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9 th Annual Veteran Entrepreneur Training Symposium

Flowdowns: Are you FAR & DFARS “Flowing”?. SAN ANTONIO. 2019. Presented by: Wayne Simpson, CFCM, CSCM May 30, 2019. 9 th Annual Veteran Entrepreneur Training Symposium May 29 – 31, 2019 | San Antonio, Texas. Flowdowns: Are you FAR & DFARS Flowing?.

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9 th Annual Veteran Entrepreneur Training Symposium

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  1. Flowdowns: Are you FAR & DFARS “Flowing”? SAN ANTONIO 2019 Presented by: Wayne Simpson, CFCM, CSCM May 30, 2019 9th Annual Veteran Entrepreneur Training Symposium May 29 – 31, 2019 | San Antonio, Texas

  2. Flowdowns: Are you FAR & DFARS Flowing? These presentation materials were prepared May 17, 2019, and are considered current through Federal Acquisition Circular (FAC) 2019-02 which was in effect at the time. FAC 2019-02 contains Final Rules effective May 6, 2019, and June 5, 2019. DFARS materials are current through the DFARS Update of April 30, 2019. 9th Annual Veteran Entrepreneur Training Symposium May 29 – 31, 2019 | San Antonio, Texas

  3. What is a “Flowdown”? • In the context of Federal Procurement, a “Flowdown” is the— • Process of transferring and translation of requirements from a prime contract into a subcontract in support of the prime contract. • The Federal Acquisition Regulation (FAR) and various agency supplemental acquisition regulations, e.g., the Defense Federal Acquisition Regulation Supplement (DFARS) requires certain clauses be flowed-down to the prime contractor’s subcontracts. 9th Annual Veteran Entrepreneur Training Symposium May 29 – 31, 2019 | San Antonio, Texas

  4. What is a “Flowdown”? • There is no exception to the flowdown requirements for small business—small business is not exempt from the requirement to flowdown clauses 9th Annual Veteran Entrepreneur Training Symposium May 29 – 31, 2019 | San Antonio, Texas

  5. What is a “Subcontract”? • “Subcontract” means any agreement (other than one involving an employer-employee relationship) entered into by a Government prime contractor or subcontractor calling for supplies and/or services required for performance of the contract, contract modification, or subcontract. (FAR 19.701) • Purchase orders for supplies or services are also considered “subcontracts” and as such are subject to flowdowns 9th Annual Veteran Entrepreneur Training Symposium May 29 – 31, 2019 | San Antonio, Texas

  6. Federal Subcontract Management • Federal Subcontract Management is a hybrid involving— • Company’s own commercial subcontracting requirements • Federal government’s prime contract/unique requirements • Operation of Federal Law – Implementing Regulations • Impacts purchasing/sourcing aspects of supply chain management • Government requirement to “flowdown”

  7. Federal Subcontract Management • Federal government does not have privity of contract w/ subcontractors/suppliers • Government prime contract contains clauses which requires they be flowed-down to subcontractors to comply with Federal law. • Prime contractor includes these flowdowns in subcontracts/purchase orders to comply with obligations under prime contract • Flowdown process is a risk-sharing process

  8. Federal Subcontract Management • Prime Contractors— • Typically have and use sets of clauses tailored to know variation in procurement types • Enables development of flowdowns appropriate to the subcontract • Often as standalone or in combination with other sets of flowdows • One size does not fit all—individual procurement actions may dictate tailoring requirements in support of prime contract requirements

  9. Federal Subcontract Management • The Subcontractor’s Perspective • Understand what and why the prime wants to flowdown • Subcontractor needs to understand enough about the prime contract and flowdown requirements to determine if a flowdown applies. • Subcontractor should review proposed clauses in the RFP/IFB/RFQ to identify concerns/exceptions to prime contractor as early as possible • Subcontractor offers rationale and possible alternatives so prime understands concerns and way to accomplish same result at less cost

  10. Federal Subcontract Management • Governing Body of Law • Commercial contract law—not Federal Law • State-enacted versions of the Uniform Commercial Code • Coordination is essential between prime contracts manager and subcontract manager • Subcontractors/suppliers should be made aware of the flowdown requirements during the solicitation/proposal phase

  11. How Do I Know What to “Flowdown”? • Unless you have someone do this work for you, you will need to review each clause/provision in the FAR (and/or DFARS and other agency supplemental regulations) to determine if a flowdown is specified. • The FAR has over 600 clauses/provisions • The DFARS has hundreds of clauses/provisions • Dozens of other Supplemental Agency Acquisition Regulations

