Does anyone know of a resource I could use to determine which FAR clauses flow down in a subcontract I must prepare (e.g. include FAR 52.232-22?)? We are a small business new to gov't. contracting. The prime contract is cost reimbursement; we are authorized in the prime to negotiate a cost reimbursement subcontract.

By Vern Edwards on Monday, June 18, 2001 - 04:50 pm:

Carol:

Many persons and organizations have, from time to time, produced lists of flowdown clauses, but they are rarely good for very long due to changes in the regulations. Also, such lists are hard to produce because there is no single combination of flowdowns that is applicable to every prime-subcontract relationship.

It is important for you to understand that there are two kinds of flowdown clauses: (a) mandatory, and (b) essential, but not mandatory. Mandatory flowdown clauses are those that the prime must flowdown because the clause in its contract with the government require it to be flowed down. The Service Contract Act clause is an example.

Essential flowdown clauses are those that the prime must flow down to protect itself, even though its contract with the government does not require it to be flowed down. The Termination for Convenience clause is an example.

It takes a careful study of FAR Part 52 in order to understand which clauses must and should be flowed down to subcontractors and which need not be flowed down. It is a complex problem and there is no easy solution.

By Ron Vogt on Monday, June 18, 2001 - 06:19 pm:

Vern is correct that there is no easy answer to your question. However, there are a couple of useful rules of thumb.

First, it is important to understand the relationship between you, your sub, and the government. A flowdown clause is "mandatory" because the FAR directs the prime to include it in its subcontracts, not because it is mandatory for the sub to accept it. If the prime fails to do so, the liability to the government is with the prime, not the sub. However, the sub cannot reject these clauses with impunity; it risks losing the contract if it refuses to accept these clauses.

Second, determine whether your sub is offering a commercial item. If so, the flowdown requirements are much less. Use Parts 12 and 44 to determine what you need to flow down.

Third, carefully check your word substitutions in the flowed-down clauses ("contractor" for "government" etc.) to make sure the clause reads correctly for a subcontract. Be especially alert for situations where you would NOT make a substitution, like in patent and data rights clauses (i.e., any license rights still go to the government, not the prime).

I have found a useful resource to be a book published by the Public Contract Law Section of the ABA, entitled "Guide to Fixed-Price Supply Subcontract Terms and Conditions", Second Edition. It is available at their website at http://www.abanet.org/contract/books.html
It has the mandatory and essential clauses in both a substitution format and a full clause format. Nevertheless, no matter what guide you use, you need to exercise your own judgment as to what is necessary to protect your company.

By Vern Edwards on Monday, June 18, 2001 - 06:55 pm:

Ron:

Boy, that's good, solid advice that you gave about flowdowns. One of the best messages that I've read here in a long time. Thanks.

Vern

By carol athey on Thursday, June 21, 2001 - 03:34 pm:

Vern, Ron: My thanks to both of you! Carol

By Brandon Hunt on Wednesday, June 27, 2001 - 12:36 pm:

I am a Contract Administrator (US Government civil servant) working at Newport Chemical Disposal Facility (NECDF) in Newport, Indiana. Our mission is to destroy VX Nerve Agent in order to comply with an international treaty to destroy nerve agents. The subcontracts we work with are currently mostly fixed-price construction subcontracts.

I compiled a list of flow down clauses from FAR and DFARS. I made an exhaustive search through FAR Part 52 and DFARS Part 252. In the list I included clauses that said specifically that the prime must flow down the clause to subcontractors. In other words, I listed the mandatory clauses.

I am interested in knowing more about essential clauses. It was mentioned that the Termination for Convenience clause is an essential clause. Insofar as other essential clauses, is there any kind of language in FAR or DFARS that would serve as a tip-off that a clause is an essential clause?

Also, while I made this review, I noticed that some clauses stated that they were required to flow down to the first-tier subcontractor. A few DFARS clauses flowed down to the second-tier subcontractor. Still other clauses flow down to all tiers of subcontractors as applicable. Can anyone explain the reason for this distinction?

