Basics of Government Subcontracting webinar2016 · oPolicy and Procedure ... complies with...

10/18/2016

1

ESSENTIALS OF COMPLIANTSUBCONTRACTING

Reducing Risk & MeetingRequirements as a PrimeContractor

© ARROWHEAD SOLUTIONS 2016 NO CLAIM TO ORIGINAL U.S. GOVERNMENT WORKS.

AGENDA

oIntroduction

oThe Process

oThe Solicitation

oThe Agreement

oConsent

oPolicy and Procedure

oDocumentation and Accountability


COMMON ACRONYMS

ACO – Administrative Contracting Officer

CO – Contracting Officer

FAR – Federal Acquisition Regulation

PoP – Period of Performance

SOW – Statement of Work

Subk – Subcontract

CAS – Cost Accounting Standards

DCAA CAM – Defense Contract Audit Agency Contract Audit Manual

Ts and Cs – Terms and Conditions


10/18/2016

2

INTRODUCTION


WHAT IS “SUBCONTRACTING”?Procurement = the purchase of goods, services, and materials from vendors,subcontractors and consultants in support of a government contract

May be referred to as “purchasing”, “buying”, “acquisition”or “subcontracting” “Subcontractor” may also mean “vendor” or “consultant”

FAR 2.101

“Acquisition” means the acquiring by contract with appropriatedfunds of supplies or services (including construction) by and for theuse of the Federal Government through purchase or lease, whetherthe supplies or services are already in existence or must be created,developed, demonstrated, and evaluated. Acquisition begins atthe point when agency needs are established and includes thedescription of requirements to satisfy agency needs, solicitationand selection of sources, award of contracts, contract financing,contract performance, contract administration, and thosetechnical and management functions directly related to theprocess of fulfilling agency needs by contract


DEFINITION OF SUBCONTRACTFAR 52.244-2 “Subcontract” means any contract, as defined in FAR Subpart 2.1, entered into by a

subcontractor to furnish supplies or services for performance of the prime contract ora subcontract. It includes, but is not limited to, purchase orders, and changes andmodifications to purchase orders

FAR Part 44 “Subcontractor” means any supplier, distributor, vendor, or firm that furnishes supplies

or services to or for a prime contractor or another subcontractor

FAR Part 19 “Subcontract” means any agreement (other than one involving an employer-employee

relationship) entered into by a Government prime contractor or subcontractor callingfor supplies and/or services required for performance of the contract, contractmodification, or subcontract.


10/18/2016

3

WHY IS GOVERNMENT PROCUREMENTDIFFERENT?

Commercial Preferred vendors

Discounts, deals and handshakes

Simple competition

Documentation IAW companypolicy (sometimes)

Government Competition unless justified solesource Market research and duediligence Approvals Adequate solicitation Adequate evaluation Determination of adequatepricing Documentation IAW compliantProcurement Policy


WHY COMMERCIAL PRACTICES DON’TALWAYS APPLYContractors are entrusted to use tax payer money to completecontracts Therefore, you must follow the same procurement rules as a government contracting

activity

Government has the right to review and approve/disapprovepurchasing system

Government has the right to review Procurement Policy to ensureproper accounting of subcontractors

Government may require approval of purchases


GOVERNING REGS

FAR Part – 6 Competition Requirements

FAR Part 19 – Small Business Programs (for large businesses)

FAR Part 44 – Subcontracting Policies and Procedures

DCAA Contract Audit Manual Chapter 5 5-600 Audit of Purchasing System Internal Controls

5-607 Purchasing System -- Contract Clause Flow Down

5-608 Purchasing Management and Administration (Make or Buy)

5-609 Purchasing Source Selections

5-610 Pricing/Cost Analysis and Negotiated Purchases

5-611 Subcontract Award and Administration

5-612 Purchasing System - Information Technology System Internal


10/18/2016

4

FAR 52.244-2 SUBCONTRACTS

(1) The contracting officer shall insert the clause at 52.244-2,Subcontracts in solicitations and contracts when contemplating--

(i) A cost-reimbursement contract;

(ii) A letter contract that exceeds the simplified acquisitionthreshold;

(iii) A fixed-price contract that exceeds the simplifiedacquisition threshold under which unpriced contract actions(including unpriced modifications or unpriced delivery orders)are anticipated;

(iv) A time-and-materials contract that exceeds the simplifiedacquisition threshold; or

(v) A labor-hour contract that exceeds the simplifiedacquisition threshold


PRIVITYDefinition - The relation which subsists between two contractingparties.

