Are You a Government Subcontractor?

08 June 2015 Manufacturing Industry Advisor Blog

Just because your company does not contract directly with the government does not necessarily mean you are not subject to the many requirements associated with government contractors. Those who provide goods and services to OEMs, or other customers who sell to the government, may also be subject to those requirements.

Many government contractors incorporate by reference Federal Acquisition Regulation (“FAR”) clauses, FAR agency supplemental clauses, or other federal government contracting laws and regulations into agreements with subcontractors and materials supplier. Then, those companies are obligated to comply with those government-unique requirements. These FAR and FAR agency supplemental clauses are often found in a customer’s terms and conditions incorporated by reference in the subcontract or purchase order and available on the customer’s website. Thus, many companies do not even realize they are government subcontractors.

So how do you know? Below are some tips to identify if your company has federal government subcontracts:

  • References in subcontracts and purchase orders to any FAR clauses, which start with 52.2XX-XX (e.g., FAR 52.333-26, “Equal Opportunity”).
  • References in subcontracts and purchase orders to any Department of Defense FAR Supplement (DFARS) clauses, which start with 252.2XX-XXXX, or other agency supplemental clauses (e.g., clauses from the FDIC Acquisition Policy Manual, General Services Administration (“GSA”) Acquisition Manual, United States Postal Service (“USPS”) Supplying Principles and Practices, etc.).
  • Reference to a Defense Priorities & Allocations System Program (“DPAS”) rating. These are DX or DO ratings, usually followed by a combination of letters and numbers and accompanied by a statement along the following lines: “This is a rated order certified for national defense, emergency preparedness, and energy program use, and the Contractor shall follow all the requirements of the Defense Priorities and Allocations System regulation (15 CFR 700).
  • Requirements to comply with the International Traffic in Arms Regulations (“ITAR”). There may also be references in drawings belonging to the customer or specifications the company receives from its customers that the documents are export-controlled or subject to an ITAR classification.
  • Requirements to comply with Executive Order 11246, contained in 41 C.F.R. §§ 60-1.4(a), 60-300.5(a) and 60-741.5(a), which may be accompanied by the following statement: “These regulations prohibit discrimination against qualified individuals based on their status as protected veterans or individuals with disabilities, and prohibit discrimination against all individuals based on their race, color, religion, sex, or national origin. Moreover, these regulations require that covered prime contractors and subcontractors take affirmative action to employ and advance in employment individuals without regard to race, color, religion, sex, national origin, protected veteran status or disability.”
  • References in a subcontract or purchase order to a customer’s U.S. Government prime contract or an express statement that your company’s subcontract or purchase order is issued in support of a U.S. Government prime contract or higher-tiered subcontract.

The federal government imposes a set of complex requirements upon all federal government prime contractors and subcontractors. And it is important to stay abreast of these government requirements as they develop. Currently, for example, regulations require compliance with various equal employment opportunity and affirmative action requirements; rules to protect intellectual property; obligations under the Truth in Negotiation Act to disclose certified cost or pricing data; adherence to Cost Accounting Standards; laws regulating the extent to which contractors may acquire materials, products, and services abroad; compliance with U.S. export controls laws and regulations; and detailed procedures governing contract changes, terminations, and warranties. It is essential to identify whether your company is a federal government contractor to determine the extent of its obligations and ensure compliance with these requirements.

Want to Learn More?

If your company is a federal government prime contractor or subcontractor, please join us for a complimentary webinar on Best Practices in Drafting U.S. Government Subcontract Terms and Conditions, which will be held on Wednesday, June 10, 2015 beginning at noon eastern. This presentation will identify best practices for drafting federal government subcontract terms and conditions to reduce risk and potential liability exposure from the perspectives of the higher-tiered contractor and the subcontractor. To register for the webinar, please click here.

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