contractor's management or the contracting officer.  That's why I previously wrote, "I hope you are keeping good records of all of the contracting officer’s decision-making and direction.  If he or she gives it orally, maybe you should follow-up with a confirming e-mail.  Maybe he or she is just giving helpful recommendations, and you are interpreting them as direction?"

1 hour ago, joel hoffman said:

Looks like a possible government led “front” contract arrangement or worse. 

Maybe -- but it could also be a contractor led or even subcontractor led "front" contract arrangement.  I've seen both in my time.

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19 hours ago, PepeTheFrog said:

Lawyergirl, have you advised your client about the limitations on subcontracting clause? 

Please see  the definition of "subcontract" in 13 CFR 125.1, particularly the last sentence.

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Wait a minute, @Retreadfed. This contract is for people/services, not parts. 

Last sentence of 13 CFR 125.1:

"Where the prime contractor has been directed by the Government as part of the contract to use any specific source for parts, supplies, or components subassemblies, the costs associated with those purchases will be considered as part of the cost of materials, not subcontracting costs."

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Pepe, you are correct.  The last sentence used to include services, but that was deleted some time back.  However, this sentence is not limited to contracts for supplies.  It also applies to contracts for services.  Service contracts, such as those for repair or R&D, can also require the use of material.  If there is a directed source for that material, the labor used to produce that material would not count as subcontract labor.

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