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Subcontract Control and Liability

Subcontract Control and Liability. Wayne Norman, Pam McFarland, Brandon Kriner. We will be discussing hot topics in Subcontract Control including: risk of loss flow down, risk assessment of suppliers as a prime, oversight via onsite audits or limited surveys, Inventory practices,

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Subcontract Control and Liability

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  1. Subcontract Control andLiability Wayne Norman, Pam McFarland, Brandon Kriner

  2. We will be discussing hot topics in Subcontract Control including: risk of loss flow down, risk assessment of suppliers as a prime, oversight via onsite audits or limited surveys, Inventory practices, what we require our subs to do annually We will allow for open dialog and questions flowing from the audience

  3. Risk of loss flow down • Current new FAR case 2013-013- Withdrawn from publice comment • DCMA -Callahan memo Sept ’12 still applies as internal guidance within DCMA • Current take- Primes should in most cases flow down limited risk of loss to suppliers in negotiated subcontracts, when it is in the prime contract* • What do you do? • Is this problematic ? • Why would you not? * With exceptions- competitively awarded contracts, FR, risk etc..

  4. Property Liability Flowdown to SubcontractorPrime Contractor and Flowdown to Subcontractor (1) FAR 52.245-1, Government Property (Apr. 2012) – Contractor has limited (Ltd) risk of loss for GOP per FAR 45.104 & 45.107 Contract clauses. (2) FAR 52.245-1, (Alternate I), Government Property (April 2012 )– Contractor has full risk of loss for GOP (3) FAR 52.215-12 Subcontractor Cost or Pricing Data (Oct 1997) – Contractor must require subcontractor to submit cost or pricing data for any subcontract expected to exceed the FAR 15.403-5 threshold ($700K+). USG . Prime Contractor Contract Type Subcontractor P.O. Type (1) (3) (2) (5) (1) (3) (1) (4) Firm Fixed Price Negotiated < $700K Firm Fixed Price - Negotiated @ $700K+ Cost Type / T&M / Labor Hr Firm Fixed Price Competitively Bid Ltd Risk of Loss Ltd Risk of Loss Ltd Risk of Loss Full Risk of Loss _____________________ ____________________ (1) (3) (1) (2) (5) (1) (4) (3) (1) (3) (2) (5) (1) (3) (1) (4) Firm Fixed Price Negotiated <$700K Firm Fixed Price Negotiated @ $700K+ Firm Fixed Price Negotiated <$700K Firm Fixed Price Negotiated @ $700K+ Firm Fixed Price Competitively Bid Firm Fixed Price Competitively Bid Cost Type / T&M / Labor Hr Cost Type / T&M / Labor Hr Full Risk of Loss Ltd Risk of Loss Full Risk of Loss Ltd Risk of Loss Ltd Risk of Loss _____________________ (1) (3) (1) (3) (2) (5) (1) (4) Firm Fixed Price Negotiated <$700K Firm Fixed Price Negotiated @ $700K+ Cost Type / T&M / Labor Hr (4) DFARS 245.107 (6) Contract clauses (Nov. 2011) – For negotiated FFP contracts awarded on a basis other than submission of certified cost or pricing data for which government property is provided, the USG will attach FAR 52.245-1 Government Property (Apr. 2012) - Contractor has Ltd risk of loss for GOP. (5) Class Deviation 2010-00003 (Feb 12, 2010) provided contracts awarded on the basis of adequate price competition with FAR 52.245-1, Government Property (April 2012 )– Contractor has Ltd risk of loss of GOP. This class deviation was rescinded on Nov 18, 2011. Firm Fixed Price Competitively Bid Ltd Risk of Loss Full Risk of Loss

  5. Potential Choices • Standard Terms and Conditions- flown down to all • With out without a liability statement • Unique terms and conditions for each sub

  6. Risk assessment of suppliers, as a prime • What risk assessment do you perform on your subs • How do you do it? • What data do you have or obtain? • Do you use this to make decisions on oversight?

  7. Oversight via onsite audits or limited surveys • Do you do onsite surveys? • Limited mailer type surveys? • How do you decide? • What data do you use? • Frequency?

  8. Inventory practices • Do you make your subs physically touch the property annually? • Why? • Do you let them follow their own procedures for frequency (if they have them biannual or triannual)? • Please get on board as an industry and don’t mandate your subs cycles

  9. What we require our subs to do annually • What do you make them turn in annually and how do you word it. • If you let them follow their own inventory cycle….. • And you want annual data…. • Why not ask them for a listing of all tagged property on hand ??? • And a Summary report of material on hand???? • Format- do you provide one?

  10. Thank you for participating

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