Overview
FAR Part 44 establishes the policies and procedures for Government oversight of a prime contractor’s subcontracting activities. It focuses on two primary mechanisms of control: the requirement for Consent to Subcontracts on an individual basis and the comprehensive Contractor Purchasing System Review (CPSR) to evaluate a contractor's overall procurement efficiency and compliance.
Key Rules
- Consent to Subcontracts (FAR 44.201):
- If a contractor has an approved purchasing system, consent is only required for subcontracts specifically identified by the Contracting Officer (CO).
- If a contractor does not have an approved system, consent is required for cost-reimbursement, time-and-materials, and labor-hour subcontracts, as well as certain fixed-price subcontracts exceeding the simplified acquisition threshold.
- CPSR Threshold (FAR 44.302): A CPSR is generally required if a contractor’s expected sales to the Government (excluding firm-fixed-price and commercial items) exceed $25 million over the next 12 months.
- Prohibited Subcontracts (FAR 44.203): Contracting Officers are strictly prohibited from consenting to subcontracts that use the cost-plus-a-percentage-of-cost (CPPC) system or subcontracts that obligate the CO to deal directly with a subcontractor.
- Commercial Items (FAR 44.402): Prime contractors are required, to the maximum extent practicable, to incorporate commercial products/services and are prohibited from flowing down non-essential FAR clauses to commercial subcontractors (beyond those required by law or executive order).
- Approval Status (FAR 44.305): System approval can be withdrawn at any time if the ACO identifies major weaknesses, such as failure to provide certified cost or pricing data or recurring noncompliance with Small Business subcontracting plans.
Responsibilities
- Administrative Contracting Officer (ACO):
- Determines the need for a CPSR and conducts reviews every three years.
- Grants, withholds, or withdraws approval of the contractor’s purchasing system.
- Maintains surveillance of the contractor’s purchasing program to protect Government interests.
- Contracting Officer (CO):
- Evaluates specific subcontracting requests for "Consent" when required.
- Ensures subcontracts are consistent with the contractor's "make-or-buy" program.
- Verifies that the contractor has performed adequate cost or price analysis.
- Prime Contractor:
- Must provide advance notification to the Government before awarding certain subcontracts.
- Responsible for selecting subcontractors, determining their responsibility, and ensuring competition.
- Must verify that proposed subcontractors are not excluded in the System for Award Management (SAM).
Practical Implications
- Administrative Burden: For contractors, achieving and maintaining an "Approved Purchasing System" is a major milestone. Without it, the administrative burden is significantly higher, as the contractor may need to pause and wait for formal Government "Consent" before awarding individual subcontracts, which can delay program schedules.
- Risk Mitigation: The CPSR process serves as a massive audit of a company’s internal "buy" logic. Contractors must be prepared to show documentation for why they chose a specific vendor, how they proved the price was fair and reasonable, and how they managed affiliates to avoid "incestuous" pricing that inflates costs.
- Commercial Vendor Relations: FAR Subpart 44.4 acts as a "shield" for commercial vendors. In real-world scenarios, commercial companies often refuse to do business with the Government if burdened by complex federal regulations; this part of the FAR ensures that prime contractors only flow down the bare minimum of required clauses to these entities.
- Subcontractor Disputes: Because the Government lacks "privity of contract" with subcontractors, Part 44 emphasizes that the CO should not be drawn into disputes between the prime and sub, though it allows for "indirect appeals" where the prime sues on the sub's behalf.