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A Subcontract Is . . . .



It was the Fall of 1978 and I was walking down the steps from the contracting office at Rock Island Arsenal. At this point in my contracting journey around the country, I was told that P. L. 95-507 had been signed into law. I was reviewing contracts awarded under the Mandatory Small Business Subcontracting Test which was authorized by the Office of Federal Procurement Policy (OFPP). OFPP conducted the test in response to Recommendation A-48 of the Commission on Government Procurement, which by the way, recommended the creation of an Office of Federal Procurement Policy. So much for history.

I had been answering questions for congressional committees as I travelled from one contracting office to the next. However, now P. L. 95-507 was law and I hadn't started writing the GAO report about the OFPP test. What to do? Issue the report anyway and explain that GAO was offering something to consider for P. L. 95-507's new subcontracting program.

In the 1979 GAO report, it was noted that P. L. 95-507 did not define subcontracting and that during the OFPP test agencies used various definitions including:

"subcontract" includes all construction, modifications, materials, supplies, and service work contracted for by the prime contractor and

"subcontracts and purchases" as used herein means procurement by the contractor of any article, material, or service required for performance of this contract, including where reasonably allocable to this contract, an appropriate portion of stock inventory, purchases of plant maintenance, repair, operation, and capital equipment.

Another agency explained that the term "subcontracts" was to "include vendors."

The definition above for "subcontracts and purchases" was derived from the 1978 forms that were used by contractors to report subcontract totals to the federal government. The GAO report noted that the forms' definition may have included everything possible. However, some consideration should be given to an agency's ability to determine compliance with a subcontracting plan. For example, during the OFPP test, contractors were including items charged to their overhead accounts as subcontracts.

Because of P. L. 95-507's lack of a definition for subcontracting, GAO recommended that OFPP define the term subcontract for use in P. L. 95-507. Additionally, GAO explained that such a definition should consider the requirements of the various kinds of contracts and an agency's ability to determine compliance with subcontracting plans.

So why do I mention a 34 year-old law and a 33 year-old GAO report? Well on the Wifcon Forum, there is a topic called: When is a subcontractor a subcontractor? As you read the questions and answers, you'll understand. By the way, the GAO report is entitled--The Mandatory Small Business Subcontracting Test: Considerations For Public Law 95-507's New Subcontracting Program.


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