Subcontracts for Commercial Items: What You Need to Know

In the world of government contracting, subcontracts are a common practice. A subcontract occurs when a company hires another company, referred to as a subcontractor, to perform a portion of the work required under a government contract. Subcontracts are especially prevalent when it comes to commercial items.

So, what exactly is a commercial item? A commercial item is a product or service that is commonly used in the private sector and can be sold to the general public. Examples of commercial items include office supplies, computers, software, and professional services such as accounting or legal services.

Subcontracting for commercial items can be a cost-effective and efficient way to fulfill a government contract. However, it is crucial to ensure that the subcontract is structured correctly to comply with the government’s subcontracting rules.

The first step in ensuring compliance is to determine whether the prime contractor is required to submit a subcontracting plan. A subcontracting plan is required if the contract is expected to exceed $750,000 ($1.5 million for construction) and it includes subcontracting opportunities. The plan outlines the prime contractor`s efforts to use small businesses, including small disadvantaged businesses, women-owned small businesses, veteran-owned small businesses, service-disabled veteran-owned small businesses, and HUBZone small businesses, in the performance of the contract.

Once it is determined that a subcontracting plan is required, the prime contractor must identify the appropriate percentage of work to be subcontracted to small businesses. The prime contractor must also determine the type of commercial item(s) to be subcontracted. The subcontractor must be a responsible contractor and must be able to perform the work required.

The prime contractor must also ensure that the subcontract contains certain terms and conditions required by the government. These terms and conditions include the requirement for the subcontractor to comply with applicable laws and regulations, such as the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS). The subcontract must also include a clause allowing the government access to the subcontractor`s books and records for audit purposes.

In conclusion, subcontracts for commercial items can be a valuable tool in fulfilling a government contract. However, it is essential to ensure compliance with the government`s subcontracting rules. Prime contractors must submit a subcontracting plan if required, determine the appropriate percentage of work to be subcontracted to small businesses, and ensure that the subcontract contains the required terms and conditions. By following these guidelines, prime contractors can successfully fulfill their government contracts and meet their subcontracting goals.