Overview
FAR 44.203 establishes the boundaries of a Contracting Officer’s (CO) authority when consenting to subcontracts, specifying that such consent is neither an endorsement of cost allowability nor a waiver of federal procurement prohibitions. It identifies specific subcontracting arrangements that COs are strictly forbidden from approving and clarifies the government's stance on subcontractor disputes.
Key Rules
- No Automatic Validation: Consent to a subcontract or approval of a purchasing system does not constitute a determination of price reasonableness, term acceptability, or cost allowability unless explicitly stated.
- Prohibited Consents: Contracting officers are strictly prohibited from consenting to:
- Cost-plus-a-percentage-of-cost (CPPC) subcontracts.
- Cost-reimbursement subcontracts where fees exceed statutory limits.
- Arrangements that obligate the CO to deal directly with a subcontractor (maintaining privity of contract).
- Subcontracts that make private settlements or arbitrations between the prime and sub binding on the Government.
- The unjustified or repetitive use of T&M, Labor-Hour, or cost-reimbursement subcontracts.
- Indirect Appeals: COs should not reject subcontracts solely because they allow "indirect appeals," provided the prime contractor prosecutes the appeal on the subcontractor's behalf and the dispute is cognizable under the Disputes clause.
Practical Implications
- Risk Retention: Prime contractors cannot use CO consent as a "safe harbor" to protect against future audits; they remain responsible for ensuring subcontract prices are fair and reasonable and that terms comply with the FAR.
- Privity Maintenance: Contractors must ensure subcontract language does not inadvertently create a direct legal obligation between the Government and the subcontractor, as COs are regulatory-bound to reject such terms.