Subcontract full of flow downs, but GC won't share prime contract

[SubcontractorFirstRodeo]

As title indicates, the GC wants to engage our company to perform services and the contract is full of flow downs.  Some of the flow downs are identified by reference to the FARs, but many are not (ie, deadline for submitting COs, indemnity requirements, insurance requirements, governing law).  It's my first government-related contract review.  I would never let this fly in the private world, but is this normal in governmental contracting? I am assuming this is perhaps a contract exempt from FOIA disclosure, but not sure.

[Don Mansfield]

It's a common tactic by primes, and I'm sure many subcontractors put up with it. It can take a lot of time and effort to determine which particular clauses should be flowed down and mistakes can be made, so one can understand why primes do this. 

You could go back and forth with the prime on each clause that you don't think applies and some subcontractors do that. I think a more elegant solution is to get the prime to agree that, notwithstanding the list of clauses in the subcontract, the only clauses that apply are those that are 1) included in the prime contract and 2) require inclusion in your subcontract.

[joel hoffman]

If you don’t specifically know the requirements of a cited flow down, recommend that you advise the prime that it needs to either specifically describe the requirement or provide the reference  to where you can find it.

I recommend advising the potential prime that you must be able to determine each requirement, including those flowed down and applicable to you, as the subcontractor.

General contractors generally have subcontract managers who ought to be well familiar with the flow down requirements.

[Neil Roberts]

On 3/24/2024 at 9:11 AM, Don Mansfield said:

It's a common tactic by primes, and I'm sure many subcontractors put up with it. It can take a lot of time and effort to determine which particular clauses should be flowed down and mistakes can be made, so one can understand why primes do this. 

You could go back and forth with the prime on each clause that you don't think applies and some subcontractors do that. I think a more elegant solution is to get the prime to agree that, notwithstanding the list of clauses in the subcontract, the only clauses that apply are those that are 1) included in the prime contract and 2) require inclusion in your subcontract.

In my experience, that above is unlikely to fly well with major prime contractors for various reasons including:

1. don't have time to deal with addressing this as there may be schedule impact to the prime for doing so (delay in placing the purchase contract with you due to company required lengthy preparation to negotiate with you over the status of perhaps  a hundred or more clauses).

2. "Business" clauses are not prohibited by a prime contract for inclusion in purchase contracts but are not included in the prime contract. Think of it as the business boilerplate often found in non-government contracts.  

3. The above position runs the risk of simply going to the next bidder who may have a higher purchase price. Factoring in the time it would take to deal with you in what is seen as a normal business practice by the prime (with dubious results probable), you may no longer be best value. Some exceptions are acceptable provided adequate rationale accompanies it.

For your first government contract review, it seems to me your company should engage an experienced subcontract person to review it alongside you.

If you wish to proceed with the above suggested approach, please be sure you have your top management's approval so that they are not surprised (and you are not embarrassed or at risk) by any phone call from a prime contract executive or program manager regarding the above suggested approach and your company's viability as a supplier. 

[here_2_help]

I would review the proposed subcontract language de novo, without regard to whether the clause is in the prime or if it is a mandatory flowdown. Identify the clauses that drive risk or other concerns. Then look those clauses up in the FAR Smart Matrix to see when they would be required to be in a prime contract. Review the clause language to see if a flowdown is required.

Then negotiate.

[Don Mansfield]

22 hours ago, Neil Roberts said:

. "Business" clauses are not prohibited by a prime contract for inclusion in purchase contracts but are not included in the prime contract. Think of it as the business boilerplate often found in non-government contracts.  

I think I wasn't clear. I was referring to the list of FAR/DFARS in the subcontract--not all clauses. 

[Retreadfed]

If this is a subcontract under a DoD prime contract, the prime contract likely contains DFARS 252.244-7001(c) states in part that an acceptable purchasing system shall "Ensure that all applicable purchase orders and subcontracts contain all flowdown clauses, including terms and conditions and any other clauses needed to carry out the requirements of the prime contract."  IAW this clause the prime contractor is required to flow down clauses that by their express terms require them to be included in specified subcontracts.  In addition, the prime is required to include clauses in the subcontract that are necessary for the prime contractor to carry out its obligations under the prime contract.  That means that there may be FAR/DFARS clauses in the subcontract that are not included in the prime contract.  For example, if the prime contract is a cost reimbursement contract but the subcontract is a firm fixed price contract, there may be several clauses in the subcontract, such as a payments clause, that are not in the prime contract.  In my opinion, if a prime contractor merely includes all FAR clauses from the prime contract in all subcontracts that is an example of professional laziness.

[Don Mansfield]

2 hours ago, Retreadfed said:

That means that there may be FAR/DFARS clauses in the subcontract that are not included in the prime contract.  For example, if the prime contract is a cost reimbursement contract but the subcontract is a firm fixed price contract, there may be several clauses in the subcontract, such as a payments clause, that are not in the prime contract.

Why would these be FAR/DFARS clauses? Why wouldn't the prime use its own payment clause?

[here_2_help]

11 hours ago, Don Mansfield said:

Why would these be FAR/DFARS clauses? Why wouldn't the prime use its own payment clause?

This was a rhetorical question, correct?

 

[Retreadfed]

11 hours ago, Don Mansfield said:

Why would these be FAR/DFARS clauses? Why wouldn't the prime use its own payment clause?

The operative word in my post was "may."  But in regard to your question, while some contractors develop their own subcontract clauses, many use FAR or agency supplement clauses for subcontracts.  This is because they do not see any reason to reinvent the wheel when a clause already exists that they can use.

[Fara Fasat]

2 hours ago, here_2_help said:

This was a rhetorical question, correct?

Not rhetorical at all. Most primes have their own standard subcontract terms that cover all the essentials -- delivery, invoicing, payment, etc. They all have purchasing departments, and they all a standard PO with their terms. Why include a FAR/DFARS clause for something that is already covered, and that may well be inconsistent? Of course, it takes some thought and effort to tailor the subcontract, so they don't bother. Or they resort to the "self-deleting" dodge.

[here_2_help]

26 minutes ago, Fara Fasat said:

Not rhetorical at all. Most primes have their own standard subcontract terms that cover all the essentials -- delivery, invoicing, payment, etc. They all have purchasing departments, and they all a standard PO with their terms. Why include a FAR/DFARS clause for something that is already covered, and that may well be inconsistent? Of course, it takes some thought and effort to tailor the subcontract, so they don't bother. Or they resort to the "self-deleting" dodge.

Most primes with USG prime contracts develop their "own" clauses by using FAR/DFARS clauses and replacing "contracting officer" with "buyer" and "Government" with "buyer" or "company". Most primes are not motivated to tailor clauses or to develop their own set of local clauses. Most primes do not train their buyers in the nuances of clause application.

Note the considered use of the word "most" in the above generalization.

[Retreadfed]

2 hours ago, here_2_help said:

Note the considered use of the word "most" in the above generalization.

To add to the generalization, in my experience, it is the larger contractors that have their own subcontract clauses.  Many of these clauses are derivations of FAR or FAR supplement clauses.  Some times these variations go further than the tweaks H2H described.  At the same time, some of the clauses are FAR clauses with only those tweaks.  Medium sized contractors and small businesses have a tendency to merely incorporate clauses from the prime contract without thinking as to whether the clause is applicable to the subcontractor or whether the "clause" is even a clause and not a solicitation provision.