  12. How Do I Know What to “Flowdown”? • The Federal Acquisition Regulations System is codified in Title 48 Code of Federal Regulations • Chapter 1 is the FAR • Chapter 2 is the DFARS • Know where to find agency supplemental regulations

  13. How Do I Know What to “Flowdown”?

  14. How Do I Know What to “Flowdown”?

  15. How Do I Know What to “Flowdown”?

  16. How Do I Know What to “Flowdown”? • The clause “tells” you • Example from the Flowdown requirement in FAR 52.222-34 Project Labor Agreement, (MAY 2010)— …….(f) Subcontracts. The Contractor shall require subcontractors engaged in construction on the construction project to agree to any project labor agreement negotiated by the prime contractor pursuant to this clause, and shall include the substance of paragraphs (d) through (f) of this clause in all subcontracts with subcontractors engaged in construction on the construction project.

  17. How Do I Know What to “Flowdown”? • The clause “tells” you • Example from the Flowdown requirement in FAR 52.222-35 Equal Opportunity for Veterans (OCT 2015) (c) Subcontracts. The Contractor shall insert the terms of this clause in subcontracts of $150,000 or more unless exempted by rules, regulations, or orders of the Secretary of Labor. The Contractor shall act as specified by the Director, Office of Federal Contract Compliance Programs, to enforce the terms, including action for noncompliance. Such necessary changes in language may be made as shall be appropriate to identify properly the parties and their undertakings

  18. How Do I Know What to “Flowdown”? • 52.203-16 Preventing Personal Conflicts of Interest (DEC 2011) • (d) Subcontract flowdown. The Contractor shall include the substance of this clause, including this paragraph (d), in subcontracts— (1) That exceed $150,000; and (2) In which subcontractor employees will perform acquisition functions closely associated with inherently governmental functions (i.e., instead of performance only by a self-employed individual).

  19. How Do I Know What to “Flowdown”? • 252.204-7004—Level I Antiterrorism Awareness Training for Contractor (Feb 2019) • (d) Subcontracts. The Contractor shall include the substance of this clause, including this paragraph (d), in subcontracts, including subcontracts for commercial items, when subcontractor performance requires routine physical access to a Federally-controlled facility or military installation.

  20. How Do I Know What to “Flowdown”? • 252.247-7023 Transportation of Supplies by Sea (Feb 2019) • (i) In the award of subcontracts, for the types of supplies described in paragraph (b)(2) of this clause, including subcontracts for commercial items, the Contractor shall flow down the requirements of this clause as follows: • (1) The Contractor shall insert the substance of this clause, including this paragraph (i), in subcontracts that exceed the simplified acquisition threshold in part 2 of the Federal Acquisition Regulation. • (2) The Contractor shall insert the substance of paragraphs (a) through (e) of this clause, and this paragraph (i), in subcontracts that are at or below the simplified acquisition threshold in part 2 of the Federal Acquisition Regulation.

  21. How to “Flowdown” • Three methods— • By Reference • By using full text of clause • By applying the substantially as follows or substantially the same basis

  22. Where to Find Clauses • www.acquisition.gov • Federal Acquisition Regulation • Supplemental Agency Acquisition Regulations • www.ecfr.gov • Electronic Code of Federal Regulations (for agencies not linked to acquisition.gov)

  23. What Could Possibly Go Wrong? • Decreased compliance/increased risk • Your contract could be terminated for cause or default. Keep in mind the prime contractor is also responsible for subcontractor compliance w/ flowdowns • Potential litigation between prime and subcontractor

  24. Flowdown Matrices Subscription Service Available • https://fedbizassist.com/shop • Annual subscription service provides matrices showing flowdowns for FAR, DFARS, and all civilian department/agency specific acquisition regulations • Updated as FAR and DFARS Cases, and other agency supplements are changed and published in the Federal Register • Increases your compliance/reduces risk of non-compliance • 25% discount for VETS19 Attendees through July 31, 2019 • Enter “VETS19” as discount coupon/code at checkout

  25. Thank you for the privilege of your time today! But most importantly, thank you for your service! Best wishes to you for every continued success in the Federal Marketplace!! Wayne Simpson, CFCM, CSCM POB 12417, RTP, NC 27709-2417 Tel: 571.255.1000 Fax: 571.255.1001 https://fedbizassist.com

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