2. Consent to Subcontract
Breakout Session # B15
Name: Rita Wells
David Richardson
Date July 30, 2012
Time 2:30 – 3:45 pm

3. 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

4. Consent to Subcontracts “When in doubt, read the contract”
Consent References
Policies and Procedures
FAR 44.2
Consent to Subcontracts
Prime Contract Clause
FAR
Subcontracts
Definitions
FAR Subpart 2.1
Agency Supplements
DFARS 244,
DEARS, TAR, etc.
Specific Requirements
The Prime Contract
“When in doubt, read the contract”

5. 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 (a)

6. 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 modifications.”

7. Subcontracts Clause (FAR 52.244-2) Requirement
FAR   Contract clauses.
(a)(1) The contracting officer shall insert the clause at , 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 simplified acquisition threshold.

8. Alternate I of the Subcontracts Clause (FAR 52.244-2) - Requirement
FAR   (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.

9. Consent Requirements

10. If Contractor has an APPROVED Purchasing System:
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

11. Excerpt From FAR (d)
If the Contractor has an approved purchasing system, the Contractor nevertheless shall obtain the Contracting Officers written consent before placing the following subcontracts:
____________________________________

12. 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)"

13. 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.”

14. Consent Requirement If Contractor Does NOT Have An Approved Purchasing System
FAR 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

15. Consent Requirement If Contractor Does NOT Have An Approved Purchasing System - Continued
(FAR ) 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

16. 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

17. 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.
5% of Estimated Cost = $50,000.
Consent Threshold = $150,000

18. (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

19. Advance Notification Requirements

20. 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

21. 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

22. 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

23. 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

24. 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)?

25. 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.

26. 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.

27. Designation of Specific Subcontractors
FAR (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
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

28. FAR Subcontracts
(j) Paragraphs (c) and (e) of this clause do not apply to the following subcontracts, which were evaluated during negotiations: ____________________________________________________________________________________________________________________________________________

29. Impact on Contractor Purchasing System Approval
  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 );
(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 ; or
(4) Small business subcontracting (see Subpart 19.7).

30. 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.