Exceptions Payment

Small Business Subcontracting Plan

Flowdowns

Contract Disputes Act claims sponsored by Prime

New labor reporting requirements

The Government does not have privity of contract with subcontractors Therefore, prime contractors are responsible for subcontractors and to fulfill all

contracting responsibilities.


IMPORTANCE OF PROPERSUBCONTRACTING

Contractor Purchasing System Reviews (CPSR)

DCAA Pre –Award Systems Survey Questions

DFARS Business Systems Rules

Reduces Risk Transfer of liability

Avoid breach of contract

Eases reporting burdens

Perception of responsible government contractor


10/18/2016

5

CONTRACTOR PURCHASING SYSTEMREVIEW

44.301 -- Objective. The objective of a contractor purchasing system review (CPSR) is to evaluate the

efficiency and effectiveness with which the contractor spends Government funds andcomplies with Government policy when subcontracting.

The review provides the ACO a basis for granting, withholding, or withdrawingapproval of the contractor’s purchasing system.


CPSR THRESHOLD

44.302 -- Requirements.

(a) The ACO shall determine the need for a CPSR based on, but not limitedto,

1) the past performance of the contractor, and the volume,complexity and dollar value of the subcontracts.

2) If a contractor’s sales to the Government (excludingcompetitively awarded firm-fixed-price and competitivelyawarded fixed-price with economic price adjustment contracts andsales of commercial items pursuant to Part 12) are expected toexceed $25 million during the next 12 months

Sales include those represented by prime contracts, subcontracts under Governmentprime contracts, and modifications.

(b) Once an initial determination has been made , at least every threeyears, the ACO shall determine whether a purchasing system review isnecessary.


THE PROCESS

10/18/2016

6

THE ACQUISITION TEAM

Contracts Manager

Purchasing/Subcontracts Manager

Business Development

Accounting

Technical

Management (as needed)


PROCUREMENT PLANNINGRESPONSIBILITIES

•Identify Need

•NDA’s and TA’s

•Make or Buy decisions

•Purchase Requisitions and approvals

•Solicitation preparation

•Market research and due diligence

•Determination of qualification and non-exclusion

•Promoting competition


ORGANIZATION FOR EFFECTIVE SUBKMGMT

The purchasing department should have an organizational plan whichestablishes clear lines of authority and responsibility. Items to considerinclude:

(1) The purchasing department is independent of otherdepartments and is responsible for procuring all materials, supplies,services, and equipment.

(2) The receiving function is performed by personnel independentof the buying function.

(3) All purchasing department personnel should understand theirassigned responsibilities, authority, and limitations.

(4) There should be procedures delegating who has the authorityto make commitments and to question quality and quantity of materialrequisitioned or received


10/18/2016

7

CRADLE TO GRAVE

Plan

Solicit

Evaluate

Award

Admin

Close

Consent?


IDENTIFY NEEDProposal Review SOW Company's responsibilities (Make or Buy)?

What aspects will required subcontracted services?

What supplies/items/products will need to be bought to support the SOW?

May be directed by government to work with a particular company– managed the same

Post – AwardWhy was the need not identified during the proposal?

What is required and why?

How will the process of subcontracting delay schedule?


NDAS AND TAS

Non-Disclosure Agreements (NDAs) First document to be executed with key subs who may participate in proposal

Ensure purpose is specific to the proposal

If subs need to coordinate with them, make it multi-party

Teaming Agreements (TAs) Once decided who are key service or product suppliers

Ensure high level SOW or item list included

Commits so that not left hanging without a sub at award

Ensure purpose is for proposal and NDA is incorporated

Exclusivity (or not)


10/18/2016

8

MAKE OR BUY

Apply a consistent make-or-buy policy that is in the best interest of theGovernment (from the DFARS)

FAR 2.101 “Make-or-buy program” means that part of a contractor's written plan for a contract

identifying those major items to be produced or work efforts to be performed in theprime contractor's facilities and those to be subcontracted.

Pertains mainly to manufacturing, but can pertain to services.


