The government has been having a bit of difficulty with regards to subcontracts in our contingency environments (Iraq and Afghanistan primarily). These issues particularly occur below the first-tier where we don't know who is receiving U.S. funds, visibility into costs become murky, and there are allegations that funds are being funneled to insurgents. I've been pondering ways to mitigate this issue and have been having difficulty. One idea I come up with was a prohibition on subcontracting below the first-tier (if mutually agreed to by the government and the prime), but enforcement would be burdensome and costs would likely soar, not to mention privity concerns. Does anyone have any thoughts or ideas on how to get at this problem?

Here is an example of the issue: http://www.nytimes.com/2011/05/01/world/asia/01road.html

Exercise FAR 52.244-2 and see how well it works.

The result may be only a bit of creative writing down in the lower tiers, but it seems a likely tool, coupled with audit and/or requirements for detailed supporting documents with invoices.

The real issue, however, is not a contracting or subcontracting problem; it's a program problem.

Edited to add: This is based on experience in Iraq with a contractor providing security services and construction camp support to government and contractor customers.

Would the flowdown state that the subcontractor must get consent from the government? How would that play with the privity issue?

Would you expand on why you think this is a program problem? I can see how, but would like to know your thinking.

I'll tell you why it's a program problem: We have a program to spend a lot of money in a poor, corrupt, lawless place in which many of the people in charge think we're dangerous idiots, but that they might as well make a buck off the idiots while they can. Do you really think you can stop what's happening by limiting subcontracting to one tier? Based on the NYTimes story you linked, you're dreaming. It would be like trying to get a real deal from a Cairo rug merchant.

I don't know if it will stop it, which is why I asked the question in the first place. Maybe it could mitigate some of the risk.

I agree that it's a crappy situation, but we shouldn't just sit idly by and let it occur without trying to fix it. Besides the obvious of pulling out of Afghanistan, what are some suggestions? Would legislation which limited subcontracting in contingency operations be viable?

Short of ending the program, I honestly don't know how you can solve the problem. Good luck.