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What's New in Federal Government Subcontracting


James F Southerland, CPCM
James F Southerland, CPCM, President, Contracts Advisory Services, Inc., 1360 Rosecrans St. Ste "D", San Diego, CA 92106, (619)224-2042

85th Annual International Conference Proceedings - 2000 

ABSTRACT. This session will cover current regulatory/legislative developments that impact the Buying Professional in his/her ability to acquire goods and services under a Federal Government prime contract or subcontract in a cost effective, profitable and "compliant" manner. Understanding these changes means buying the smart way, not the old cumbersome way. Topics include changes in contracting for commercial items for incorporation into finished products delivered to the Federal Government as well as cutting edge changes in Federal Acquisition Regulations and agency implementing regulations including those changes in the proposal/ comments stage, planned regulatory changes, and those expected to be proposed to support administration goals.

THE OPPORTUNITY. Each time Congress is in session, the rules for acquisitions and purchases under government contracts and subcontracts are changed. Court decisions and Boards of Contracts Appeals decisions supplement the new Congressional mandates. This leads to the amendment of the regulations which must be considered in all aspects of the purchases made by government prime contractors and subcontractors. The buying professional must be aware of these changes to permit purchase of items and minimize the added specific flowdown requirements.

SESSION OBJECTIVE. The objective is to make the buyer of items under a U.S. Government Agency prime contract aware of the most current requirements that apply to the acquisition of items under those U.S. Government prime contracts.

HIGHLIGHTS OF THE SESSIONS. Most of the changes implemented during the past year have evolved around the requirements for use of commercial items in government supplies, new socioeconomic program goals in subcontracting, relaxed requirements for purchasing systems reviews, emphasis on alternate dispute resolution, implementation of higher level government quality requirements, and government role in approval of subcontractors, payment of suppliers, and privity between the Government and first or second tier suppliers.

New initiatives include price-based contracting to reduce the amount of cost date prepared and submitted, reducing or eliminating labor restrictive provisions, more use of multiple award schedule type procurements, outsourcing, integrated process teams to reduce the acquisition cycle time, and higher thresholds for submittal of data and certifications.

New legislation will be in proposed form at the time of the conference. The key aspects of the latest proposals, as they affect the role of the buyer for items under government contracts, will be discussed.

Focus will be on the relaxation and commercialization of the rules but also on the added reporting and compliance as changes are made to tracking and reporting requirements.

  • Socioeconomic subcontracting requirements:

Increased with the establishment of subcontracting goals for women owned small business concerns when the subcontract exceeds $500,000. In addition, we have:

  • OFPP Policy Letter 991, Small Business,Subcontracting Reporting
  • HUBZone small business subcontracting goals
  • Disabled Veteran owned business concerns
  • Indian Organizations and Indian Owned economic enterprises
  • Extended MentorProtege programs
  • Subcontracting Goals for purchases benefiting severely handicapped persons (NIB/NISH)
  • SDB certification program through SBA
  • Vietnam Era Veteran's Readjustment Assistance

Programs that impact Small Businesses:

  • Anticompetitive Teaming
  • Contract Bundling at the Prime Contract level
  • Streamlined payments practices/purchase cards
  • Very small business concerns (VSB)

Programs that impact subcontracting:

  • Government Property (FAR Part 45) rewrite to reflect relaxed control and reporting requirements
  • Clause flowdowns commercial item purchases
  • Electronic contracting/electronic payments
  • Progress payments and related financing policies
  • Commercial Item purchases over $100,000

Programs to be aware of that may impact subcontracting:

  • Price Based contracting
  • Evaluation criteria of subcontracting program for award of prime contracts
  • Contracting Officer approval of individual subcontract awards based on competition present
  • CBD notice of subcontracting opportunities
  • Single Process Initiative/Unique Standards
  • Impact of "Coiltron" decision? Unilateral contract

New Regulations that you should be aware of:

  • Purchasing System Review rules and thresholds
  • Consent or notification of placement of subcontract
  • Source inspection and quality flowdowns
  • Elimination of certifications/representations
  • New thresholds and rules for cost accounting stds
  • Cost or pricing data, prime waiver impact
  • Brand name purchases
  • Per diem and incidental expenses (M&IE) changes

PROCESS CHECK. When you insert clauses from the Federal Acquisition in your purchase order or subcontract, are you sure they are correct and appropriate? How do you determine if the standard terms and conditions should be applied? Is there a communication between the purchasing organization and the selling side of the company to assure efficient and cost effective requirements or is it always business as usual? If it's business as usual, you're paying too much. Know the right requirements, pay for what you need.

REFERENCES. Federal Acquisition Regulation. Available online at or by subscription from the Government Printing Office.

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