Rule change eases subcontracting process

Contractors will no longer have to inform agencies when they hire subcontractors in some cases, under a rule published today.

The rule applies only to the Defense Department, NASA and the Coast Guard. Although it could potentially streamline the subcontracting process, some experts say that federal agencies will have to examine their own contract requirements for it to make much difference.

The requirement was often unnecessary, said Larry Allen, executive vice president at The Coalition For Government Procurement. As long as the prime contractor is held accountable for doing the work, he said, there is no reason to inform the contracting agency of every subcontractor. He called the rule change a “net gain” for the government.

But federal agencies often include their own provisions in contracts that do require notification of subcontracting, said Chip Mather, a partner at Acquisition Solutions. Those provisions can be more restrictive for contractors than the Federal Acquisition Regulation provision that the new rule cancels.

“If agencies do not change their provisions, it will have no impact,” Mather said.

Congress mandated the change in the fiscal 2004 National Defense Authorization Act. The Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council developed the published rule.

The rule applies to contractors under cost-reimbursement contracts who are awarding cost-plus-fixed-fee or fixed-price subcontracts.

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