We have had several clients tell us they have purchase orders under the Truthful Cost or Pricing Data (TINA) threshold for what they believe to be commercial purchases. They run a quick search on the purchase order (PO) and find there are no Federal Acquisition (FAR) or Defense FAR Supplement (DFARS) clauses in the agreement even though the prime contract is to the U.S. Government.
However, when we review the agreement, we find there is generally a reference/link to the prime contractor’s webpage referring to U.S. Government provisions or clauses or other terminology without specifically identifying the terms “FAR or DFARS.” Once the purchase order/subcontract is signed, you are responsible for compliance with the terms and conditions of the purchase order/subcontract, even if it is simply a link that has been identified.
Even if your purchase is small (e.g., over the simplified acquisition threshold and less than the TINA threshold), there may be clauses in the “link” that you are required to follow. One common one is cybersecurity requirements.
Understanding Your Agreements
Contractors and subcontractors need to understand the terms and conditions of the contracts/purchase orders they sign. See our article, The Critical Importance of Understanding Legally Binding Contracts Before Signing.
Most prime contractors flow down all of the FAR and DFARS clauses in their prime to subcontracts, whether they are required to be flowed down or not. It is easier in the procurement process for a prime to just flow all the clauses to a subcontract and say the clauses are self-deleting. This is incorrect, as clauses are not self-deleting.
Subcontractors need to review the clauses and request the prime delete them from the subcontract/purchase order before signing the agreement.
In addition, the number of clauses flowed down in a commercial subcontract has been limited. DoD issued a final rule amending DFARS 252.244-7000 in November 2023 to reduce the number of flow down clauses in subcontracts for commercial products/services unless:
- It is so specified in the specific DFARS clause, or
- Listed in FAR 52.244-6(c).
Read our article, DoD Creates Confusion Related to Commercial Subcontracts, for further details. Based on what we are seeing, primes and higher-tier subcontractors are not complying with this limitation well.
Takeaway
Subcontractors need to read and understand the terms and conditions of the subcontract before they sign the agreement. If they are in your agreement, you are required to comply with the clauses. As part of negotiations, it is important to obtain a list of the clauses in your agreement and strike through the ones that are not applicable to the subcontract based on threshold, type of contract, etc.
How Redstone GCI Can Support You
At Redstone GCI, we partner with contractors across the U.S. and internationally to navigate the complexities of government contracts and subcontracts. From understanding flow-down requirements to ensuring compliance before and after award, our team is here to support you every step of the way. Let us help you protect your business and strengthen your contracts.
Lynne is a Director with Redstone Government Consulting, Inc. providing government contract consulting services to our clients primarily related to Commercial Item Determinations and support, Cost Accounting Standards, DFARS Business System Audits, Proposals, and Incurred Cost. Prior to joining Redstone Government Consulting, Lynne served in several capacities with DCAA and DCMA for over 35 years. Professional Experience Lynne began her career working with DCAA in the Honeywell Resident Office, Clearwater, FL in 1984. Lynne’s experience included various positions which involved conducting or reviewing forward proposals or rate audits, financial capability audits, progress payments, accounting and estimating systems, cost accounting standards, claims and disclosure statement reviews. She is an expert in FAR, DFARS, CAS and testified as an expert witness. Lynne assisted in drafting the commercial item guidance for DCAA Headquarters. Lynne was assigned as a Regional Technical Specialist where she provided guidance to 20 field offices on highly complex or technical issues relative to forward pricing, financial capability or progress payment issues. As an Assistant for Quality, she was involved in reviewing and ensuring audit reports were in compliance with policy and GAGAS as well as made NASBA certified presentations to the staff including but not limited to billing reviews, CAS, unallowable cost and progress payments. To enhance her experience in government contracting, Lynne accepted a position with DCMA in 2015 as part of the newly organized DCMA Cadre of Experts in the Commercial Item Group. This included performing reviews of prime contractor’s assertions and/or commercial item determinations as well as performing price analyses. Lynne was a project lead and later became a lead analyst where she engaged with the buying commands on requests and reviewed price analysis reviews performed by a team of 5 analysts. She also assisted the DCMA CPSR team relative to commercial items and co-instructed the Commercial Item Training presented to DCMA. Education Lynne earned a Bachelor of Science Degree in Accounting from the University of Central Florida. Certifications State of Florida Certified Public Accountant State of Alabama Certified Public Accountant Defense Acquisition Workforce Improvement Act (DAWIA) Level III- Auditing DAWIA Level III – Contracting