(Most subcontract agreements we examine are outdated, based on a model developed in 1984. They are boilerplate agreements that do not reflect recent changes to the Federal Acquisition Regulations – in particular, all FAR mandatory "flow-down" clauses (clauses in prime contracts that must be included in all first tier subcontracts and sometimes lower tier). The Committee on Federal Subcontracting Section of Public Contract Law group of the American Bar Association has just issued a second edition "Guide to Fixed Price Supply Subcontract Terms and Conditions". It is intended to assist both prime contractors and subcontractors draft subcontracts for fixed price supply contracts (though it explicitly applies to "supply contracts" our inquiries to two members of the committee who wrote it said it generally represents good guidance for labor service contracts also.)

The Committee has identified all mandatory clauses as well as a limited number of clauses that are not mandatory yet the Committee believes are necessary. The publication identifies the clauses for both governmentwide and Department of Defense use, provides full text of them, offers other provisions that parties may want to consider including and subcontracting clauses for commercial items. We will limit this article to listing the new mandatory and recommended clauses as well as the new, limited requirements for commercial items. You can receive the publication for $45 plus $4.95 handling by calling the ABA Service Center at 1-800-285-2221 and asking for product code # 5390179.)

The following provisions are now mandatory FAR Clauses:

52.203-6, Restrictions on Subcontractor Sales to the Government. Applies to orders exceeding $100,000.

52.203-7, Anti-Kickback Procedures. Applies if Order exceeds $100,000.

52.204-2, Security Requirements. Applies if subcontracts involve access to classified information

52.214-26, Audit and Records – Sealed Bidding. This applies to prime contracts awarded by sealed bidding and to subcontracts that are expected to exceed $500,000 and require submission of cost or pricing data.

52.214-28, Subcontract Cost or Pricing Data – Modifications – Sealed Bidding. Same applicability as 52.214-26.

52-215-2, Audit and Records – Negotiation. Applies if prime contract was awarded through negotiations, exceeds the simplified acquisition threshold of FAR 13 (currently $100,000) and required cost or pricing data.

52.215-24, Subcontractor Cost or Pricing Data.

52.215-25, Subcontractor Cost or Pricing Data – Modifications.

52.215-27, Termination of Defined Benefit Pension Plans.

52.222-4, Contract work Hours and Safety Standards Act – Overtime Compensation. Applies if this Order exceeds $100,000.

52.222-26, Equal Opportunity. Only Subparagraph (b)(1) through (11) is mandatory.

52.222-35, Affirmative Action for Special Disabled and Vietnam Era Veterans. Applies if Order exceeds $10,000.

52.222-36, Affirmative Action for Handicapped Workers. Applies if Order exceeds $2,500.

52.222-37, Employment Reports on Special Disabled Veterans and Veterans of the Vietnam Era. Applies to Orders exceeding $10,000.

52.224-2, Clean Air and Water. Applies to Orders exceeding $100,000.

52.225-3, Buy American Act – Supplies. Applies only if Seller is supplying an item which is an end product under the Buyer’s prime contract. The same condition applies to 52.225-9, 11, 18 and 21 below.

52.225-10, Duty free Entry. Applies to duty-free imported supplies in excess of $10,000.

52.225-11, Restrictions on Certain Foreign Purchases.

52.227-1, Authorization and Consent

52.227-2, Notice and Assistance Regarding Patent and Copyright. Applies to Orders exceeding simplified acquisition threshold.

52-227-9, Refund of Royalties

52.227-10, Filing of Patent Application – Classified Subject Matter. Applies to Orders covering classified subject matter

52-244-6, Subcontracts for Commercial Items and Commercial Components

52.245-18, Special Test Equipment

52.246-2, Inspection of Supplies

52.246-16, Responsibility for Supplies

52.248-1, Value Engineering

The following clauses, though not mandatory, are considered necessary to ensure that the prime contractor can perform its obligations to the government or that some critical right or obligation of the Buyer, Seller or the Government is protected.

52.211-5, New Materials

52.211-7, Other than New Material, Residual Inventory and Former Government Surplus Property

52.211-15, Defense Priority and Allocation REquirements

52.214-27, Price Reduction for Defective Cost or Pricing Data – Modifications – Sealed Bidding. Applies to prime contracts awarded by sealed bidding.

52.215-22, Price Reduction for Defective Cost or Pricing Data. Applies if prime contract was awarded through negotiations, cost or pricing data and a Certificate of Current Cost or Pricing Data was presented (not required unless contract or subcontract exceeds $500,000). This same limitation applies to 52.215-23, 24, 25 and 27 below.

52.215-23, Price Reduction for Defective Cost or Pricing Data.

52.219-8, Utilization of Small, Small Disadvantaged and Women-owned Small Business Plan. This is not applicable to small business concerns.

52.222-20, Walsh-Healey Public Contracts Act. Applies if Order exceeds $10,000.

52.225-9, Buy American Act – Trade Agreements – Balance of Payments Program

52.225-18, European Union Sanction for End Product.

52.225-21, Buy American Act – North American Free Trade Agreements

52.227-14, Rights in Data – General

52.229-3, Federal, State and Local Taxes

52.233-3, Protest After Award

52.242-15, Stop Work Order

52.242-17, Delay of work

52.243-1, Changes – Fixed-Price

52.245-2, Government Property (Fixed-price Contracts)

52.246-2, Inspection of Supplies – Fixed Price

52.246-16, Responsibility for Supplies

52.249-2, Termination for Convenience – Fixed Price

52.249-8, Default (Fixed-Price Supply and Service)

The following three clauses are considered mandatory for commercial item subcontracts. The FAR contemplates that parties will use their own commercial agreements as purchase orders (see the article above on for further discussion of FAR clauses pertinent to commercial item purchasing).

52.222-26, Equal Opportunity

52.222-35, Affirmative Action for Special Disables and Vietnam Era Veterans

52.222-36, Affirmative Action for Handicapped Workers

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