Are You Getting Your Consent to Subcontract?

If the answer is either a) no or b) what is consent? Then the topic of this blog could be hugely important to you; particularly if you are performing cost type government contracts.

The clause 52.244-2 Subcontracts is most likely contained in your government contracts and is most likely incorporated by reference.   This clause dictates that a contractor, if they do not have an approved purchasing system, must obtain consent to subcontract if the subcontract meets the following conditions:

(1) Is of the cost-reimbursement, time-and-materials, or labor-hour type; or

(2) Is fixed-price and exceeds—

(i) For a contract awarded by the Department of Defense, the Coast Guard, or the National Aeronautics and Space Administration, the greater of the simplified acquisition threshold or 5 percent of the total estimated cost of the contract; or

(ii) For a contract awarded by a civilian agency other than the Coast Guard and the National Aeronautics and Space Administration, either the simplified acquisition threshold or 5 percent of the total estimated cost of the contract.

Also note that per FAR Part 44, the definition of “subcontracts” includes all types of purchasing conducted under the contract. Whether your company calls it “purchasing”, or you use “vendors” or “consultants”, that is all subcontracting in the eyes of the FAR.

The contents of a consent request are dictated by the FAR, but the ramifications of not obtaining consent are not.  The government (as usual) hasn’t been consistent over the years on requiring consent, checking up on your consent or hitting you in audits on consent. Nor is there consistency across agencies or even among offices. Some offices state that if you name your subs in your proposal and that proposal is incorporated by reference into the contract, then they gave consent. However, your ACO and DCAA auditor may not agree.

We recently have run into a situation, during an incurred cost audit, where the client did not have proof they obtained consent required by 52.244-2.  Due to the lack of consent, DCAA was suggesting that ALL those subcontract costs be disallowed.  This is HUGE negative impact on a company.

It is better to be safe than sorry. Check your contracts for 52.244-2 Subcontracts, decide if it is applicable and either

1) Ask the CO to list the names of your subcontractors in (j) of the clause before you sign the contract; or

2) Obtain the consent as required regardless if you think you received de facto consent.

This one small step may help you out more than you realize in the long run.

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About Stephanie Amend

Stephanie is the Principal and CEO of Arrowhead Solutions, LLC, a solutions firm specializing in assisting established small businesses be successful government contractors.

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