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Quoted 2013 comment by Vern Edwards: “A subsidiary might be a separate profit center with its own products. A subsidiary is not the same as a division. It is a legally distinct entity. The subsidiary might be a larger company than the parent. The parent merely owns more than half of the subsidiary's stock.”

Thus, the subsidiary is a separate legal entity from the contract holder.

What anecdotal evidence says otherwise?

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  • 4 weeks later...

See, for instance:
Gear Wizzard, Inc.,B‑298993, Jan. 11, 2007, 2007 CPD

https://www.gao.gov/mobile/products/A65425

EDIT Add:

See also, for example, DynCorp International:

https://www.gao.gov/assets/710/708126.pdf

Edited by joel hoffman
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  • 3 weeks later...

Perhaps the correct question is.... Can a parent company bid on work and subcontract most (if not all of it) to its wholly-owned subsidiary?     

And to answer some possible follow-up questions:  Why subcontract to the wholly-owned subsidiary?  Because the subsidiary has most of the personnel and resources to do the work.

Why not have the wholly-owned subsidiary get its own GSA MAS?  Because the parent already has its own MAS and it would be more time efficient to use the parent's GSA MAS than to apply for its own.  

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Depends upon what, if any,  restrictions on subcontracting are in the MAS schedule contract, subcontracting plan, if any, the ordering activity etc. The prime schedule holder is still the “contractor” for legal and performance responsibility purposes.

Only  the prime has privity  of contract with the government and can interact with the government. According to GSA, ordering activities are permitted to specify in the RFQ that the use of subcontractors requires prior approval by the ordering activities. (See, for example, page 30 of the GSA Student guide for Contractor Team Arrangements and the GSA MAS Program)

Why don’t you ask the Parent Company or GSA these questions? 

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5 hours ago, Jordy1182 said:

Because the subsidiary has most of the personnel and resources to do the work.

Is the anticipated work something that is covered by the parent's GSA contract and that the parent can perform?  If the parent cannot perform the work, how did it get on the schedule?

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5 hours ago, Retreadfed said:

Is the anticipated work something that is covered by the parent's GSA contract and that the parent can perform?  If the parent cannot perform the work, how did it get on the schedule?

Retreaded, I spent a couple of hours researching the GSA guidance and rules and regs concerning subcontracting. I couldn’t find much on limitations on subcontracting. Most of the web-based information stresses subcontracting opportunities for small and small disadvantaged businesses and encourages subcontracting. The only specific restrictions that I found were the standard limitations on subcontracting for schedules that are reserved for small and small disadvantaged businesses.

Reminds me of my experiences during my first year of active duty assignment   (1971-1972)  in the Air Force at Castle AFB in Atwater, CA. I was an Air Force Civil Engineering Officer in charge of the “Contract Inspection Section” of the Base Civil Engineering Squadron. We administered various custodial service contracts and maintenance, repair, minor construction and a new Family Housing Construction contract. I don’t remember much about the custodial contracts.  But I do remember that for every repair and minor construction project, all of them were performed by the second low bidder as the subcontractor to the prime. I never met or even saw anyone who worked for the prime contractors... Hmmm...

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Joel, the reason I asked the question about the scope of the parent's contract is because when placing orders against a schedule contract, the work must be performed either by the contract holder with the work being covered by that contract.  If the work is not covered by the prime's contract, the prime can enter into a subcontract with  a subcontractor that has a schedule contract that covers the work.  This is a variant of the open market procurement concept.  If the work is not covered by a prime's or subcontractor's GSA schedule, it must be procured through an open market procurement.  Based on what Jordy wrote, this issue came to mind. 

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6 hours ago, Retreadfed said:

Joel, the reason I asked the question about the scope of the parent's contract is because when placing orders against a schedule contract, the work must be performed either by the contract holder with the work being covered by that contract.  If the work is not covered by the prime's contract, the prime can enter into a subcontract with  a subcontractor that has a schedule contract that covers the work. 

Retreaded, where is the GSA requirement stated that the prime has to perform the work that is covered on its contract? I couldn’t find that type policy in my searches.

Two or more primes can also form a contractor teaming arrangement. The way I read it was that the GSA contract holders were all signatories on the order, not prime and sub(s).

