Most contractors and project managers eventually face the need to engage the support of one or more subcontractors to win and then perform on government contracts. There are several project initiation requirements that involve subcontract management.
Companies doing business in the United States are required by FAR Part 6 to provide for full and open competition when selecting subcontractors to perform work on a government contract. This competitive process is usually accomplished during the proposal phase in compliance with your company’s procurement policies. In limited cases, a subcontractor may be selected on a sole source basis as long as the written justification complies with the FAR.
Subcontractors – individuals or companies – must sign a subcontract with your company to be able to perform work. Only the Subcontracts Department can sign a subcontract.
In many cases, your company itself is the subcontractor in which case the contracts department will be negotiating and signing a subcontract with your prime contractor.
There are several reasons your company might use a subcontractor. These include:
- Positive relationship with client
- To help with workload
- Unique skill set or technology
- Unique key personnel
- Extra qualifications necessary to win
- Low cost reliable provider
- Strategic Your company partner
- Socio economic requirements
Finalize which parts of your statement of work and corresponding WBS tasks each subcontractor will perform. This is usually described at a high level in an attachment to the teaming agreement but needs to be clarified as necessary to be compatible with the final contract requirements and project WBS.
Subcontract Agreement. The subcontract agreement formally defines the work to be performed by the subcontractor, and the terms and conditions for performance of that work. It is required for all subcontractors providing services. The subcontract agreement may be drafted prior to the award of the project contract, but is not finalized until after project award (for fixed price contracts subcontracts should be negotiated prior to project award). Specific items from your company’s contract with the customer flow down into our agreement with the subcontractor.
The subcontract management plan forms the basis for the technical work to be performed under the subcontract by major subcontractors and should be an attachment to the subcontract agreement. The business unit develops the technical aspects of the plan and your company subcontracts representative develops the contractual aspects. Note that your company policy requires that an authorized company representative, typically a contracts manager, sign the agreement on behalf of your company.
Purchase Order. The purchase order formally defines the services and products to be delivered by a vendor and the requirements for delivery. A purchase order is required for all subcontractors providing services and products. A request for quote may be drafted prior to the award of the project contract for costing purposes, but the purchase order is not issued until after project award or approval of a work authorization permitting the order to be placed. The subcontract management plan forms the basis for identifying purchase order line items. Your company’s delivery organization identifies the specific services and/or products needed via a purchase requisition (PR) and the company procurement representative prepares the purchase order.
Prepare a purchase requisition in the cost accounting system to include this subcontractor statement of work. Assist the Subcontracts Administrator by reviewing your company’s prime contract and the intended subcontract contract to assure that all applicable Ts&Cs (which is contract slang for terms and conditions) such as contracts clauses and invoicing have been incorporated.
Support the negotiation process between your company and the subcontractor. Ensure that the appropriate management personnel approve the intended negotiations prior to actual implementation.
All subcontract commitments and scope changes should be approved by a company executive and the Contracts Director. Your company’s Subcontracts Administrator should be involved in all contractual communications with your subcontractors. Fixed price subcontracts have some additional requirements including the need to agree on an interim payment schedule that is tied to time or specific project deliverables. The subcontractor payment schedule also needs to be synchronized with your company’s payment schedule.
– Mike Lisagor