In November of 2023, DoD issued a final rule amending the Defense Federal Acquisition Regulation Supplement (DFARS) to partially implement a section of the 2017 National Defense Authorization Act (NDAA) addressing the Federal Acquisition Regulations (FAR) and DFARS contract clauses impacting prime or higher-tier contractors issuing commercial subcontracts for commercial products, including commercially available off-the-shelf items, and commercial services.
Where Does the Confusion Come In?
This resulted in what we believe is confusing language in the new DFARS 252.244-7000(a), which states:
(a) The Contractor shall not include the terms of any Federal Acquisition Regulation (FAR) clause or Defense Federal Acquisition Regulation Supplement (DFARS) clause in subcontracts for commercial products or commercial services at any tier under this contract, unless—
(1) For DFARS clauses, it is so specified in the particular clause; or
(2) For FAR clauses, the clause is listed at FAR 12.301(d), or it is so specified in paragraph (e)(1) of the clause at FAR 52.212–5 or paragraph (b)(1) of the clause at FAR 52.244–6, as applicable. (Section 847(b)(1)(B), Pub. L. 114–328)
Note – FAR 52.244-6(b)(1) should be (c)(1); this is a typo in the DFAR.
Part of the confusion begins with the FAR references being a listing of specific contract and solicitation clauses, while the DFARS simply sends you to hunt through the numerous DFARS clauses to find those that require the terms of the DFARS clause to be included in a commercial subcontract. At the time of our writing of this article it was around Easter time – but that is no Easter Egg Hunt we would want to go on.
The next confusing point is the reference to FAR 12.301(d) and FAR 52.212–5(e)(1). Neither of these references are contractual requirements (i.e., included in) the non-commercial contract between the higher-tier contractor and the Government or other higher-tier contractor.
Compounding the Confusion
Additionally, these three references refer to lists in the FAR and are being read as an absolute – i.e., all clauses listed must be included, and no others may be included. We do not believe that was the intent. For example:
- FAR 12.301(d) lists FAR 52.204-7, System for Award Management, as a required clause in solicitations. There is no requirement for a commercial subcontractor to register on gov. While a subcontractor needs a unique identification number, only contractors doing business directly (i.e., primes) with the Government need to register on SAM.gov.
- FAR 52.212–5(e)(1) lists FAR 52.222-51, Exemption from Application of the Service Contract Labor Standards to Contracts for Maintenance, Calibration, or Repair of Certain Equipment-Requirements, as a required clause in contracts. This is an exemption applying to the Government’s direct contracting with a contractor. The Service Contracting Act is applied to commercial subcontractors by direct application of the statute by the Department of Labor, not through additional contractual means.
The DFARS clause should have limited its reference to FAR 52.244-6(c) which provides a complete listing of the required terms to implement statutes and executive orders to commercial subcontractors.
To be clear, we believe the DFARS references are not the most appropriate way of implementing the NDAA requirement. However, we do not believe the wording providing that the contractor shall not include the terms of any FAR or DFARS clause in subcontracts for commercial products or commercial services prohibits the inclusion of terms necessary for the higher-tier contractor to comply with its contractual terms with the Government. For example:
- FAR 52.222-4, Contract Work Hours and Safety Standards – Overtime Compensation, requires the higher-tier contractor to ensure its employees and any employees of a subcontractor, including a commercial subcontractor, working over 40 hours in any workweek are paid at least time and 1/2 for each hour worked over 40 hours.
- FAR 52.224-3, Privacy Training, requires the higher-tier contractor to ensure its employees and any employees of a subcontractor, including a commercial subcontractor, have taken the necessary training to work on a government effort involving “personally identifiable information.”
What a Higher-Tier Contractor Should Do
We believe that a higher-tier contractor issuing a commercial subcontract needs to do the following:
- Include the terms of the FAR clauses listed in FAR 52.244-6(c). This does not mean simply referencing FAR 52.244-6(c) or simply listing the FAR clause numbers. When the Government says: “terms of,” it means you need to take the language of the clauses and make them language in your legal documents (i.e., the commercial subcontract). Remember, the Government does not have the privity of a contract with the subcontractor, so simply including reference clauses that address the Government's contractual relationship with a prime contractor may lead to significant confusion for the subcontractor and – God forbid – a civil court judge.
- Review the FAR 52.212-1, Instructions to Offerors—Commercial Products and Commercial Services; 212-3, Offeror Representations and Certifications—Commercial Products and Commercial Services; and 52.212-4, Contract Terms and Conditions—Commercial Products and Commercial Services, to ensure your standard terms and conditions for commercial subcontracts are relatively consistent with what the Government uses when contracting directly with commercial prime contractors.
- Review your contract clauses with the Government or higher-tier contractor to determine if there are any terms you need to add to your standard terms and conditions for a commercial subcontract to support your reporting or compliance requirements that the commercial subcontractor may impact.
Now to Get on Our Soapbox for a Moment
Many large prime contractors have taken up a process of simply incorporating FAR and DFARS clauses into their subcontracts by reference or an extensive listing with a note that you are to replace the Government with the prime contractor’s name. These large prime contractors also state: “Do not worry any clauses that do not apply are self-deleting.” – We are not sure the courts would see it that way. While this makes it easier for the prime, your job of understanding what is expected of you as the subcontractor is significantly harder. Pushing back may not be customer-friendly as the prime sees it, but at some point, these hard-to-understand contracts are going to create a problem for everyone. Primes, do your job and rewrite the FAR and DFARS terms to fit understandable subcontract requirements.
When it comes to government subcontracts, commercial or not, getting the requirements right is a complex effort. There is no paint-by-numbers process – you will need to create a free-hand masterpiece. I wish there was a better answer.
How Can Redstone Help
Redstone GCI assists contractors throughout the U.S. and internationally in understanding the Government’s subcontracting requirements and developing flowdown matrixes for both commercial and non-commercial subcontracts. We would be happy to be part of your team.
