Pass-through

Over the past decade, Congress has focused on eliminating excessive “pass-through” charges—charges defined as overhead costs or profits passed to the Government by contractors adding negligible value over work done by lower-tier contractors.  The efforts began with the Post-Katrina Emergency Management Reform Act of 2006, which introduced limitations on tiered subcontracts after allegations that the Government grossly overpaid for goods and services provided largely by lower-tier subcontractors in the reconstruction following Hurricane Katrina.  However, until the passage of the instant rule to be implemented in FAR 15.404-1(h) effective June 8, 2015, such efforts have had little impact on agencies’ procurement processes.  This latest rule has the potential to significantly reduce the appetite for such contracts, and impact proposal and bid protest strategies.
Continue Reading Contracting Officers Must Soon Separately Justify Awards to Offerors Proposing High-Percentage or “Pass-Through” Subcontracting