Closely Examine Your Subcontractor FAR Flowdown clauses

Subcontractor flow downs are clauses that are passed through the prime contractor from the original government contract and “flow-down” to the subcontractor. FAR 44.101 defines a subcontract as “any contract as defined in subpart 2.1 entered into by a subcontractor to furnish supplies or services for performance of a prime contract or a subcontract. It includes but is not limited to purchase orders, and changes and modifications to purchase orders”. Further, it defines a subcontractor as “any supplier, distributor, vendor, or firm that furnishes supplies or services to or for a prime contractor or another subcontractor”.

Prime contractors are well acquainted with the fact that there are FAR clauses that must be passed down to their subcontractors. Clauses carrying flow down requirements are also included in the agency supplemental regulations. The flow down clauses can have a considerable impact on obligations and risk. Some of these flow downs can be mandatory, not applicable, or optional. Examining flow downs is important to prime contractors, it is equally important to subcontractors to ensure that they can fully comply with Federal Acquisition Regulation (FAR) clauses and to determine if they conflict with general terms and conditions of the subcontract.

To better clarify—Here are five reasons why you should always examine your subcontractor FAR flow down clauses:

    1. A subcontractor flow down list is not representative of the clauses that exist in the prime contract.

      A subcontractor flow down list can cause you to either flow too few or include too many clauses. Putting at risk a Contractor Purchasing System Review (CPSR) violation or, in the latter case, putting an unnecessary strain on your supply chain.
      If they are not representative, they simply are not “flow downs”.

    1. Subcontractor flow downs are not always tailored to subcontractors’ unique characteristics.

      Even though most subcontractor flow downs we have viewed attempt to tailor to commercial/non-commercial items and different contract types, this is not enough to prevent the inclusion of clauses that are dependent on the work location or type of work, business size, competitive vs. sole source nature of the procurement, etc. Often subcontractor flow downs omit the fact that the selection of clauses for a commercial subcontract is dependent on whether the prime contract is commercial or non-commercial. For example, FAR 52.244-6(c)(1) and FAR 52.212-5 (e)(1) contain different flow down clauses.

    1. Some companies attempt to supplement subcontractor flow downs with additional lists of clauses unique to their prime contract—however, this task has proven to be time consuming and produces inconsistent results.

      Since companies are unable to fully reconcile the differences among the multiple lists, they end up flowing duplicate clauses and/or flowing clauses that create immediate conflicts with the clauses listed on their subcontractor flow down list.

    1. Subcontractor flow downs need to be constantly updated.

      It is common for the FAR Council to update clauses twice a month. This results in additions, deletions, or edits to the clauses. It can be vital for you to ensure the latest clause has been included.

  1. Subcontract flow downs, in the words of Forrest Gump, are “like a box of chocolates, you never know what you’re going to get.”

    Unison’s side- by-side comparison of subcontractor flow downs available online by the Top 5 Defense Contractors showed that less than 40% of clauses and provisions were in common between those that were tailored to the same type of items (commercial/non-commercial) and same contract types (FFP/T&M).Separately, some companies completely omit version dates, while others will try to pass down all possible combinations of clauses as they are unaware that non-applicable clauses will not be self-deleting. If you would never accept general terms and conditions that are subject to the self-deleting “standard’, why would you accept this standard with your FAR clauses?

Unison FARclause is a light-weight solution for understanding clause flow down. Unison’s FARclause is capable of instantly extracting and processing clauses from prime contracts and guiding you through the process of generating flow downs unique to your subcontractor’s characteristics.

Generate FAR flow down clauses with FARclause  

Unison FARclause quickly answers questions related to your subcontractors’ unique requirements to dynamically generate a list of appropriate and necessary subcontractor flow down clauses. FARclause enables you to create an audit trail showing why certain clauses were omitted or included and ensure CPSR compliance.

Links used in blog:

44.101 Definitions. | Acquisition.GOV