MAKE OR BUY PROGRAM

FAR 15.407-2 - “Make item,” means an item or work effort to beproduced or performed by the prime contractor or its affiliates,subsidiaries, or divisions. Part of contractor’s written plan for a contract identifying those major items to be

produced or work efforts to be performed by the prime and those to besubcontracted.

Contracting officers may require prospective contractors to submit make-or-buyprogram plans for negotiated acquisitions requiring certified cost or pricing datawhose estimated value is $12.5 million or more, except when the proposed contract isfor research or development and, if prototypes or hardware are involved, nosignificant follow-on production is anticipated.

The requirement will be called out in a solicitation – and program willbe included in proposal


MARKET RESEARCH

Identify capable and qualified subcontractors

For recurring needs – build and maintain abidders list of potential vendors. Maintain on a current basis to ensure maximum usefulness.

For rare or project-specific situations Utilize a method similar to govt with industry days, draft SOWs, andpublication of notices (sources sought)


10/18/2016

9

QUALIFICATIONTechnical Validate technical capabilities with past performance assessment Either during build of bidders list or as a solicitation evaluation requirement.

Debar (non-exclusion) Ensure company (nor individual) is excluded Check debarred and suspended parties on www.epls.gov

Financial Bonding capabilities

D&B

DCAA Assist Audit (rate)

Refer to FAR Part 9


PROMOTING COMPETITION

52.244-5 -- Competition in Subcontracting.

As prescribed in 44.204(c), insert the following clause: Competition in Subcontracting (Dec 1996)

(a) The Contractor shall select subcontractors (includingsuppliers) on a competitive basis to the maximumpractical extent consistent with the objectives andrequirements of the contract.

(b) If the Contractor is an approved mentor under theDepartment of Defense Pilot Mentor-Protégé Program(Pub. L. 101-510, section 831 as amended), theContractor may award subcontracts under this contracton a noncompetitive basis to its protégés.


SOLE SOURCE JUSTIFICATION

Exception to competition documentation See FAR 6.302

Must prepare a document similar to a Justification and Approval(J&A) Includes “story” of reason and rationale for sole source and how it will benefit the

government and project

And how it fits within the FAR rules

Keep in file in case it must be provided to government


10/18/2016

10

PURCHASE REQUISITIONS ANDAPPROVALS

Purchase Requisition (PR) - Used to ensure nothing is bought outside company practice,that there is funding available, and to fulfill regulations

Per DCAA CAM 5.608.2 - purchases must be based on authorized requisitions

PR should be the evidence of “need”

Even if requirement included in proposal, the PR is the tool to get the acquisition started

PR should be pre-numbered and have

Contract for which it supports, description, quantity, independent estimate or ROM, potential suppliers, PoP

Approval signature


PR PROCESS

PR Built

PRReviewed

PRApproved

Solicitation

Technical

Contracts

Accounting

Entire Team


THE SOLICITATION

10/18/2016

11

PRE-AWARD VS. POST-AWARDPre-Award Identify need to procure

Solicit Don’t promise

LOI’s (if necessary)

Evaluate and decide

Incorporate into proposal

Release orders upon win

Post-Award Identify need to procure

Identify ability to procure Allowed?

Budget?

Solicit Don’t Promise

Evaluate and decide

Request consent

Release orders upon consent


SOLICITATION RESPONSIBILITIES

Plan the solicitation with key players

Provide clear SOW, SOO, specs, etc. Date the SOW!

Build appropriate proposal/quote prep instructions and evaluationfactors

Ensure prime contract clauses are flowed down From prime solicitation

From prime contract

If competitive – ensure adequate competition Go for 3+

Best to follow methods of appropriate FAR sections depending on dollarvalue


FORMULATE SPECS

Identify what will be needed for a sub to provide a good quote.

Take into consideration how narrow the SOW or specs should be.

For services: Scope, Background, Objective, Tasks, Period of Performance, Deliverables, and misc

areas (Access, Travel, Milestones, etc)

For supplies Part number or detailed description (can use brand name), unit of issue, # units,

delivery date, etc.


10/18/2016

12

CHOOSING SUBCONTRACT TYPE

Need to identify up front in solicitation what type of solicitation iscontemplated

If the potential sub does NOT have an approved accounting system,do not award a cost type subcontract.

