Consent to Subcontract
Breakout Session # D12
Name:
Rita Wells
Daniel Johnson
Anthony Simmons
Date:
July 12, 2011
Time:
11:15 – 12:30
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Consent to Subcontract Topics
• References
• Definitions
• Consent Requirements
– With Approved Purchasing System
– Without Approved Purchasing System
• Advance Notification Requirements
• Contracting Officer Evaluation &
Considerations
• Consent Limitations
• Designation of Specific Subcontractors
• Impact on Purchasing System Approval
• Contractor Considerations
2
Consent References
Policies and
Procedures
FAR 44.2
Prime Contract FAR 52.244-2
Clause
Definitions
FAR Subpart 2.1
Agency
Supplements
DFARS 244,
DEARS, TAR, etc.
Specific
Requirements
The Prime
Contract
Consent to
Subcontracts
Subcontracts
Definitions
“When in doubt,
read the contract”
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Definitions
“Subcontract” means any contract, as
defined in FAR Subpart 2.1, entered into by a
subcontractor to furnish supplies or services
for performance of the prime contract or a
subcontract. It includes, but is not limited to,
purchase orders, and changes and
modifications to purchase orders.”
- FAR 52.244-2 (a)
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FAR 2.1 Definition of Contract
“Contract” means a mutually binding legal
relationship obligating the seller to furnish the
supplies or services (including construction) and the
buyer to pay for them. It includes all types of
commitments that obligate the Government to an
expenditure of appropriated funds and that, except
as otherwise authorized, are in writing. In addition to
bilateral instruments, contracts include (but are not
limited to) awards and notices of awards; job
orders or task letters issued under basic
ordering agreements; letter contracts; orders,
such as purchase orders, under which the contract
becomes effective by written acceptance or
performance; and bilateral contract
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modifications.”
Subcontracts Clause
(FAR 52.244-2) Requirement
FAR 44.204 Contract clauses.
(a)(1) The contracting officer shall insert the clause
at 52.244-2, Subcontracts, in solicitations and
contracts when contemplating—
(i) A cost-reimbursement contract;
(ii) A letter contract that exceeds the simplified
acquisition threshold;
(iii) A fixed-price contract that exceeds the
simplified acquisition threshold under which
unpriced contract actions (including
unpriced modifications or unpriced delivery
orders) are anticipated;
(iv) A time-and-materials contract that exceeds
the simplified acquisition threshold; or
(v) A labor-hour contract that exceeds the
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simplified acquisition threshold.
Alternate I of the Subcontracts
Clause (FAR 52.244-2) - Requirement
FAR 44.204 (a)(2) (2) If a cost-reimbursement contract is
contemplated, for civilian agencies other than
the Coast Guard and the National
Aeronautics and Space Administration, the
contracting officer shall use the clause with
its Alternate.
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Consent Requirements
8
Consent Requirement
If Contractor has an APPROVED Purchasing
System:
Consent is required for:
Subcontracts specifically identified by the
Contracting Officer in the Subcontracts
clause in the prime contract.
May also be required for individual
subcontracts to protect the interest of the
contract
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Excerpt From FAR 52.244-2 (d)
If the Contractor has an approved purchasing
system, the Contractor nevertheless shall obtain the
Contracting Officers written consent before placing
the following subcontracts:
____________________________________
____________________________________
____________________________________
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Specific Clause in Contract A
The Consent clause in Contract A states:
"If the Contractor has an approved purchasing
system, the Contractor nevertheless shall obtain
the Contracting Officers written consent before
placing the following subcontracts:
Any subcontracts over $550,000.00
(Does not exclude commercial or fixed price
contracts as defined by the FAR)"
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Specific Clause in Contract B
The Consent clause in Contract B states:
"If the Contractor has an approved purchasing
system, the Contractor nevertheless shall
obtain the Contracting Officers written consent
before placing the following subcontracts:
Any subcontracts over $100,000.”
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Consent Requirement If Contractor
Does NOT Have An Approved
Purchasing System
FAR 44.201 - Consent is required for any
subcontract that is
Cost-Reimbursement
Time & Material
Labor Hour
Letter Contracts
Unpriced actions (including unpriced
modifications and unpriced delivery orders)
under Fixed price contracts that exceed the
Simplified Acquisition Threshhold (SAT)
- Continued
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Consent Requirement If Contractor
Does NOT Have An Approved
Purchasing System - Continued
(FAR 44.201-1) Consent is required for
(1) Cost-reimbursement, time and materials, labor
hour subcontracts, and
(2) Fixed price subcontracts that exceed:
For DOD, Coast
Guard & NASA
Greater of the Simplified Acquisition
Threshold or 5% of the total
estimated cost of the contract
Civilian Agencies
Other than NASA
Either Simplified Acquisition
Threshold or 5% of the total
estimated cost of the contract
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Consent Threshold?
A DOD contractor does not have an
approved purchasing system.
What is the consent threshold for a
contract with an estimated cost of:
(1) $10,000,000
(2) $ 1,000,000
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Consent Threshold
(1) Estimated Cost = $10,000,000.
Simplified Acquisition Threshold = $150,000.
