Redstone Government Consulting Blog | Contractor Purchasing System Review (CPSR) (5)

What is FAR 52.204-10 – Reporting Executive Compensation and First-Tier Subcontract Awards?

FAR 52.204-10 requires the contractor to report executive compensation of first-tier subcontracts with a value of $30,000 unless an exemption applies. Contracting Officers are required to include the FAR clause 52.204-10, Reporting Executive Compensation and First-Tier Subcontract Awards, in all solicitations and contracts of $30,000 or more. A first-tier subcontract is a subcontract awarded directly by the contractor for the purpose of acquiring supplies or services for performance of a prime contract. This does not include long term arrangements between the prime and first-tier subcontractors for material or supplies that benefit multiple contracts.

DCAA/DCMA Viewpoint

If you look through the DCAA audit guidance and the DCMA Contractor Purchasing System Review guidance, you would think that the Government is only concerned with a Commercial Item Determination when the purchase value exceeds $2M. This is all based on commerciality being an exception to the requirement for certified cost or pricing data at FAR 15.403-1(b)(3) & (c)(3).

Prime contractors must award contracts to responsible subcontractors. One of the required flowdowns from a prime to a subcontract is FAR 52.209-6, Protecting the Government's Interest When Subcontracting with Contractors Debarred, Suspended, or Proposed for Debarment. This flowdown is required when the solicitation or contract exceeds $35,000 but is not required when purchasing commercially available off the shelf (COTS) items. The purpose of the clause is to protect the government. A contractor that is debarred or suspended is referred to as an excluded contractor.

What’s New in this Long-Standing Area?

The FAR Council at long last issues final rule to implement the Trump Executive Order 13881, Maximizing Use of American-Made Goods, Products, and Materials. Only a few days later a Biden Executive Order 14005, Ensuring Future of America is Made in America by all of America’s Workers, hit the streets.

Here are the Details

DoD issued DFARs Final Rule D2019-D029 – Treatment of Commingled Items Under $10K, effective October 1, 2020, to implement several sections of the National Defense Authorization Act for Fiscal Year 2017 that addresses treatment of commingled items purchased by contractors and services provided by nontraditional defense contractors as commercial items. This blog only addresses the DFARS change relative to the treatment of commingled items purchased by a contractor. The final rule is applicable to all solicitations and contracts, including solicitations and contracts using FAR Part 12 procedures for the acquisition of commercial items and solicitations and contracts valued at or below the simplified acquisition threshold.

Here are the Details

DoD issued a DFARs Final Rule D2019-D029 – Services Provided by Nontraditional Defense Contractors, effective October 1, 2020, to implement several sections of the National Defense Authorization Act for Fiscal Year 2017 that addresses treatment of commingled items purchased by contractors and services provided by nontraditional defense contractors as commercial items. This blog only addresses the DFARS change related to services provided by nontraditional defense contractors as commercial items.

Where Did This Come From?

National Defense Authorization Act (NDAA) of 2019, required the implementation of a new Federal Acquisition Regulation (FAR) rule barring federal contractors from using telecommunications products or services or video surveillance equipment from certain foreign companies – The People’s Republic of China. As a result, a new contract clause came into place – FAR 52.204-25, Prohibition on Contracting for Certain Telecommunications and Video Surveillance Services or Equipment – effective August 13, 2020.

If your business pipeline is growing and you are issuing more subcontracts of higher values, Contractors should be aware that your organization has a duty under 48 CFR §22.805 to the Office of Federal Contract Compliance Programs (OFCCP).

Our Commercial Item Expert, Lynne Nalley, discusses and clarifies common questions and issues associated with commercial items and Commercial Item Determinations (CID).

While the government promotes full and open competition, and competition is the preferred method of subcontracting, there are situations where the contractor uses a “sole source” or a “single source” when awarding a subcontract/Purchase Order (PO). There is a difference between a sole source and a single source award.