Acquisition councils beef up subcontracting oversight

Last week, the councils responsible for the Federal Acquisition Regulation proposed a rule that would increase oversight of subcontracting arrangements in federal contracts.

The rule would require agencies to evaluate how well contractors manage their subcontractors, who often perform a significant portion of work. Contracting officers would be required to consider those evaluations when making future contracting awards. If enacted, the rule would apply to contracts worth over $100,000.

"Subcontract management efforts will be recorded for use in past performance evaluations during source selection," the councils stated.

Currently, contracting officers do not have to evaluate management of subcontractors and generally have limited oversight over subcontracting relationships. FAR Part 42, which describes contract administration and audit rules, states that the prime contractor is responsible for subcontract management, and the agency is required to get involved only if there appears to be a problem.

Scott H. Amey, general counsel of the Project on Government Oversight, a Washington-based watchdog group, said the proposed rule would lead to more responsible contract administration by requiring more complete performance evaluations: "Past performance evaluations evidence a contractor's ability to perform successfully, which protects taxpayer dollars."

While no comments have yet been publicly submitted - they are due by Aug. 22 - Amey anticipated resistance from industry groups. "Contractors will complain that the rule is too subjective, but they lobbied for the best value contracting and therefore their complete contracting track records should be considered by the government [when making contract awards]," Amey said.

The evaluation of subcontractor management will include how well the prime contractor meets its small business goals through subcontracting.

Cathy Garman, senior vice president of public policy at the Contract Services Association, an industry group, said small business participation in subcontract work often is overlooked. "We've been trying to bring more sunlight onto subcontracts so people can recognize their value….a lot of excellent work is being done at the subcontract level that people haven't yet focused on," she said.

Garman said that while she hasn't yet studied the proposed rule, she plans to do so and submit a comment before the August deadline.

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