By Ron Vogt on Thursday, June 28, 2001 - 06:42 pm:

Before I try to answer your question, let me ask why you are interested in flowdowns to a subcontractor. If I am reading your message correctly, you are a government contract administrator. If so, then you deal with the prime contractor, and what the prime flows down to the sub should be of little concern to you. Yet you also say that you work with subcontracts. Why?

Remember the first point in my earlier message: keep the relationships straight. If you are the government, then deal with your prime and don't try to administer the subcontracts too. If you are compiling your list of clauses as a purely academic exercise, I can think of better ways to spend your time, like hitting yourself on the head with a brick.

By John Ford on Thursday, June 28, 2001 - 08:55 pm:

Ron, before you get too rough with Brandon, I think he is on the right track. As a government contract administrator, he would be interested in ensuring that the prime complies with its contract requirements to include the proper flowdown clauses in subcontracts. Additionally, if he is to approve subcontracts, it would be good to know if the prime has adequately protected the government's interests in regard to the subcontract. Thus, to that extent, I do not believe he is getting into an area he should not be in. However, I hope Brandon is not trying to administer the subcontracts. That is a prime's responsibility.

By joel hoffman on Thursday, June 28, 2001 - 09:29 pm:

Ron, Brandon works at one of our Chemical Weapons Demilitarization Plants, presently under construction. It is a cost reimbursable contract. Let me say that Brandon has every right to be concerned about how our Prime contractor is subcontracting to FFP subcontractors. Brandon is a very dedicated contract specialist in a construction field office, and will also administer the systemization, training, pilot testing , operations and closure of this facility.

The EAC on this contract has almost doubled and the time will also about double. In my opinion, the Prime contractor's personnel seem to have mostly commercial experience and little construction management experience. This is a CPAF systems contract which includes design-build phase to design and construct the plant. This project involves an unproven disposal technology on some of the most dangerous chemicals in the world. 1/100th of a drop will kill you. The technology includes some beyond the state of the art processes which have not been perfected.

We are extremely concerned that the prime should include not only the mandatory flow down clauses, but also the "essential flow down provisions" or their equivalent, to protect the Government's interests. Many of the subcontractors are local contractors from a rural environment. Perhaps this will answer your question to Brandon. Happy Sails! joel hoffman

By Brandon Hunt on Friday, June 29, 2001 - 11:24 am:

First of all, let me say that I understand the Privity of Contract Issue. I understand that I CANNOT TELL THE SUBCONTRACTOR WHAT TO DO, that responsibility rests solely with the prime contractor. John Ford is correct that I am interested in assuring that the prime contractor complies with his contractual obligations to the Government, including proper inclusion of flowdown clauses in his subcontracts. Also, although it doesn't always pan out in practice, we try to "partner" with the prime as much as possible. In other words we try to help each other out. In this case the prime was including many clauses in their subcontracts that were unnecessary. This resulted in arguments between the prime and subs and extra administrative burden. I was therefore tasked to make a list of flowdown clauses. To those that might be concerned that my exercise was a waste in taxpayer dollars, I think it will save in the long run as this administrative burden and haggling is lessened. So I made a list of mandatory clauses. This should be a win-win situation for everyone.

I understand that it is the prime contractor's responsibility to find the essential clauses to protect itself. But the prime contractor takes direction from the Government and I believe it is always useful to keep the lines of communication and understanding open between the Government and prime contractor.

I looked in search engines such as Defense Acquisition Deskbook and found very limited information on flowdown. This area seems to be the orphan child of acquisition instruction.

To Joel Hoffman, you explained the situation beautifully, better than I could have. Thanks a million!

To John Ford thank you, as I said above, your assumption of why I did this was correct.

To Ron Vogt, as one taxpaying citizen to another, I hope my response answers some of your concerns that I may be just taking up space with make-work projects. Since you seem to know it all, maybe you could come here to Newport, Indiana and straighten out this mess with VX demilitarizaion. But due to your combative nature I hope you are never my supervisor. It is insulting when someone who is not in my work environment makes an assumption that I am just doing an "academic exercise" that is fully effective as beating ones head into a brick wall. Get a life!