5% of Estimated Cost = $500,000.
Consent Threshold = $500,000.
(2) Estimated Cost = $1,000,000.
Simplified Acquisition Threshold = $150,000.
5% of Estimated Cost = $50,000.
Consent Threshold = $150,000.
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(FAR 44.201-1) Consent Requirements
- More
Consent may be required for Subcontracts
under Architect / Engineer Prime Contracts
The Contracting Officer’s authorization to
purchase from Government Sources (FAR
Part 51) constitutes consent.
Examples: FSS
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Advance Notification
Requirements
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Advance Notification Requirements:
DOD, Coast Guard and NASA
Under Cost-Reimbursement Contracts, the
contractor is required by Statute (10 USC 2306)
to notify the Contracting Officer as follows:
For DOD,
Coast
Guard &
NASA
Unless the contractor has an
approved purchasing system,
advance notification is required for:
• any cost-plus fixed fee or any
fixed price subcontract
• that exceeds the greater of the
SAT or 5% of the total estimated
cost of the contract
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Advance Notification Requirements
– Civilian Agencies Other Than
NASA
Under Cost-Reimbursement Contracts, the
contractor is required by Statute (10 USC 2306) to
notify the Contracting Officer as follows:
Civilian
Agencies
Other
Than
NASA
Even if the contractor has an
approved purchasing system,
advance notification is required for:
• any cost-plus-fixed fee or any
fixed price subcontract
• that exceeds either the Simplified
Acquisition Threshold or 5% of the
total estimated cost of the contract
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Contracting Officer Evaluation
and Considerations
The Administrative Contracting Officer (ACO)
is responsible for consent to subcontracts
ACO reviews the contractor’s notification and
data to ensure that the proposed subcontract
is:
- Appropriate for the risks involved, and
- Consistent with current policy and
sound business judgment
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Contracting Officer Evaluation and
Considerations – continued
1. Consistent with approved make-or-buy program, if any?
2. Is special test equipment or real property available from the
government?
3. Is selection of the particular supplies, equipment, or
services technically justified?
4. Compliant with prime contract requirements for Small
Business subcontracting
5. Adequate price competition? Justification if not?
6. Were Subcontractors’ alternate proposals adequately
assessed, if offered?
7. Is there a sound basis for determining responsibility of
subcontractor?
8. Adequate cost or price analysis or price comparisons?
Obtained cost or pricing data? Data other than certified
cost or pricing data?
-continued
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Contracting Officer Evaluation and
Considerations - continued
9. Is proposed subcontract type appropriate for
risks? Consistent with current policy?
10. Has adequate consideration been obtained
for proposed use of government property?
11. Were prime contract technical requirements
adequately translated into subcontract
requirements?
12. Compliance with Cost Accounting
Standards?
13. Is the proposed subcontractor in Excluded
Parties List System (EPLS)?
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Contracting Office Evaluation and
Considerations - continued
Particular attention is paid if:
-The prime contractor’s purchasing system or
performance is inadequate.
-Close relationships or owner affiliations
between the prime and subcontractor that may
preclude competition or result in higher prices.
-Non-competitive awards, unreasonable prices,
higher prices than comparables.
-Cost-reimbursement, time-and-materials,
labor-hour contracts.
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Consent Limitations
44.203 Consent limitations.
(a) The contracting officer’s consent to a
subcontract or approval of the contractor’s
purchasing system does not constitute a
determination of the acceptability of the
subcontract terms or price, or of the allowability
of costs, unless the consent or approval specifies
otherwise.
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Designation of Specific
Subcontractors
FAR 44.202-1 (c) Designation of specific
subcontractors during contract negotiations does
not in itself satisfy the requirements for advance
notification or consent pursuant to the clause at
52.244-2.
However, if, in the opinion of the contracting
officer, the advance notification or consent
requirements were satisfied for certain subcontracts
evaluated during negotiations, the contracting
officer shall identify those subcontracts in
paragraph (j) of the clause at 52.244-2.
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FAR 52.244-2 Subcontracts
(j) Paragraphs (c) and (e) of this clause do not apply
to the following subcontracts, which were evaluated
during negotiations:
_________________________________________
_________________________________________
_________________________________________
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Impact on Contractor Purchasing
System Approval
44.305-3 Withholding or withdrawing approval.
The ACO may withdraw approval at any time on the basis of
a determination that there has been a deterioration of the
contractor’s purchasing system or to protect the Government’s
interest. Approval shall be withheld or withdrawn when there is
a recurring noncompliance with requirements, including but not
limited to—
(1) Certified cost or pricing data (see 15.403);
(2) Implementation of cost accounting standards (see 48 CFR
Chapter 99 (FAR Appendix, loose-leaf edition));
(3) Advance notification as required by the clauses
prescribed in 44.204; or
(4) Small business subcontracting (see Subpart 19.7).
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Summary
Understand the consent and advance notification
requirements for the subcontracts you manage.
-Requirements may vary, so check the
Subcontracts clause in the Prime Contract.
-If requirements are unclear, seek guidance
from Contracting Officer.
Process consent requests and advance
notifications in a timely and complete manner.
-Keep documentation in the file.
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