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Good afternoon,

I am new to the world of contracting! Our company sells exclusively COTS items and occasionally gets agencies and primes that would like to contract with us. I came across a contract a a couple days ago that had a mandatory flow-down of FAR 52.244-6 to all applicable subcontracts, (i.e. any of our suppliers who sell us commercial items in my understanding). 

The exact language is as follows for clarity:

[Buyer is a government contractor/subcontractor and is subject to various federal laws, executive orders, and regulations that may also be applicable to Supplier and its subcontractors. Supplier hereby agrees that to the extent required by the reference clauses below, and only as applicable, it shall comply with, incorporate into its subcontracts, and require its subcontractors at all tiers to incorporate in their lower tier subcontracts, the following contract clauses as continuously updated by the government and found at https://www.acquistion.gov/content/52244-6-subcontracts-commercial-items.

For the purpose of Supplier's compliance with this mandatory requirement, "Contractor" shall mean Supplier, "Contracting Officer" shall mean Buyer, and "subcontracts awarded under this contract" shall mean any lower tier company that provides services to Supplier in support of the government contract where Supplier is supporting Buyer with any portion of work.]

I had a couple of questions that I have been researching, but cannot find a clear or concise answer to. 

1. Since we sell COTS items, are we required to flow-down FAR 52.244-6 or does our company being COTS make this not applicable? In the paperwork it says "mandatory requirement", however I am unclear on the wording and if it is only mandatory if we sell commercial items. Is this typically a mandatory requirement for commercial item suppliers? Based on the language, it sounds like if we sold commercial items, it would apply. I am unsure since we sell COTS. I am unsure if OUR status as COTS precludes us from the flow-down. 

2. In the language, it mentions OUR suppliers supporting the work that will be sent to buyer. We are a build-to-stock company and keep products stocked on shelves for easy and painless sales. How is this supposed to flow-down is the work is already done and products are already built? We do not typically bid this subcontract work out. We buy the needed part(s) from our preferred/vetted supplier and then use it to assemble our product. Does this still count as an "award"? 

 

Thank you in advance. If I can add clarity to anything, please let me know. 

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First off I suggest that for your extended research you consider contacting a Procurement Technical Assistance Center (PTAC) near you if you are a small business.   As a free service I suspect strongly that they will be able to assist you with regard to application of the clause for you as a prime or subcontractor to a Federal government contract.   You can find a PTAC by utilizing this website https://www.aptac-us.org/

Now to your post.   

COTS by definition of the Federal Acquisition Regulations (FAR) are considered "Commercial Items".  You can find the definitions in FAR Part 2. https://www.acquisition.gov/far/part-2#FAR_2_101

I will admit some confusion in your post as the quoted language you have provided in your post as to what 52.244-6 says is not what is found in the FAR.   It appears as if the agency issuing the solicitation/contract has attempted to add some clarifying language that I will admit is confusing to me. For clarity sake you might take a look at what the clause actually reads as in the FAR.   https://www.acquisition.gov/far/52.244-6

Also I suggest a read of the "prescription" with regard to placement of the clause in a solicitation/contract.   The prescription is the FAR instructions to government of when to place the clause in a solicitation/contract.   The prescription is found here....https://www.acquisition.gov/far/44.403

Now to a definition of what a subcontract is it becomes a looping discussion of confusion and hence my recommendation to contact a PTAC for assistance.   If you are not a small business then you would try seeking out experts in the field of Federal contracts where a PTAC may be able to provide references at least.  I say this noting that FAR subpart 44.4 provides that a definition lies within FAR part 12 as to what a subcontractor is - see FAR 44.401.   A further read of FAR part 12  is not real specific with a definition and likewise brings applicability of COTS which is primary to your questions.  

So beginning point for me that might help in your research is this.... if you as a prime receive a commercial item contract from the government it would appear that 52.244-6 should not be in that contract.   If you, as a subcontractor to a prime where the prime has received an other than commercial item contract the clause will be in the primes contract and will be flowed down to you as a subcontractor.   You as a subcontractor are then required to flow the clause down to your subcontractors pursuant to paragraph (d) of the clause.  If the prime received a commercial item contract then it would appear that 52.244-6 should not be in their contract to flow down to you as a subcontractor.

I hope this helps with your continued research to determine applicability of 52.244-6 if such a clause appears in contract (prime or sub) awarded to your company.

 

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2 hours ago, C Culham said:

First off I suggest that for your extended research you consider contacting a Procurement Technical Assistance Center (PTAC) near you if you are a small business.   As a free service I suspect strongly that they will be able to assist you with regard to application of the clause for you as a prime or subcontractor to a Federal government contract.   You can find a PTAC by utilizing this website https://www.aptac-us.org/

Now to your post.   