By Anonymous on Friday, June 29, 2001 - 12:12 pm:

What, pray tell, is the Government thinking? This sounds like mindless contracting. Excerpts from what appears to be someone in the program office:

Prime contractor's personnel seem to have mostly commercial experience

little construction management experience

project involves an unproven disposal technology on some of the most dangerous chemicals in the world

1/100th of a drop will kill you

technology includes some beyond the state of the art processes which have not been perfected

Bhopal anyone? Three Mile Island? I'll bet there is concern. There should be more than concern.

By anonymous on Friday, June 29, 2001 - 12:56 pm:

Welcome to the wonderful, wacky world of Chem-Demil. Only time and exhorbitant amounts of money will tell whether the alternative technology will work. Environmentalists opposed other, proven technology. This alternative, R&D effort is the result of that opposition.

By Ron Vogt on Friday, June 29, 2001 - 06:38 pm:

To All, and especially Brandon, LIGHTEN UP!!! Working with those chemicals has made your skin too thin.

I was preparing to help with your question, and was looking for some background information on your particular situation. The "brick" comment was a reflection on the difficulty of coming up with a definitive list of "essential" flowdown clauses. It's dry humor, you know.

However, after being told that I "know it all", and am combative, insulting, and need to get a life, I'm not exactly inclined to spend my valuable time helping you with your problem. If I wanted that kind of response, I would have tried helping my teenage kids. (Dry humor again; don't comment on my parenting skills). Due to your hypersensitive nature, I hope you are never my employee.

To the others who responded: while I agree that some assistance to an inexperienced prime may be warranted, I question the degree to which you seem to want to get into the prime's management of the sub. Most seem to justify it with the phrase "to protect the government's interests." But if the government has no privity with the sub, and the prime is fully liable to the government, what more protection does the government get by making sure the prime protects itself in a contract?

For example, take the Stop Work clause (an essential clause, Brandon). If the prime fails to include it in a subcontract and ends up liable to the sub, how is the government hurt by this? It won't owe the prime anything more, even if the prime has to accept continued performance by its sub.

I can understand monitoring the mandatory clauses. The FAR itself says they should be in subcontracts. After that, how much further do you want to go? Call it partnering, call it assistance, call it whatever you want, it's still the government doing the prime's job.

This is now way off of the original topic. If someone wants further discussion on how deeply the government should get involved in subcontracts, maybe Bob will open up another thread. For this thread, the question remains: what are the essential flowdown clauses? And I'm feeling too surly now to finish the answer. Buy the book I mentioned in my first posting, Brandon (which, by the way, is now in its third edition).

By Anonymous on Saturday, June 30, 2001 - 10:57 am:

Blame "Environmentalists" for what seems a contract problem of specifying and/or selecting a contractor fitting that profile? Nonsense!

What next, selecting an "I ain't never seen one of them thangs before!" contractor to disarm nuclear weapons using "unproven" and "beyond cutting edge" techniques? Blame that on objections to current techniques? Dangerous nonsense!

These folks have larger issues than flow downs to worry about.

By Brandon Hunt on Monday, July 09, 2001 - 12:24 pm:

RON -- I offer an apology for being too hypersensitive -- and combative myself -- in the process. I took it too seriously and flew into an e-rage. In the oral arena I'm soft-spoken -- to a fault, but am equally aggressive in the written arena. I'm trying to reach middle ground in both arenas. I thought the "brick wall" comment was made to "beat up on me". I didn't know it was in the spirit of humor. I don't know you and can't say whether you are "combative". I promise not to comment on your parenting skills.

I don't want to give the impression to anyone that I can't take constructive criticism and be pointed out when I'm wrong. If I'm wrong, I want to know. If I had all of the answers I wouldn't be asking questions on this web site.

In this case the prime contractor ASKED FOR OUR ASSISTANCE IN FLOW DOWN CLAUSES AND WAS GRATEFUL TO RECEIVE IT. It was not a situation where we rammed this down the contractor's throat. I am all too familiar with Government/contractor relations being poisoned. An impression I get from this site as is that people think that everyone in the Government is out to hamstring the contractor or every contractor is out to gouge the Government. That's isn't always so. There are good and bad apples on both sides.

