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Nicole1986

Subcontractor Classifications

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Hello all -

I am new to an organization that does social policy research (mostly with HHS and Dept. of Ed). They issue lower-tier agreements under federal contracts which they refer to as "site agreements." The organization's Legal department believes that these "sites" would not be considered subcontractors, and therefore the procurement and other regulations related to subcontractors would not apply. Is there another type of classification for partners under the FAR? I have tried to do research on my own, but have not found anything and would not even know where to start. 

Thanks in advance for any insight. 

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(1) Is your organization the prime contractor?

(2) Is the prime contract a FAR-based contract? [not a grant, not a cooperative agreement, not a contract under an authority other than the FAR]

(3)(a) Is any site agreement solely between the prime contractor and the lower-tier provider? 
(3)(b) The Government is not a party to those agreements?

(4)(a) Are the site agreements entered into because of and to accomplish the purpose of the prime contract? 
(4)(b) Or, do the site agreements exist without regard to the prime contract?

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To add to what ji wrote, with what kind of organization are the site agreements with and what do the "sites" do in regard to your contracts?  What is the rationale for the opinion that the "sites" would not be considered subcontracts?

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Hello to you both -

Sorry for the delayed response, I did not know there were responses! To answer the follow up questions:
 

(1) Is your organization the prime contractor?

Yes

(2) Is the prime contract a FAR-based contract? [not a grant, not a cooperative agreement, not a contract under an authority other than the FAR] -

Yes

(3)(a) Is any site agreement solely between the prime contractor and the lower-tier provider?

Yes
(3)(b) The Government is not a party to those agreements?

No

(4)(a) Are the site agreements entered into because of and to accomplish the purpose of the prime contract?

Yes, but this is where our organization is confused. Often the projects under which we will issue "site agreements" are either evaluation or program design work whereby we will design a program and work with the sites to implement it in their community. Or we will be evaluating a program and need these "sites" to participate in the evaluation. Or we will provide funds to a site to run a program we have designed. It seems so much more like grant work, but it is acquisition (FAR based).

(4)(b) Or, do the site agreements exist without regard to the prime contract?

No, they do not. 

To answer Retreadfed's question - the sites will sometimes be small non profits or state/local government health departments. The work would be as I described under 4a. It seems pretty clear to me they would still be subcontractors, but I could be missing something. 

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From what you have described, I agree that the site agreements are subcontracts.  However, it would be good to know the rationale given by your legal department as to why they are not.

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Maybe the prime contract is a procurement contract covered by the FAR, but the site agreements are not procurement contracts?  The term "subcontractor" has a definition in FAR 44.101 as a concern "that furnishes supplies or services to or for a prime contractor or another subcontractor."  If the site agreement concerns do not furnish supplies or services to or for the prime contractor, well, maybe they aren't subcontractors.  Perhaps the site agreements are cooperative agreements or  grants or something along those lines?

So, your organization (the prime contractor) has a legal department and that legal department has an opinion.  If you want to learn more, I would ask your legal department.  If the agency that issued your prime contract agrees with your legal department, then I recommend leaving everything alone.  Is there a difference of opinion between the agency and your legal department?

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Thanks to you both ji20874 and Retreadfed. The only rationale the legal department provided to me that "these arrangements seem different than subcontracts." If they had something a little more defendable then I might feel more at ease. I have flagged these as a risk to those above me, because the org has not been consistently following consent or procurement procedures for "site agreements."

I was thinking they could be grants or CAs, but I do not know where to start looking in the FAR to determine what we would need to do in such cases. I do not have experience with that. 

My organization never really addresses this with the agencies we work with (primarily DOL and HHS). And from what I have seen in past correspondence shared with me, the COs have referred to some of the "sites" as subcontractors. 

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4 hours ago, Nicole1986 said:

I  was thinking they could be grants or CAs, but I do not know where to start looking in the FAR to determine what we would need to do in such cases. I do not have experience with that. 

I think you are on the right track. You should review the prime contract SOW to see if there is some mention of these "sites" as sort of a delivery point for prime contract work or otherwise called out it the prime in some way.  

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The FAR provides some guidance on subcontracts, but essentially no guidance on the contractor's other affairs.  

I suppose the text of the contract will be where you need to look.  FAR 1.102-4(e) will be helpful.

If the concern is future purchasing system reviews and so forth, maybe you can document something for the future reviewer to read, to show that this matter has already been considered.  Maybe you can even get the current contracting officer to agree, for the record.

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Thanks so much, I will do what you have both suggested. I mentioned to my leadership that even if it is uncomfortable to the program teams, until we have a better understanding of how the government would classify these type of agreements, we will need to confer with the CO(s).

I appreciate everyone that responded!

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