May 16, 2018
Many of the Federal Acquisition Regulations included in a prime contract require that the substance of the clause also be included in subcontracts. These flow-down clauses are generally intended to help ensure that the subcontracts adhere to federal procedures.
Contract clauses define compliance requirements. Contractors should flow-down all clauses that place requirements on subcontractors that allow the prime contractor to meet its own contractual obligations.
The flow-down requirement may be affected by such factors in the subcontract as:
- The dollar amount;
- The compensation or ordering arrangement; or
- The nature of the subcontracted goods and services.
Many other clauses aren’t mandatory flow-downs, but they should still be included in lower-tier subcontracts. That helps ensure that the subcontractor’s obligations to your contracting business parallel your enterprise’s obligations to the federal government.
Many contractors ensure that mandatory and other clauses are included in subcontracts by using standard attachments. These will typically:
- List all required and desired flow-down clauses regardless whether they are in the prime contract;
- Include a preface that recognizes and applies the contractor/subcontractor relationship in lieu of the relationship between the government and the prime contractor; and
- Stipulate factors that affect the inclusion of a listed clause, such as dollar amounts or the compensation arrangement.
The federal contract requirements to flow-down FAR clauses for the acquisition of commercial items are limited, so contractors have also prepared standard attachments for these situations. Due to the very limited government flow-down requirements here, it is almost always in the prime contractor’s best interest to include additional clauses.
- Create and maintain several standard attachments that include clauses appropriate to various types of contracts or subcontracts.
- When a subcontractor declines to include a specific clause, evaluate whether the clause is mandatory, desirable or inconsequential and take appropriate action to protect your interests.
- Include clauses that are not mandatory flow-downs. Rule of thumb: When in doubt, include the clause.