Determine type based upon risk, scope of work, and ability toprovide adequate pricing.

Reference FAR Part 16


THE SOLICITATION PACKAGE

Required As Needed

Instructions Solicitation Letter

Basic subcontractor info form Templates

Representations and Certifications Subcontractor qualification forms

SOW, SOO, or specs document Draft subcontract

Evaluation methodology

Prime contract flow downs

Company terms and conditions


COST & PRICE ANALYSIS

CAM 5-610.1 Cost/Price Analysis and Technical Evaluation

a. The contractor should perform cost/price analysis and technicalevaluation of its subcontractor's and supplier'sproposals/quotations.

The scope and conclusions of the analysis should be documented and included in thepurchase order file. The contractor should obtain a certificate of current cost andpricing data when applicable.

b. Buyers should document the purchase order file to explain priceincreases (over previous buys or over bill of material estimates) andlack of decreases in price when circumstances indicate that the priceshould be lower (when quantity is increased over a previous buy orvendor quote, or when learning or other factors indicate lesser coststhan in a previous buy).


10/18/2016

13

SELECT

Build “Apparent Successful Offeror” letter

Build “No Award” letter

Be prepared for debrief request

If company that was not on a bidder’s list made a good showing,remember to add them to bidder’s list


THE AGREEMENT

WHAT TYPE OF DOCUMENT?

Subcontract

Purchase Order

Blanket Purchase Agreement

Letter Contract


10/18/2016

14

FLOWDOWNSDCAA CAM 5-606.3 All applicable purchase orders and subcontracts contain all flowdown

clauses, including terms and conditions

DFARS Ensure that all applicable purchase orders and subcontracts contain all

flowdown clauses, including terms and conditions and any other clausesneeded to carry out the requirements of the prime contract

Utilize the prime contract, FAR (and supplements), FARMatrix

Mandatory and Non-Mandatory Mandatory – labor, CAS, Audit and Intellectual Property

Non-Mandatory – termination, changes, risk mitigation

Also can utilize clauses to pass other areas of risk down to the sub


FLOWDOWN CONSIDERATIONS

Ensure preface includes language replacing terms such as “Government” with“Contractor” and similar replacements

Understand the difference between general or standard provisions/clauses andthose which are special (use only when warranted)

Mandatory, Optional and Desired?

Reference or full text?

Custom or modified?

Type of Prime Contract?

Type of Subcontract?

Method of Award

Subject Matter

Dollar Value


RISKY FLOWDOWNS

Disputes

Payment

Intellectual Property

Government Property

Labor Laws

Termination

Purchasing


10/18/2016

15

MODIFICATION52.249-10 -- Default (Fixed-Price Construction). (Apr 1984)

(a) If the SubContractor refuses or fails to prosecute the work or anyseparable part, with the diligence that will insure its completion within thetime specified in this contract including any extension, or fails to complete thework within this time, the Government Prime may, by written notice to theSubContractor, terminate the right to proceed with the work…

(b) The SubContractor’s right to proceed shall not be terminated nor theSubContractor charged with damages under this clause, if --…..

(2) The SubContractor, within 10 days from the beginning of any delay(unless extended by the SubContracting Officer Manager), notifies theSubContracting Officer Manager in writing of the causes of delay. TheSubContracting Officer Manager shall ascertain the facts and the extent ofdelay. If, in the judgment of the SubContracting Officer Manager, thefindings of fact warrant such action, the time for completing the work shallmay be extended. The findings of the Contracting Officer shall be final andconclusive on the parties, but subject to appeal under the Disputes clause.


EXAMPLE - FLOWDOWNS

A prime contractor’s contract includes the following clauses: 52.222-41 Service Contract Act

52.227-14 Rights in Data – General

52.232-25 Prompt Payment

52.223-6 Drug-Free Workplace

52.243-1 Changes – Fixed Price

52.203-13 Contractor Code of Business Ethics and Conduct

Which are mandatory flowdowns and which are not?


SUBCONTRACTOR INFORMATION

Company information Address, website, CAGE, DUNS, Tax ID, etc.

