Overview
FAR Subpart 17.4 defines "Leader Company Contracting" as an extraordinary acquisition technique where an established developer or sole producer (the leader) provides technical assistance and expertise to one or more designated "follower" companies. The primary goal is to enable the follower companies to become independent sources of supply, thereby enhancing the competitive base and ensuring supply chain stability for complex systems or products.
Key Rules
- Restrictive Use: This technique is considered "extraordinary" and is limited to special circumstances where agency procedures specifically authorize its use.
- Strict Criteria for Use: It may only be used if the leader company possesses unique know-how, no other source can meet requirements without this assistance, and the assistance is limited only to what is essential for production.
- Government Oversight: The Government must reserve the right to approve all subcontracts between the leader and follower companies.
- Proprietary Data Protection: Contracts must include firm, legally binding agreements regarding the disclosure and protection of trade secrets, proprietary software, and technical designs.
- Objectives: The technique must aim to achieve specific benefits such as reducing delivery time, achieving geographic dispersion, maximizing scarce tooling, or transitioning from development to competitive production.
Responsibilities
- Contracting Officers (CO):
- Responsible for selecting one of three award structures (Prime to Leader, Primes to both, or Prime to Follower).
- Must ensure that all contracts contain specific agreements regarding the disclosure of proprietary data and trade secrets.
- Must verify that the use of this technique is authorized by specific agency procedures.
- Leader Company:
- Responsible for furnishing the necessary "know-how," technical assistance, and potentially tooling/equipment to the follower.
- Must fulfill their own production requirements while supporting the follower's development.
- Follower Company:
- Responsible for gaining the capability to produce end items or components to the required specifications.
- Must adhere to subcontracting terms or prime contract requirements for production.
- Federal Agency:
- Responsible for providing the underlying authorization and procedures that allow the CO to use this specialized technique.
Practical Implications
- Breaking Monopolies: This subpart is a powerful tool for the government to break "sole-source" dependencies. By forcing a leader company to train a competitor, the government creates a multi-source environment for future acquisitions.
- Supply Chain Resilience: In defense or aerospace, this technique is used to ensure that if a leader company's facility is compromised (e.g., by a natural disaster or conflict), a "follower" company in a different geographic location can maintain production.
- Risk Mitigation in Complex Tech: It allows for a smoother transition from the Engineering and Manufacturing Development (EMD) phase to full-rate production by using the developer's expertise to "on-ramp" other manufacturers, reducing the likelihood of production failures in the follower's early stages.
- Intellectual Property Hurdles: The most significant practical challenge is the negotiation of proprietary data rights. Because the leader is essentially training a future competitor, the Contracting Officer must be extremely diligent in protecting the leader's intellectual property while ensuring the follower gets enough information to be successful.