YMachining Posted July 10, 2023 Report Share Posted July 10, 2023 Hello all, Super helpful information on this forum, I've read quite a bit and you all seem very knowledgeable and I've learned a ton already. I'm a first time poster. My company is a second tier contractor for a prime DOD contract. We provide machined parts to the prime, who outfits the machined parts with electronics to send to the govt. The prime is significantly behind on their payments. What recourse do we have against the prime? How would we escalate this issue to the contract manager? Or do we? Also, the prime is threatening us with DFAR saying that if we don't ship product (even though they are over 90 days past payment terms) then we could be held responsible for the govt deadlines and we would be held accountable. This doesn't seem right in my gut, but I don't have enough experience to dispute this. In my mind, their PO says net 30 and they're at almost 120 days which makes them in breach of their own contract with us. If the prime isn't paying their subcontractors, are we required to continue shipping parts per their PO? The prime is coming up on a milestone with their contract and are at jeopardy of not making their milestone without our parts, but I'm afraid if we supply the parts we might not ever get paid. Further, is there any protection for second tier suppliers if the primary defaults on their contract with the govt? Again, I'm sorry for all the newbie questions. I did look in the forum quite a bit as I'm sure some of these questions have been addressed before but I wasn't able to find anything. Thanks! Quote Link to comment Share on other sites More sharing options...
joel hoffman Posted July 12, 2023 Report Share Posted July 12, 2023 Is the prime contract a supply contract? Quote Link to comment Share on other sites More sharing options...
C Culham Posted July 12, 2023 Report Share Posted July 12, 2023 5 hours ago, joel hoffman said: Is the prime contract a supply contract? Also has the contract/order to you from the prime been assigned a DPAS rating? Quote Link to comment Share on other sites More sharing options...
Don Mansfield Posted July 12, 2023 Report Share Posted July 12, 2023 You need an attorney to read your contract with the prime. Quote Link to comment Share on other sites More sharing options...
C Culham Posted July 12, 2023 Report Share Posted July 12, 2023 14 minutes ago, Don Mansfield said: You need an attorney to read your contract with the prime. I think the basis for my and Joel's questions provide that the prime contract may provide answers to On 7/10/2023 at 8:09 AM, YMachining said: What recourse do we have against the prime? and On 7/10/2023 at 8:09 AM, YMachining said: If the prime isn't paying their subcontractors, are we required to continue shipping parts per their PO? Therefore at least the intent of my question was to assist in pointing to possible clauses of the prime contract whereby a subcontractor might have recourse and responsibility for continued performance. An attorney would be good but the attorney ought to look at the prime contract as well. Quote Link to comment Share on other sites More sharing options...
joel hoffman Posted July 12, 2023 Report Share Posted July 12, 2023 The reason that I asked if it was a supply contract was to determine which prompt payment clause is in the prime contract. As far as I know, only the prompt payment for construction contracts and payment under fixed price construction contracts clauses confer any responsibilities of the prime to promptly pay subcontractors and to pass down similar responsibilities to subcontractors for lower tier subcontracts. If the terms of your subcontract on a non-FP prime construction contract require payment within 30 days, then your action is likely a private one between you and your first tier sub. As to whether or not you must continue performance after a breach, Carl is exploring whether thie prime DoD contract is assigned a DPAS rating. The advice to consult with legal representation is probably sound. if, for some reason the prime contract is for fixed-price construction, we can talk more about subcontractor and sub-sub contractor rights and responsibilities and whether you can seek help from the COR/KO/ACO. For construction contracts, any applicable payment bonds might be pertinent. Quote Link to comment Share on other sites More sharing options...
Retreadfed Posted July 12, 2023 Report Share Posted July 12, 2023 On 7/10/2023 at 11:09 AM, YMachining said: What recourse do we have against the prime? It depends on what terms are in your subcontract from the prime. For example, if there is an indemnity clause in the subcontract, you could be liable to the prime if you do not deliver and the government takes action against the prime. Normally, the government would not deal directly with a subcontractor because it does not have privity of contract with the sub. So without seeing the entire subcontract, it is difficult to say what recourse you have against the prime. Quote Link to comment Share on other sites More sharing options...