Business size and designation

POCs

Remit info

NAICS

Past Performance info (if not part of the proposal package)

D&B Report (if necessary)

Other info as necessary to determine capabilities


10/18/2016

16

SOLICIT

Pull the entire solicitation package together

Publicize and/or send out to bidders list

Allow adequate time for response

Issue amendments as needed Make sure publicized the same way as original solicitation

Allow Q&A Publicize Q&A the same way as solicitation


DISCUSSIONS & CLARIFICATIONS

Discussions Occur with all bidders

Bring in each potential subcontractor and ask same set of questions to each

Beneficial to get a personal impression

Allows you to hear explanation of their proposal

Clarifications Use with a potential sub as needed

Only to clarify a part of a proposal.

Not meant to be a opportunity to materially change proposal or promote.


NEGOTIATION OF TS AND CS

Essential Terms/Conditions That Will Likely Needto be Negotiated Changes

Payment

Intellectual property and patents

Inspection and acceptance

Terminations

Warranties

Disputes

Indemnification and Limitations of Liability


10/18/2016

17

HIERARCHY OF TERMS

Precedence General Terms and Conditions

Prime Contract FAR Supplement Flowdowns

Prime Contract FAR Flowdowns

Special Contract Terms

Special Program Terms

Special Company Terms

Include an order of precedence clause in Ts andCs


EVALUATION AND NEGOTIATIONRESPONSIBILITIES

Competitive Evaluate responses in accordance with solicitation

Determine if there is a competitive range and/or clarifications need to be conducted

Document process and decision

Identify successful subcontractor

Sole Source Review offer

Build negotiation position

Negotiate (if necessary)

Document decision

Provide notice of completion of negotiations


EVALUATE

Evaluate price, quality, delivery, technical capabilities, and financialcapabilities of competing vendors to ensure fair and reasonableprices. Conduct cost or price analysis to further determine reasonableness

Include PR originator and accounting in review at minimum

Record evaluation Price Negotiation Memorandum

Price Competition Memorandum

Establish and maintain adequate documentation to provide acomplete and accurate history of purchase transactions to supportvendors selected and prices paid.


10/18/2016

18

COMMERCIAL SUBCONTRACTS52.244-6 -- Subcontracts for Commercial Items.

To the maximum extent practicable, the Contractor shall incorporate, and require its subcontractors at all tiers toincorporate, commercial items or nondevelopmental items as components of items to be supplied under this contract.

The Contractor shall insert the following clauses in subcontracts for commercial items: 52.203-13, Contractor Code of Business Ethics and Conduct (Apr 2010) (Pub. L. 110-252, Title VI, Chapter 1 (41

U.S.C. 251 note)), if the subcontract exceeds $5,000,000 and has a performance period of more than 120 days. Inaltering this clause to identify the appropriate parties, all disclosures of violation of the civil False Claims Act or ofFederal criminal law shall be directed to the agency Office of the Inspector General, with a copy to the ContractingOfficer.

52.203-15, Whistleblower Protections Under the American Recovery and Reinvestment Act of 2009 (Jun 2010)(Section 1553 of Pub. L. 111-5), if the subcontract is funded under the Recovery Act.

52.219-8, Utilization of Small Business Concerns (Dec 2010) (15 U.S.C. 637(d)(2) and (3)), if the subcontract offersfurther subcontracting opportunities. If the subcontract (except subcontracts to small business concerns) exceeds$650,000 ($1.5 million for construction of any public facility), the subcontractor must include 52.219-8 in lower tiersubcontracts that offer subcontracting opportunities.

52.222-26, Equal Opportunity (Mar 2007) (E.O. 11246).

52.222-35, Equal Opportunity for Veterans (Sep 2010) (38 U.S.C. 4212(a));

52.222-36, Affirmative Action for Workers with Disabilities (Oct 2010) (29 U.S.C. 793).

52.222-40, Notification of Employee Rights Under the National Labor Relations Act (Dec 2010) (E.O. 13496), if flowdown is required in accordance with paragraph (f) of FAR clause 52.222-40.

52.222-50, Combating Trafficking in Persons (Feb 2009) (22 U.S.C. 7104(g)).

52.247-64, Preference for Privately Owned U.S.-Flag Commercial Vessels (Feb 2006) (46 U.S.C. App. 1241 and 10U.S.C. 2631), if flow down is required in accordance with paragraph (d) of FAR clause 52.247-64.

