Incurred Cost Submission Schedule H - Are subcontracts to government prime contracts listed as Commercial type contracts?

[kmbrew]

We are a subcontractor to a government prime contractor. Should I list the subcontract on schedule h of my incurred cost submission as a "Commercial" type contract? 52.216-7 is flowed down to us in our subcontract. 

[here_2_help]

I treat subcontracts to government prime contractors as being government contracts, not commercial contracts. Yes, such contracts are generally subject to the UCC if there is a dispute between the parties; however, the government generally has audit rights as conferred by subcontract terms and conditions (particularly if the subcontract is other than FFP). Chances are your prime contractor has listed your subcontract in its own Schedule J so that the auditors can initiate assist audits if they elect to do so.

Because the government generally has audit rights that it may exercise, I treat the subcontract as being governmental.

[AlsoExDCAA]

 

12 hours ago, here_2_help said:

however, the government generally has audit rights as conferred by subcontract terms and conditions (particularly if the subcontract is other than FFP). Chances are your prime contractor has listed your subcontract in its own Schedule J so that the auditors can initiate assist audits if they elect to do so.

Experienced this cluster with a capital F over the years. 

Prime flows down 52.216-7 + the kitchen sink in its T&C's with the sub. Prime's standard USG T&Cs include instructions to replace terms like 'Government' and 'Contracting Officer' with 'Buyer' and 'Buyer Representative', except all too often there is a carveout for audit responsibilities. 

The CPFF subcontractor will submit an ICS to their local DCAA office. In DCAA's review of the ICS, they see no prime contracts, so it gets placed in the sub's contract file without an adequacy review, citing FAR 52.216-7(d)(5): "...The prime contractor is responsible for settling subcontractor amounts and rates included in the completion invoice or voucher and providing status of subcontractor audits to the contracting officer upon request." Contract privity only exists between the USG and the prime, and between the prime and the sub.

Contract years go by, the prime is unaware of its responsibility to finalize rates with this sub. Prime asks the sub constantly for its final annual indirect rates. Sub says they have nothing from DCAA, unaware DCAA has no reason to audit the sub's rates. Then the prime wakes up and realizes they have the responsibility to finalize the rates to close out its subcontract with the sub, but wants to see the ICS in order to do so. But guess what, sending the ICS to the prime wasn't part of the contract.

In my anecdote, the absurdity is magnified by the fact the sub also had a cost-type sub to a competing prime for similar deliverables, and had NDAs in place with each prime stating 'proprietary cost data' will only be shared with the USG.

 

[here_2_help]

2 hours ago, AlsoExDCAA said:

 

Experienced this cluster with a capital F over the years. 

Yep. Plus the prime always had the ability to request a DCAA assist audit but the prime's buyer was asleep at the switch.