What I wanted to know is if there are there industry standards for essential clauses. My understanding is that there have to be negotiations in order to flow down non-mandatory clauses into subcontracts. The contractor can't just insert such clauses and the Government can't just insist contractors insert such clauses. It must be agreed by both contracting parties. There may be differences that need to be ironed out in what the contractor and Government think is essential. As far as clauses that flow down to lower tiers of subcontractors, my understanding is that is between the subcontractor and the next lower tier.

Previously I worked as a buyer (Contract Specialist) for helicopter parts for the Army in St. Louis Missouri and Huntsville, Alabama. This job of being a Contract Administrator for Chem-Demil in Newport, Indiana is radically different from anything I did in the past. I've been here for 14-1/2 months and sometimes feel like I just got here. So I'm trying to get all the answers and assistance I can get. But I hope it is in a civil manner. Likewise I will from here out react in a civil manner.

Bitter arguments are OK for politics-oriented web-sites. I have chatted about everything from the environment, labor unions, abortion, the death penalty, gun control, etc., etc., and have given as well as I have gotten. On such sites I expect heated debate to occur. However, I hate to see this informative web site on Government contracting turned into such a forum. Again I regret my part in pointing this in that direction.

By bob antonio on Monday, July 09, 2001 - 12:49 pm:

Brandon:

Thank you for the above note. I have been watching this thread with the hope of a peaceful resolution. The difficulty with internet forums is that we cannot see and hear the people with whom we discuss issues. Because of that, we must be willing to give others the benefit of the doubt. As we approach 4,000 notes in less than a year, I have had to delete very few posts. I think most have been my own for some reason or another.

This site is visited from around the world. Major contractors, small contractors, grantees, etc. visit along with international, federal, state, city, and county agencies. With this mix of contributors and potential new contributors, much can be learned.

By Brandon Hunt on Tuesday, July 10, 2001 - 10:56 am:

Bob:

Thanks for your reply. I won't beat a dead horse to death but I'd like to make a few short comments to close this chapter and again say I'm sorry for whatever embarrassment I caused this site.

I realize that I was not hired here to lord over the subcontractor flow down process, but it was a major undertaking I made. It was the first thing I did that really received universal praise here at Newport, IN, from both Government and Contractor personnel.

So I got overprotective of it. When Ron was making a joke, I mistakenly took it as a frontal assault on something which was a source of pride that took much time and effort on my part. I will - as you say - give people the benefit of the doubt in the future.

Brandon

By Shawn Kerkes on Tuesday, July 10, 2001 - 07:38 pm:

To all who commented on the topic of subcontractor flow-down clauses, I applaud that excellent points were made from several different perspectives. I must make a disclaimer up front that I am a long time friend of Brandon's and may be bias from a personal perspective.

Humor is good, by the way. There is sometimes little allowance for it in government contracting. Maybe that is due to the glass fishbowl environment under which we operate on a daily basis. However, regardless of a fickle public perception, there is a great deal of pride in the quality of our work to provide quality and timely supplies, services and programs to public sector agencies. Hopefully, as professionals, we can still maintain a positive working environment. There's enough road rage to deal with, without having to engage in e-rage as well. I guess we are all well aware of our human shortcomings.

I am a Cost and Price Analyst and Contract Administrator at Brandon's sister site at Umatilla, Oregon. From a contracting perspective, I agree that while a prime contractor is entirely responsible for managing his subcontracts, it is also incumbent upon senior government contracting personnel to understand all aspects of their prime contract and to perform annual contract management reviews on their primes to ensure compliance with Federal procurement regulations, laws, and prudent business decisionmaking. A critical portion of a bottom-to-top CMR is to review and certify all major subcontracts. Failure to perform a thorough review of the prime and their major subcontractors could result in downstream problems for a government program. A thorough review performed early in a multi-year contract can effectively eliminate potential problems, be they in the areas of technical, financial, or physical plant portions of contract performance. The subcontract flow-down clauses, if properly chosen by a well informed prime, can ensure that the subs are on notice of performance government requirements. In most cases these are experiences subs, but in some cases these may be subs who are new to performing on a government contract. Agressive contract management can ensure that primes and subs who are new to the government arena are properly informed and bound contractually to appropriate government requirements. Much of the legwork in this area should have been covered during the pre-ward phase of a contract, but since this is not a perfect world, it must be covered in the contract and again on annual performance reviews.