COTS by definition of the Federal Acquisition Regulations (FAR) are considered "Commercial Items".  You can find the definitions in FAR Part 2. https://www.acquisition.gov/far/part-2#FAR_2_101

I will admit some confusion in your post as the quoted language you have provided in your post as to what 52.244-6 says is not what is found in the FAR.   It appears as if the agency issuing the solicitation/contract has attempted to add some clarifying language that I will admit is confusing to me. For clarity sake you might take a look at what the clause actually reads as in the FAR.   https://www.acquisition.gov/far/52.244-6

Also I suggest a read of the "prescription" with regard to placement of the clause in a solicitation/contract.   The prescription is the FAR instructions to government of when to place the clause in a solicitation/contract.   The prescription is found here....https://www.acquisition.gov/far/44.403

Now to a definition of what a subcontract is it becomes a looping discussion of confusion and hence my recommendation to contact a PTAC for assistance.   If you are not a small business then you would try seeking out experts in the field of Federal contracts where a PTAC may be able to provide references at least.  I say this noting that FAR subpart 44.4 provides that a definition lies within FAR part 12 as to what a subcontractor is - see FAR 44.401.   A further read of FAR part 12  is not real specific with a definition and likewise brings applicability of COTS which is primary to your questions.  

So beginning point for me that might help in your research is this.... if you as a prime receive a commercial item contract from the government it would appear that 52.244-6 should not be in that contract.   If you, as a subcontractor to a prime where the prime has received an other than commercial item contract the clause will be in the primes contract and will be flowed down to you as a subcontractor.   You as a subcontractor are then required to flow the clause down to your subcontractors pursuant to paragraph (d) of the clause.  If the prime received a commercial item contract then it would appear that 52.244-6 should not be in their contract to flow down to you as a subcontractor.

I hope this helps with your continued research to determine applicability of 52.244-6 if such a clause appears in contract (prime or sub) awarded to your company.

 

Good morning C Culham, 

Thank you for the detailed response! I am fairly new at this and really have only been working on this side of contracting for a few months. We are a small business and I had no idea about the PTAC. I will reach out and give them a call!

I have responded to Vern's post as well, but the language quoted was directly from the buyer's PO T&C's. (My apologies, I should have been more clear in my original post!) They do quote FAR 52.244-6 a little later in the paragraph though and the quote lines up with the FAR definition that I read on https://www.acquisition.gov/far/52.244-6

Thank you, I will absolutely take a look at  44.401 and 44.403 and see what I can learn. 

In this case, we are at least a subcontractor receiving from a prime, we are not the prime. I do not know if the buyer is buying for a contract or not, I have yet to see an official order. I appreciate your clarifications. 

If I might ask one more question, in the event that we ARE required to flow this down to our subcontractors, would there be any blow back if we chose to deny this sale? Would that be a huge "no" if we want to keep contracting, both as a prime and as a subcontractor? We have very easy contracts for our suppliers and I would hate to complicate things and muddy the waters by having to flow-down 52.244-6. My CEO feels the same way and is not excited about the idea of having to flow-down this clause. I just want to make sure that we aren't marking ourselves as a bad prime or bad subcontractor by denying a sale due to a potentially forced flow-down. 

Thank you for your response and information! This has been very helpful for my question. I will most definitely read 44.401/403 and will be giving the PTAC a call about this. 

RF-SA
 

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19 hours ago, RF-SA said:

[Buyer is a government contractor/subcontractor and is subject to various federal laws, executive orders, and regulations that may also be applicable to Supplier and its subcontractors. Supplier hereby agrees that to the extent required by the reference clauses below, and only as applicable, it shall comply with, incorporate into its subcontracts, and require its subcontractors at all tiers to incorporate in their lower tier subcontracts, the following contract clauses as continuously updated by the government and found at https://www.acquistion.gov/content/52244-6-subcontracts-commercial-items.

@RF-SAFirst, read the definition of "commercially available off-the-shelf item" in FAR 2.101.

Okay, so the "Buyer" is your customer and you are the "Supplier."

I think FAR 52.244-6 is in the Buyer's contract with the government. I presume that the Buyer considers you, the Supplier, to be a COTS subcontractor. FAR 52.244-6 tells the Buyer to include the clauses paragraph (c)(1) in all COTS subcontracts to the extent that each is applicable, and to require you, as a COTS subcontractor, to include those clauses in their own contracts for commercial items that are to be delivered to the Buyer, and to flow them down to their own COTS subcontractors.

You asked two questions:

19 hours ago, RF-SA said:

1. Since we sell COTS items, are we required to flow-down FAR 52.244-6 or does our company being COTS make this not applicable?

FAR 52.244-6(c)(1) and (d) applies to COTS subcontractors. You are a COTS subcontractor to Buyer, and Buyer has effectively included FAR 52.244-6 in its contract with you. As a COTS subcontractor, you must flow the clause down to your own commercial item subs that will provide anything incorporated into the product that you sell the Buyer, to the extent that they are applicable.