General.Zhukov Posted July 12, 2023 Report Share Posted July 12, 2023 Caveat: I have no particular expertise in subcontracts, but I have dealt with late payments (but not any DoD reg, I'm not DoD). Obviously, the specifics of your situation matter a great deal, as do the contracts, consult with a lawyer, etc. FAR defines Untimely payment to subcontractors, I think it's more than 90 days past due from when gvt paid prime. There is some recourse in the FAR for untimely payment to subcontractors that might apply to you. Again, consult with a lawyer. FAR Clause 52.219-9 Small Business Subcontracting Plan - which states: (14) Assurances that the Contractor will not prohibit a subcontractor from discussing with the Contracting Officer any material matter pertaining to payment to or utilization of a subcontractor. FAR Clause 52.242-5 Payments to Small Business Subcontractors FAR 32.112-1 Subcontractor assertions of nonpayment (only for non-commercial) Quote Link to comment Share on other sites More sharing options...
joel hoffman Posted July 12, 2023 Report Share Posted July 12, 2023 2 hours ago, Retreadfed said: It depends on what terms are in your subcontract from the prime. For example, if there is an indemnity clause in the subcontract, you could be liable to the prime if you do not deliver and the government takes action against the prime. Normally, the government would not deal directly with a subcontractor because it does not have privity of contract with the sub. So without seeing the entire subcontract, it is difficult to say what recourse you have against the prime. The original poster is a second tier subcontractor. It’s not clear what the “net 60” payment terms refer to (the sub sub purchase order? the 1st tier sub -prime?). Quote Link to comment Share on other sites More sharing options...
joel hoffman Posted July 12, 2023 Report Share Posted July 12, 2023 2 hours ago, General.Zhukov said: Caveat: I have no particular expertise in subcontracts, but I have dealt with late payments (but not any DoD reg, I'm not DoD). Obviously, the specifics of your situation matter a great deal, as do the contracts, consult with a lawyer, etc. FAR defines Untimely payment to subcontractors, I think it's more than 90 days past due from when gvt paid prime. There is some recourse in the FAR for untimely payment to subcontractors that might apply to you. Again, consult with a lawyer. FAR Clause 52.219-9 Small Business Subcontracting Plan - which states: (14) Assurances that the Contractor will not prohibit a subcontractor from discussing with the Contracting Officer any material matter pertaining to payment to or utilization of a subcontractor. FAR Clause 52.242-5 Payments to Small Business Subcontractors FAR 32.112-1 Subcontractor assertions of nonpayment (only for non-commercial) Thanks for the references Gen.! Quote Link to comment Share on other sites More sharing options...
Retreadfed Posted July 12, 2023 Report Share Posted July 12, 2023 On 7/10/2023 at 11:09 AM, YMachining said: My company is a second tier contractor for a prime DOD contract. We provide machined parts to the prime, who outfits the machined parts with electronics to send to the govt. Joel, based on this statement it is not clear whether we are talking about a first tier sub or a second tier sub. Imprecise language causing more confusion. Quote Link to comment Share on other sites More sharing options...
joel hoffman Posted July 12, 2023 Report Share Posted July 12, 2023 2 hours ago, Retreadfed said: Joel, based on this statement it is not clear whether we are talking about a first tier sub or a second tier sub. Imprecise language causing more confusion. Ah, yes! I see that now. What is a “second tier contractor” ? Hmm. I read right past that. I’m not familiar with that term. Quote Link to comment Share on other sites More sharing options...
C Culham Posted July 13, 2023 Report Share Posted July 13, 2023 20 hours ago, General.Zhukov said: There is some recourse in the FAR for untimely payment to subcontractors that might apply to you 18 hours ago, joel hoffman said: Thanks for the references Gen.! If I may, and because of the facts we may not know about, I would like to offer one more reference - FAR 52.212-5 which by its wording makes FAR 52.232-40 applicable to all commercial item contracts and it is a flow down clause. Quote Link to comment Share on other sites More sharing options...
Neil Roberts Posted July 16, 2023 Report Share Posted July 16, 2023 On 7/10/2023 at 8:09 AM, YMachining said: If the prime isn't paying their subcontractors, are we required to continue shipping parts per their PO? The prime is coming up on a milestone with their contract and are at jeopardy of not making their milestone without our parts, but I'm afraid if we supply the parts we might not ever get paid. Your company may have the right to stop work, terminate the contract and sue for monetary damages for breach of contract. Quote Link to comment Share on other sites More sharing options...
joel hoffman Posted July 17, 2023 Report Share Posted July 17, 2023 YMachining last checked in on July 10 at the time of their original post. I think that he/she has abandoned the conversation. Quote Link to comment Share on other sites More sharing options...
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