(2) While not required, the Contractor may flow down to subcontracts for commercial items a minimal number ofadditional clauses necessary to satisfy its contractual obligations.

(d) The Contractor shall include the terms of this clause, including this paragraph (d), in subcontracts awardedunder this contract.


CONSENT

CONSENTLook for FAR 52.244-2 Subcontracts – By obtaining consent to subcontract, theGovernment is afforded the opportunity to verify that the purchase is IAW withthe contract and regulations, as well as the application of sound businessjudgment.

(b) If the contractor does not have an approved purchasing system, consent to subcontractis required for cost-reimbursement, time-and-materials, labor-hour, or letter contracts, andalso for unpriced actions (including unpriced modifications and unpriced delivery orders)under fixed-price contracts that exceed the simplified acquisition threshold, for--

(1) Cost-reimbursement, time-and-materials, or labor-hour subcontracts; and

(2) Fixed-price subcontracts that exceed—

(i) For the Department of Defense, the Coast Guard, and theNational Aeronautics and Space Administration, the greater of the simplified acquisitionthreshold or 5 percent of the total estimated cost of the contract; or

(ii) For civilian agencies other than the Coast Guard and theNational Aeronautics and space Administration, either the simplified acquisition threshold or5 percent of the total estimated cost of the contract.


10/18/2016

19


WHAT IS CONSENT MADE OF?

(i) A description of the supplies or services to besubcontracted.

(ii) Identification of the type of subcontract to be used.

(iii) Identification of the proposed subcontractor.

(iv) The proposed subcontract price.

(v) The subcontractor’s current, complete, and accuratecertified cost or pricing data and Certificate of CurrentCost or Pricing Data If over $750,000

(vi) The subcontractor’s Disclosure Statement orCertificate relating to CAS If sub is subject to CAS

(vii) A Negotiation Memorandum per the FAR© ARROWHEAD SOLUTIONS 2016 NO CLAIM TO ORIGINAL U.S. GOVERNMENT WORKS.

MEMO FOR CONSENT(vii) A negotiation memorandum reflecting -

(A) The principal elements of price negotiations;(B) The most significant considerations controlling establishment of initial orrevised prices;(C) The reason certified cost or pricing data were or were not required;(D) The extent, if any, to which the Contractor did not rely on thesubcontractor’s certified cost or pricing data in determining the price objectiveand in negotiating the final price;(E) The extent to which it was recognized in the negotiation that thesubcontractor’s certified cost or pricing data were not accurate, complete, orcurrent; the action taken by the Contractor and the subcontractor; and theeffect of any such defective data on the total price negotiated;(F) The reasons for any significant difference between the Contractor’s priceobjective and the price negotiated; and(G) A complete explanation of the incentive fee or profit plan when incentives areused.


10/18/2016

20

NO CONSENT

Contracting officers shall not consent to --

(1) Cost-reimbursement subcontracts if the fee exceeds the fee limitationsof 15.404-4(c)(4)(i);

(2) Subcontracts providing for payment on a cost-plus-a-percentage-of-cost basis;

(3) Subcontracts obligating the contracting officer to deal directly with thesubcontractor;

(4) Subcontracts that make the results of arbitration, judicialdetermination, or voluntary settlement between the prime contractor andsubcontractor binding on the Government; or

(5) Repetitive or unduly protracted use of cost-reimbursement, time-and-materials, or labor-hour subcontracts (contracting officers should followthe principles of 16.103(c)).


CONSENT OF PROPOSED SUBS

The designation of a specific subcontractor duringcontract negotiations does not in itself satisfy therequirement of consent. However, if in the opinion of the CO, the consent requirement wassatisfied for certain subcontracts, the CO will have identified thosesubcontractors in the Subcontracts clause of the contract.


EXAMPLE

A prime contractor holds a Time & Materials contract for warehousingthat is valued at $750,000. The prime does not have an approvedpurchasing system. The prime realized during the proposal phase thatthey would need to subcontract the logistics services and purchasingshelving. The prime competed both needs before the proposal wassubmitted and selected a company for each need to include in theprime contract proposal. The CO accepted the proposal. FAR52.244-2 is included in the prime contract, unedited. The logisticsservices will be a T&M subcontract valued at $70,000. The shelvingwill be an FFP order valued at $152,000.

