Can I Be A Government Contractor Without Selective Services

Merle Grand. DeLancey Jr.

Recently, clients take asked if they or a vendor or supplier are a "subcontractor" under a federal regime contract. Sometimes the answer is piece of cake—e.yard., yous are a subcontractor when a prime contractor contracts direct with a vendor or supplier (hereinafter "vendor") to perform a federal contract. But the lines become less clear when a prime contractor does not inform the vendor that the farm is being entered into in furtherance of a federal government contract or where the vendor supplies goods that the prime contractor uses to perform commercial and authorities contracts.

Why Is Subcontractor Status Important?

Subcontractor condition is of import to prime and subcontractors. A federal prime contractor is required to flow-down multiple Federal Acquisition Regulation ("FAR") clauses to its subcontractors. See FAR 52.212-5(e). The required flowdown clauses that receive the nearly attending implement three antidiscrimination laws: Executive Lodge 11246, Department 503 of the Rehabilitation Act of 1973, as amended; 29 UsaC. § 793; and Section 402 of the Vietnam Era Veterans' Readjustment Assistance Act, 38 U.S.C. § 4212. A prime number contractor'due south failure to flow down these clauses to its subcontractors could outcome in the prime contractor being held responsible and/or liable for its subcontractor's noncompliance.

It as well is of import to know if you are a subcontractor under a federal prime contract because, if yous are, the required FAR flowdown clauses apply. Significantly, these clauses apply regardless of whether they announced in the applicable subcontract or vendor agreement. OFCCP v. Monongahela Railroad Co., 1985-OFC-ii, ALJ Recommended Decision and Order (April 2, 1986). (The regulations state that the EEO clause is "incorporated by reference in all Authorities contracts and subcontracts," and "by operation of the [Executive] Order" is "considered to be a function of every contract and subcontract required by the Social club and the regulations … whether or not it is physically incorporated in such contracts and whether or not the contract between the agency and the contractor is written.")

The Two-Function Exam

With one exception, the applicable regulations contain broad definitions of the terms "government contract," "prime number contractor," and "subcontractor." As a upshot, well-nigh are non helpful in determining whether a vendor is a subcontractor. The ane exception is in the Section of Labor'southward regulations implementing EO 11246 which ascertain "subcontract" as follows:

Subcontract means any agreement or organisation between a contractor and whatever person (in which the parties do not stand up in the relationship of the employer and an employee):

(ane) For the purchase, sale or use of personal property or nonpersonal services which, in whole or in part, is necessary to the performance of any one or more contracts;

(ii) Under which whatsoever portion of the contractor'due south obligation under whatsoever one or more contracts is performed, undertaken or assumed.

41 C.F.R. § 60-i.iii. Interpreting the to a higher place definition of "subcontract," courts have created a two-role examination.

First, to exist considered a "farm" under whatsoever federal statute or regulation, at that place must be some reasonably shut nexus between the efficiency and economic system criteria of the Federal Property and Administrative Services Act, the cardinal procurement statute underlying EO 11246 and any expectation imposed upon federal contractors. Liberty Mutual Insurance Co. v. Friedman, 639 F.2nd 164, 170-71 (4th Cir. 1981) (finding that at that place was no "reasonably shut nexus" between the purpose of the Federal Property and Administrative Services Act, of ensuring efficiency and economy in government procurement and the imposition of the Executive Guild'south requirements on the insurance companies).

Second, to be considered a "farm" under any federal regime contract there also must be a showing that the products or services beingness acquired past the prime contractor ultimately will exist used in performance of a government contract. OFCCP v. Monongahela Railroad Visitor, 1985-OFC-2, ALJ Recommended Decision and Order (Apr 2, 1986). And, so long equally the products or services existence procured are "necessary" to the performance of a federal government contract, the vendor is a subcontractor regardless of the number of products or amount of services being supplied. Id. (railroad was a subcontractor where it delivered coal to one of many power plants endemic by a utility that contracted with the federal regime to supply electric and steam to government facilities even when the federal government used approximately 0.4 percentage of the electricity generated by the utility on a yearly ground).

Review Your Contracts

Prime and subcontractors should review their contracts to determine a vendor'south status. Prime number contractors should decide if an applicable vendor is a subcontractor and, if and then, make certain the required FAR and antidiscrimination laws are included in the farm. Subcontractors should perform a like review of their agreements. Specifically, yous should review the post-obit:

• Prime and subcontractors:
  • Does the applicable understanding have a value of at least $10,000 triggering the applicability of EO 11246?
  • Does the applicable agreement have a value exceeding $fifteen,000 for applicability of Section 503 of the Rehabilitation Act of 1973, as amended, 29 U.S.C. § 793?
  • Does the applicable agreement have a value of $150,000 or more than for applicability of Section 402 of the Vietnam Era Veterans' Readjustment Assist Human activity, 38 U.S.C. § 4212?
  • Does your company have at least fifty employees and a contract valued at $50,000 or more than triggering the requirement for written affirmative action program?
  • Are the appurtenances or services the vendor is selling is "necessary" to the government contract? In other words, are the goods or services incidental to or to facilitate performance of a government contract or are they a deliverable nether the contract?

• Subcontractors:
  • Are in that location whatsoever FAR or Bureau FAR Supplement clauses or references in your agreement or purchase social club?
  • Are there any references in your agreement or buy gild to Executive Social club 11246, the Rehabilitation Act of 1973, the Vietnam Era Veterans' Readjustment Assistance Act or whatever of their implementing regulations (41 C.F.R. Part lx.1)? Prime contractors are required to send annual written notification of the company'due south policy on equal employment opportunity and affirmative action obligations to all subcontractors, including vendors and suppliers.
  • Are in that location are any references in your agreement or purchase order to a federal government prime number contract?
  • Has your visitor filed or is it filing EEO-1 Reports and is it representing itself as a contractor?
  • Has your company received whatsoever notices from customers informing the visitor that they are a federal contractor or requesting a re-create of your affirmative activity plan?

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Can I Be A Government Contractor Without Selective Services,

Source: https://governmentcontractsnavigator.com/2019/01/28/who-is-a-subcontractor-under-a-federal-government-contract/

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