Quote

2. In the language, it mentions OUR suppliers supporting the work that will be sent to buyer. We are a build-to-stock company and keep products stocked on shelves for easy and painless sales. How is this supposed to flow-down is the work is already done and products are already built? We do not typically bid this subcontract work out. We buy the needed part(s) from our preferred/vetted supplier and then use it to assemble our product. Does this still count as an "award"? 

According to the language Buyer included in its contract with you, you must include the clauses listed in FAR 52.244-6 in your subcontracts.

However, you should check with your customer ("Buyer") to ask how they interpret the clause, because FAR 52.244-56 says "awarded under this contract."

Bottom line: You should talk this over with Buyer.

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1 hour ago, Vern Edwards said:

@RF-SAFirst, read the definition of "commercially available off-the-shelf item" in FAR 2.101.

Okay, so the "Buyer" is your customer and you are the "Supplier."

I think FAR 52.244-6 is in the Buyer's contract with the government. I presume that the Buyer considers you, the Supplier, to be a COTS subcontractor. FAR 52.244-6 tells the Buyer to include the clauses paragraph (c)(1) in all COTS subcontracts to the extent that each is applicable, and to require you, as a COTS subcontractor, to include those clauses in their own contracts for commercial items that are to be delivered to the Buyer, and to flow them down to their own COTS subcontractors.

You asked two questions:

FAR 52.244-6(c)(1) and (d) applies to COTS subcontractors. You are a COTS subcontractor to Buyer, and Buyer has effectively included FAR 52.244-6 in its contract with you. As a COTS subcontractor, you must flow the clause down to your own commercial item subs that will provide anything incorporated into the product that you sell the Buyer, to the extent that they are applicable.

According to the language Buyer included in its contract with you, you must include the clauses listed in FAR 52.244-6 in your subcontracts.

However, you should check with your customer ("Buyer") to ask how they interpret the clause, because FAR 52.244-56 says "awarded under this contract."

Bottom line: You should talk this over with Buyer.

Hello Vern,

Yes, the "Buyer" is our (potential) customer and we are the "Supplier". 

So what I am hearing you say (please correct me if I have anything wrong!), is that if this clause is included in our contract, we are required to flow down to our suppliers, who supply our parts to build this product. I see the wording "as applicable" in the clause and in your post. Can I assume that "as applicable" means flow-down to any of our suppliers who supply us with a commercial or COTS item? 

I am going to ask you the same question I posed to C Culham since you have a vast experience in contracting. In your opinion/experience, if we were to turn down this contract because of the flow-down requirement, does that make us appear less stable to any future primes or subcontracts that come our way? If we were to deny this contract, do you feel there would be, or there has the potential to be, an ill-impact on our future contracting? (This is understandably an opinion and I am curious to hear what you have to say if you feel comfortable responding). 

I will check with the Buyer for a final decision by them. Thank you for your insights and help! 

RF-SA

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2 hours ago, RF-SA said:

If I might ask one more question, in the event that we ARE required to flow this down to our

 

17 minutes ago, RF-SA said:

 

I am going to ask you the same question I posed to C Culham since you have a vast experience in contracting. In your opinion/experience,

I will just let Vern reply.

I still encourage PTAC contact for the long haul as I am sure they can help with reality.

 

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22 minutes ago, RF-SA said:

So what I am hearing you say (please correct me if I have anything wrong!), is that if this clause is included in our contract, we are required to flow down to our suppliers, who supply our parts to build this product. I see the wording "as applicable" in the clause and in your post. Can I assume that "as applicable" means flow-down to any of our suppliers who supply us with a commercial or COTS item? 

You have to flowdown to commercial suppliers of the products that will go into the products that you are supplying to the Buyer. You don't have to flow down to all of your commercial suppliers. I do not think you have to flowdown retroactively to suppliers who furnished products in inventory.

22 minutes ago, RF-SA said:

In your opinion/experience, if we were to turn down this contract because of the flow-down requirement, does that make us appear less stable to any future primes or subcontracts that come our way? If we were to deny this contract, do you feel there would be, or there has the potential to be, an ill-impact on our future contracting?

I don't think it will affect your other business unless buyers want to flow down the clause down to you and you don't want to accept it or flow it down further. Then you will have effectively taken yourself out of that market.

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6 minutes ago, Vern Edwards said:

You have to flowdown to commercial suppliers of the products that will go into the products that you are supplying to the Buyer. You don't have to flow down to all of your commercial suppliers. I do not think you have to flowdown retroactively to suppliers who furnished products in inventory.

I don't think it will affect your other business unless buyers want to flow down the clause down to you and you don't want to accept it or flow it down further. Then you will have effectively taken yourself out of that market.

Hello Vern,

Thanks for the quick response! I appreciate your insights! 

RF-SA

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16 minutes ago, C Culham said:

 

I will just let Vern reply.

I still encourage PTAC contact for the long haul as I am sure they can help with reality.

 

Hello C Culham, 

Thank you for all of your help! I am going to be contacting PTAC with additional questions! I really want to thank you for opening my eyes to them as a resource!

RF-SA

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