Does either purchase require consent? Why?


10/18/2016

21

POLICY AND PROCEDURE

POLICY

Policy is the high level instruction for government subcontracting

Dictates who has authority to make commitments

Approved by an appropriate level of management to signify thedelegation of authority to effectively convey management’scommitment to adhere to the policy and procedure, FAR, DFARS, etc.


PROCEDURE

Use the FAR and DCAA CAM

Modify (within reason) to fit Company's business

Actual practices should be consistent withestablished procedures

Ensure Consistency

Based on authorized requirements

Communication and training

All major duties and responsibilities are addressed


10/18/2016

22

DETERMINING INTERNAL THRESHOLDS

Advisable to utilize the Government thresholds Less than $3,000 is micropurchase

Can use credit cards

Greater than or equal to $3,000 but under $150,000

Use Purchase Orders

Greater than $150,000

Use Subcontracts

For long term, broad scope of various dollars amounts

Use BPA or IDIQ with orders under

Task or purchase


DFARS CLAUSE252.244-7001 Contractor Purchasing System Administration (May 2011)

a) Definitions. As used in this clause—

“Acceptable purchasing system” means a purchasing system that complies with the systemcriteria in paragraph (c) of this clause.“Purchasing system” means the Contractor’s system or systems for purchasing andsubcontracting, including make-or-buy decisions, the selection of vendors, analysis ofquoted prices, negotiation of prices with vendors, placing and administering of orders,and expediting delivery of materials.“Significant deficiency” means a shortcoming in the system that materially affects theability of officials of the Department of Defense to rely upon information produced bythe system that is needed for management purposes.

(b) General. The Contractor shall establish and maintain an acceptable purchasingsystem. Failure to maintain an acceptable purchasing system, as defined in this clause,may result in disapproval of the system by the Contracting Officer and/or withholdingof payments.


DCAA CAM

http://www.dcaa.mil/cam.htm

5-600 Audit of Purchasing System and Internal Controls

5-608.2 Administrative Controls

5-608.3 Purchasing File Data (see worksheet)


10/18/2016

23

DOCUMENTATION &ACCOUNTABILITY

“Administration”

DOCUMENTATION

Subcontract FilesSubcontract File Checklist

Subcontract Summaries – similar to contract briefs

Subcontract Database

Internal numbering system Tie all purchasing to a prime contract IN ADDITION to anything tied in

QuickBooks


ADMINISTRATION•Some form of register or control is maintained to "flag" delivery due dates

•Procedures are in effect to expedite delivery of subcontract material.

•Corrective action is taken when the supplier is delinquent in delivery schedules

•Evaluate the delivery schedules when engineering changes have been introduced.

•Timely notification from to subcontractors when modifications are introduced.

•Adequate action taken when change orders or modification notices affect cost.

•Emphasis on production and financial controls, which ensure that physical progress ofproduction is commensurate with reimbursement;

•Timeliness and adequacy of the repricing actions

•Propriety of the costs generated by the subcontractor

•Audit of progress payments (refer to 5-1107.7 billing system audit of subcontractorprogress payments).


10/18/2016

24

REPS AND CERTS

Section K of a prime contract built for a sub

FAR Part 4.1200

SAM.gov includes a company’s reps and certs

Best practice to build a company version of reps and certs, but canuse SAM.gov instead

This Company's evidence of the sub certifying to critical items such as: Not being debarred

Paying taxes

Socioeconomic certification

Etc.


REPORTING

Ensure that any reporting required under the prime contract, butsubject to subcontract input, is delivered with enough time to review anincorporate

Identify in prime contract any reporting requirements for subs Ex) DD882/Reporting of Patentable Inventions


REPORTING OF SUBS

First Tier subcontract awards - 52.204-10 – Reporting Executive Compensation andFirst-Tier Subcontract Awards.

If clause is in contract, then unless otherwise directed by the contracting officer, by the end of the monthfollowing the month of award of a first-tier subcontract with a value of $30,000 or more, (and anymodifications to these subcontracts that change previously reported data), the Contractor shall report thefollowing information at http://www.fsrs.gov for each first-tier subcontract.