I guess I've added my two cents worth.

By joel hoffman on Wednesday, July 11, 2001 - 10:35 am:

Again, I would remind folks that Brandon and Shawn are working on cost reimbursement contracts, not firm fixed-price contracts. I believe their comments are from that perspective.
happy sails! joel hoffman

By Ron Vogt on Friday, July 13, 2001 - 09:03 am:

Brandon and all, I appreciate your responses and hope that I was not too quick to take offense at anything. I have been on travel and would have responded sooner.

It sounds like this thread is wrapping up, so I will close with an attempt to address the original question. There is no definitive list of essential flowdowns. It all depends on what the contract requirements are and what the prime believes it needs to protect itself. There is probably near-universal agreement on the more important ones,and those are in that ABA book. Beyond those, it is up to the prime.

When I am reviewing a contract, prime or sub, I try to think of whether the prime needs something from the sub in order to fulfill its own obligations to the government. If so, then a clause is needed. If I am the prime, then I flow down the obligation; if I am a sub, I don't object to it.

Good luck with your contracts. For what it's worth, Vern and Eric have had much more spirited discussions!

By bob antonio on Friday, July 13, 2001 - 09:31 am:

Ron:

I agree with you. This thread has been mild. I appreciate the professional manner in which everyone posts notes. It makes things much easier for me and it gives me the opportunity to remain invisible as a moderator.

By Anon13 on Friday, July 13, 2001 - 12:06 pm:

Probably a new thread is appropriate if there is interest in responding to the following questions:

Have mistakes in the prime's flow down action caused direct and serious problems for the government?

Has the government suffered secondary damage or difficulties in a prime's mistakes in this area?

Note that these questions deal purely with damage or difficulties to the government and not to the prime who made a mistake or misjudgement. That might also be interesting as another topic entirely.

In part my questions relate to the wisdom of keeping the government's dealings solely with the prime. Unless these difficulties between prime and sub become government problems there is good reason to keep well clear.

By Brandon Hunt on Friday, July 13, 2001 - 05:35 pm:

Ron. Thanks for your reply. I'm considering getting that book you are talking about. I'm sure it would be of help. However, the book is about fixed-price supply contracts and we are currently working with mostly fixed-price construction subcontracts. Our prime contract is on a cost-plus-award-fee basis. If anyone has information about flow-down as it relates to fixed-price construction subcontracts, that would be great.

Anon: I haven't yet seen an instance where a mistake in the prime contractor's flow down process caused the Government serious injury. But that's a good question and I'd like to know more on that one too. I was tasked to find the appropriate flow down clauses because the prime did not know which clauses to insert in its subcontracts. As a result they were inserting many clauses which were not mandatory flow-down clauses, and I'm sure many were non-essential as well. This was causing arguments between the prime contractor and the subcontractors. This was done to streamline the entire acquisition process and make it go smoother. In the list I made, I made a distinction as to which clauses flow down to only the first-tier subcontractor and which flow down to lower tiers of subcontractors.

While I was searching for flow down information on acquisition search engines such as Defense Acquisition Deskbook, I found some rumblings of wanting to amend at least in part the Privity of Contract rule, where the Government cannot get involved with subcontractors. There may be emergencies or times when efforts to go through the prime have failed and the Government may need to get directly involved with a subcontractor. However, I could see that such exceptions should be extremely rare. Otherwise it could open up a can of worms where not only the Government frequently gets involved with subcontractors but primes get involved with lower-tier subcontractors and subcontractors get involved with other subs beyond the next lower tier. The acquisition process could be greatly convoluted and an "OK Corral" situation could result.