When doing business with the U.S. Government, regardless of whether at the prime contractor or subcontractor level, companies must comply with a number of laws and regulations that are in addition to the standard contract terms found in the commercial market. The Small Business Subcontracting Plan Program was passed in 1978 to ensure that prime contractors further the goal of increasing participation of small businesses in Federal procurement. Because a subcontractor lacks privity with the Government (i.e., there is no relationship directly between the two parties), the laws and regulations applicable to subcontracts are much less than those applicable to a prime contractor. Prime contractors, however, often attempt to flow-down virtually all of the terms of their prime contract. Subcontractors should carefully review proposed subcontracts and attempt to limit flow-down terms to those required by law or otherwise needed to address the Governments right to modify the prime contract.

A subcontract for commercial items is subject to fewer required flow-down clauses than one for non-commercial items. For commercial item subcontracts, the required flow-down clauses generally relate to the Governments socio-economic programs (e.g., Equal Opportunity; Affirmative Action). Nothing prevents a prime contractor from trying to flow-down additional provisions from its prime contract. The Subcontracts for Commercial Items clause encourages prime contractors to limit flow-down clauses to a minimal number necessary to satisfy its contract obligations. There are terms that, as a practical matter, may need to be included in a subcontract. For instance, the Changes clause in the prime contract may need to be included if the subcontractor is providing something that may be subject to a change directed by the Government.

Lawyers at The Nevarez Law Firm can help you deal with all of the small business issues related to subcontracting. The Firm provide substantial experience, knowledge and expertise in dealing with prime and sub-contracts, especially with relation to socio-economic programs and flow-down clauses.