Thanks! 

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On ‎8‎/‎1‎/‎2020 at 5:56 PM, joel hoffman said:

Retreaded, where is the GSA requirement stated that the prime has to perform the work that is covered on its contract?

Looking back at my earlier post it seems my brain got ahead of my fingers so that I did not write exactly what I was thinking.  Let me try again in a little bit of a different way.  Work described in an order issued against a GSA schedule contract generally has to be performed by someone who holds a schedule contract that covers the work described in the order.  Thus, if an order is issued to a contractor that holds a schedule contract, but the order is not covered by that contractor's schedule contract, the contractor cannot subcontract that work to a concern that does not have a schedule contract.  The exception to this would be if the government issues the order as an open market procurement in accordance with FAR 8.402(f).  Because Jordy wrote that the subsidiary has most of the personnel and resources to do the work, it made me curious as to whether the work was covered by the parent's GSA contract,  and, if so, how did the parent get the contract if it does not have the apparent capability to perform the work.

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As already mentioned in another thread, a Schedule holder can utilize another company’s (subcontractor) labor by subcontract arrangements.  All work must fit within the Schedule contractors labor categories and meet all qualifications of the described position.  The only other way to use another company is by CTA, which is already stated, or by open market and the ordering agency complies with all regulations and policies.  See open market under the GSA procedures.

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On 6/18/2020 at 11:51 AM, Jordy1182 said:

can't seem to find concrete guidance.   

If a time and material or labor-hour contract is contemplated by the Government, my understanding is that FAR 52.212-4 ALT I (e)(ii) should be included in the solicitation/contract. It provides as follows:

(ii) “Hourly rate” means the rate(s) prescribed in the contract for payment for labor that meets the labor category qualifications of a labor category specified in the contract that are-

(A) Performed by the contractor;

(B) Performed by the subcontractors; or

(C) Transferred between divisions, subsidiaries, or affiliates of the contractor under a common control.

Edited by Neil Roberts
ALT I
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On 6/18/2020 at 2:51 PM, Jordy1182 said:

Can a wholly owned subsidiary bid on contracts through its parent’s GSA Schedule?  I'm finding conflicting anecdotal evidence and can't seem to find concrete guidance.   

Back to the original question.  This question comes up a lot at GSA.  The answer generally is no.  However it all depends on how the company made their offer including disclosure details to GSA at time of award.  The company establishes its own ordering information with their offer including the exact address for orders to be placed.  The company may wish to accept orders on behalf of subsidiaries and be responsible for fulfilling.  As the contract holder they must fulfill orders at the agreed upon labor categories and rates for services of products if a supply contract.  

But in the absence of that a subsidiary may not accept an order issued directly to them if it runs counter to the contract.

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  • 1 year later...
On 6/20/2020 at 9:13 AM, ji20874 said:

No.

But the wholly-owned subsidiary can try to get its own schedule contract.

what if wholly owned subsidiary setup for public is and does not have any track record on its own? to get a GSA contract past performance of few years is needed? How about if we Novate the contract from parent to the subsidiary?

 

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@Ramesh M. WadhwaniTo answer the first of your two questions, search SAM.gov for Past Performance factors that are set up to allow this.  Look for RFPs seeking to evaluate reference contracts.  Then look for details like this in the RFP:

"Offeror may provide past performance information for its parent organization(s) provided the Offeror’s proposal demonstrates that the resources of the parent will be provided or relied upon in contract performance such that the parent will have meaningful involvement in contract performance."

Here, meaningful involvement means the parent will provide material supplies, equipment, personnel, or other tangible assets to contract performance.  You will need to do some reading of case law on this matter to truly make good decisions here.  Read Core Tech International Corp.- Costs, B-400047.2, Mar. 11, 2009.  Also read the sections containing citations of "B-400047.2" in all of these cases: U.S. GAO - Search

I don't have an answer to your second question (about how many years GSA needs), and I don't have an answer to your suggestion about a novation.  Instead, I suggest you find an Agency that is willing to expand its industry pool by including the above language, you ensure your parent company will be meaningfully involved in contract performance, and then you propose exactly how they will do so.

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