10/18/2016

25

AUDITING

•Property

•Costs/Accounting

•Quality

•Records

TYING PURCHASING TO PRIMECONTRACTS

All subcontracts or purchase orders must reference the prime contractnumber

Ensure subcontractor invoices reference the subcontract number -accounting should have an internal numbering system that allows asubcontract # to tie to a prime contract number

Ensure subcontract payment terms are no less restrictive than primecontract payment terms


COMMERCIAL DEFENSE SUBCONTRACTS

SUBPART 244.4--SUBCONTRACTS FOR COMMERCIAL ITEMS ANDCOMMERCIAL COMPONENTS

244.402 Policy requirements. (a) Contractors shall determine whether a particular subcontract item meets the

definition of a commercial item.

Contractors are expected to exercise reasonable business judgment in making suchdeterminations, consistent with the guidelines for conducting market research in FARPart 10.


10/18/2016

26

CLOSEOUT RESPONSIBILITIES

Ensure all items delivered and services completed

All invoices have been submitted and paid

Vendor is no longer needed to support the prime contract

Obtain written authorization to close the subcontract by technicalPOCs

Submit liability and release of claims form to vendor for signature

Submit signed closeout letter to vendor

Identify files as closed and archive May not be able to officially close for years under Cost Type prime contracts


RELATED ADMINISTRATION

Property Management

Standards of Business Conduct

Intellectual Property Rights

Accounting System Compliance

Export Compliance

Small Business Subcontracting Goals

Contract Administration It all ties back to the government contract


BEST PRACTICES

Written, compliant policy and procedure (P&P) FOLLOW the P&P

Training

Testing System against P&P

Look to the FAR and CAM

Tie procurements to contracts Via contract briefs and internal coding

Watch costs

Document, Document, Document Purchasing files, checklists, memos, etc.


10/18/2016

27

SPECIAL TOPICS

QUALITY/ACCEPTANCE

Quality and acceptance requirements, surveillance and proceduresshould have been in solicitation

Ensure the subcontract is clear on Quality and Acceptance

General Terms and Conditions would dictate warranty and paymentupon acceptance UNLESS – the prime contract dictates something specific

Or

Subcontract acceptance is tied to prime contract acceptance


CHANGES

If proper flowdowns are included, then sub will handle changes(hopefully) IAW the subcontract and FAR

Follow FAR principles in issuing and managing modifications tosubcontracts/orders

Maintain modification templates

Review mods to prime contract to ensure no changes trigger a mod tothe subcontract/order


10/18/2016

28

WARRANTIES

Warranty terms should mirror the prime contract.

Watch commencement of coverage Ensure coverage will cover through prime contract

Avoid implied warranties

Be clear in the solicitation what warranty terms are expected

Avoid collision of requirements in prime contract


TERMINATION/BREACH

Remember to keep the Govt CO in the loop on any subcontractorissues Although privity of contract is between Company and subcontractor, actions of sub

reflect on Company.

Understand your rights to terminate

Understand how it will impact the prime contract Avoid terminations by

Picking the right subs

Managing and monitoring constantly and consistently

Keeping lines of communication open


QUESTIONS?

10/18/2016

29

THANK YOU!

Stephanie Amend

Arrowhead Solutions, LLC

720-515-0527

[email protected]

www.arrowheadsolutionsllc.com

THE UCC

The Federal Common Law , as embodied in the FAR, controls thecreation, administration and interpretation of federal prime contracts

Commercial contracts (prime/sub) are governed by the laws ofvarious states embodied in the UCC as adopted by the state. The body of law governing the prime contract is different than that governs a

subcontract

Some of this difference can be addressed through flowdowns


THE UCC CONT.

Under the UCC, parties can agree to do most anything they choose. If they are silent on certain matters, then the UCC will fill in the blanks.

Mandatory flow down clauses protect the government Some key clauses that protect the prime are not mandatory, but should be flowed

down and modified

Ex) Terminations


10/18/2016

30

EXERCISE - PRIMES AND SUBS

What will the prime and sub each want in the following areas? Changes

Payments

Inspection and Acceptance

Terminations

Warranties

Indemnification and Limitation on Liability


Basics of Government Subcontracting webinar2016 · oPolicy and Procedure ... complies with...

Documents

Transcript of Basics of Government Subcontracting webinar2016 · oPolicy and Procedure ... complies with...