[Updated August 13, 2018]
If an agreement qualifies as a “subcontract” under a government contract, then it may be subject to certain flow-down, compliance, and reporting requirements. These requirements are intended to protect the government’s interests, and have significant ramifications for contractors, e.g., increasing transaction costs, expanding potential areas of exposure. These compliance obligations and risks can even deter some companies from performing under government contracts, especially those companies offering commercial items.
Currently, there is no uniform definition of “subcontract” in the applicable procurement regulations or in the procurement chapters under Titles 10 and 41 of the U.S. Code. Indeed, there are more than twenty varying definitions of “subcontract” in the FAR and DFARS, with many clauses failing to specify which definition applies. Now Congress is looking to address this lack of uniformity through the FY 2019 National Defense Authorization Act (NDAA).