The Wonderful World of Flowdowns

There is a lot of discussion surrounding the flowdown requirements in government contracts clauses.  For good reason, this is one of those items that I hear on a regular basis.  First, there is the problem of getting your subcontractor (who might not normally have to prepare government contracting reports) to prepare government contracting reports.  Then, there is the problem of just remembering which ones flow and which ones are not required.  Last, there is the conundrum of how to include those that need to be included in the first place – not to mention the overlap with the Agency supplements.

 Historically, subcontractors remain subcontractors, many times, because they don’t want to submit themselves to the “hassles” of priming a contract.  They can provide the knowledge and expertise required for the contract requirements, but they either don’t have the capital and can team with a prime or they just don’t want to have to prepare the volumes of proposal documentation and potential pricing information the way the government would like to see it.  So, the subcontractor finds a good prime (usually a “BIG BUY”) and rides the coattails for a while.  Then comes the flowdown requirements for the FAR clauses and things start to change.  Now the subcontractor has the same or similar requirements to the prime and has to submit themselves to the same rigors they were trying to avoid.  So, what’s next?  The subcontractor now faces increased requirements (read “costs”) of doing business as if they primed.

 Do not hear me say that being a prime is easy.  I know it is not.  In fact, on the topic of flowdowns, there is a particular risk to the prime.  What happens if you “forget” or just don’t know whether a flowdown requirement exists?  Worse than that, what happens if you get it wrong?  What if you are supposed to include the full text of a clause in all subcontracts, but you don’t?  Well, at that point the prime answers to the government.  The subcontractor for whom you are responsible may be just out of your “control” when it comes to the specific requirement, but you still have to answer for them as well.  From there, it could go to court with the “US versus” or “Subcontractor versus.”  Fortunately for you, I am not a lawyer and will not begin to try the cases here.

 Some will turn to the Christian Doctrine to say that those clauses that should have been included in a contract would be included by “ingrained policy” even if they are not written into the contract.  However, the Christian Doctrine does not speak to all required clauses, but to those specifically that can be determined to be “significant or deeply ingrained.”  Some clauses are not necessarily part of a deeply ingrained public policy.

 For example, FAR 52.219-8, Utilization of Small Business Concerns, would not necessarily be considered a normal course of business.  This clause serves to enhance the opportunities for small businesses to gain contracting opportunities.  Sometimes, in the normal course of business, this is not cost-effective or not practical and is not promotes as highly as the clause may want.  Also, the clause includes language that says it must be included in subcontracts that offer further subcontract opportunities. 

 So, as a prime it is your responsibility to abide by this clause when included in your contract. You have to solicit the appropriate amount of small business, have a plan to use small businesses and so on.  ALSO, you have to make sure you include this clause in your subcontracts because your SUBCONTRACTORS have to do the same thing.  It is not up to you to make sure they comply.  How?

 I have heard of companies that use a certification process.  It is not your job to do your subcontractor’s work.  They should comply with the clauses in their contract just like you should.  In the end though, they are only responsible to you, not the US Government.  So, you have them sign a paper specifically related to the included clauses – showing they understand what is being asked.  Then, when they submit billing or progress reports, they include similar language showing they have complied.  Other thoughts on how to easily accomplish this without keeping the onus on the prime?

 Last, let’s turn briefly to how the clause is included and whether agency clauses should be as well.  First, I think it is just good practice where an agency supplement overlaps with the FAR clause including a flowdown – the agency supplement clause should also be included.  The language of the flowdown itself varies, though.  For some flowdown requirements, the contractor must include the “intent” or “substantial duplication” of the clause.  Other times, the clause can be IBR (incorporated by reference).  Still other clauses may have to be simply “included” which leaves the door open to interpretation (the full text or just a reference or just a paraphrase…) I would be interested to know whether specific clauses have been encountered where these requirements have been parsed out as to what it means to be “included” in the subcontract.

About Marty Herbert

With 13 years of government contract administration, analysis, finance, and audit experience, I have established a firm baseline in ethics and a specialization in government contracts that has prepared me to become a subject matter expert in my field. I am currently working on enhancing government contracts management and compliance through workflow tools and product offerings - attempting to make the process proactive as opposed to reactive.
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