NCMA - National Contract Management Association Subcontract Management Questions and Answers — Questions and Answers
Question 1: A subcontractor on a fixed-price government contract is dissatisfied with a payment delay from the prime contractor. The subcontractor contacts the government's Contracting Officer directly to demand payment for services rendered. What is the Contracting Officer's most appropriate response based on the principle of privity of contract?
- Pay the subcontractor directly and deduct the amount from the prime's next invoice.
- Mediate the dispute between the prime contractor and the subcontractor.
- Direct the subcontractor to resolve the issue directly with the prime contractor. (Correct answer)
- Initiate a termination for default against the prime contractor for failure to pay its subcontractor.
Correct answer: Direct the subcontractor to resolve the issue directly with the prime contractor.
The principle of privity of contract means that a direct contractual relationship exists only between the parties who signed the contract. In this case, the government has a contract with the prime, and the prime has a separate contract with the subcontractor. There is no direct contractual relationship between the government and the subcontractor. Therefore, the Contracting Officer should direct the subcontractor to address their payment issues with the prime contractor, as that is where the contractual obligation lies.
Question 2: What is the primary objective of a Contractor Purchasing System Review (CPSR) conducted by the government?
- To select the best subcontractors for a specific government project on behalf of the prime.
- To evaluate the efficiency, effectiveness, and compliance of a prime contractor's purchasing system with government policy. (Correct answer)
- To approve every individual subcontract purchase order before it is issued by the prime contractor.
- To negotiate lower prices with suppliers for all major subcontracts.
Correct answer: To evaluate the efficiency, effectiveness, and compliance of a prime contractor's purchasing system with government policy.
According to FAR Subpart 44.3, the primary objective of a CPSR is to evaluate the efficiency and effectiveness with which the contractor spends Government funds and complies with Government policy when subcontracting. The review provides the administrative contracting officer (ACO) a basis for granting, withholding, or withdrawing approval of the contractor's entire purchasing system, not to approve individual purchase orders or negotiate prices.
Question 3: A prime contractor is preparing a subcontract for commercial services under a non-commercial government contract. According to FAR 52.244-6, which of the following clauses is generally required to be flowed down to the subcontractor?
- Cost Accounting Standards (FAR 52.230-2)
- Changes - Fixed-Price (FAR 52.243-1)
- Government Property (FAR 52.245-1)
- Equal Opportunity (FAR 52.222-26) (Correct answer)
Correct answer: Equal Opportunity (FAR 52.222-26)
FAR 52.244-6, Subcontracts for Commercial Products and Commercial Services, specifies the mandatory clauses that must be flowed down to subcontracts for commercial items. Clauses related to fundamental public policy, such as Equal Opportunity (FAR 52.222-26), are required. Clauses like Cost Accounting Standards, the prime's specific Changes clause, and the Government Property clause are not automatically required for all commercial subcontracts and are only included if specific conditions are met.
Question 4: A prime contractor holds a cost-reimbursement contract that includes the clause FAR 52.244-2, Subcontracts. The contractor does not have a government-approved purchasing system. What action must the prime contractor take before awarding a new time-and-materials subcontract?
- Obtain the Contracting Officer's written consent. (Correct answer)
- Proceed with the award, as consent is only needed for cost-reimbursement subcontracts.
- Notify the Contracting Officer within 15 days after making the award.
- Request a new purchasing system review before awarding the subcontract.
Correct answer: Obtain the Contracting Officer's written consent.
When a contractor does not have an approved purchasing system, FAR 52.244-2(c) requires the contractor to obtain the Contracting Officer's written consent before placing any subcontract that is of the cost-reimbursement, time-and-materials, or labor-hour type. This requirement applies regardless of the subcontract's dollar value.
Question 5: In the context of subcontract management, what is the primary purpose of a "Make-or-Buy" program plan submitted to the government?
- To provide a list of pre-approved subcontractors for the contract.
- To satisfy small business subcontracting goals before proposal submission.
- To document the contractor's final, unchangeable sourcing decisions.
- To allow government review and agreement on the contractor's plan to produce items in-house versus subcontracting them. (Correct answer)
Correct answer: To allow government review and agreement on the contractor's plan to produce items in-house versus subcontracting them.
A Make-or-Buy program, governed by FAR 15.407-2, is a plan submitted by an offeror that outlines which major items will be produced in-house ('make') and which will be acquired from outside sources ('buy'). This allows the government to review, negotiate, and agree upon these critical sourcing decisions to ensure the lowest overall cost and risk.
Question 6: A prime contractor delivers a final product to the government. During acceptance, a critical component provided by a subcontractor is found to be non-conforming to the prime contract's specifications. Who is ultimately responsible to the government for correcting the defective component?
- The subcontractor, because they manufactured the faulty component.
- The prime contractor, for all aspects of contract performance. (Correct answer)
- The government, if it consented to the award of that specific subcontract.
- Both the prime contractor and subcontractor, who are jointly and severally liable.
Correct answer: The prime contractor, for all aspects of contract performance.
Due to the principle of privity of contract, the prime contractor is solely responsible to the government for the performance of the entire contract, including all work performed by its subcontractors. The government's contractual relationship is with the prime, and it looks to the prime to deliver a product that meets all specifications, regardless of the source of any defects. Government consent to a subcontract does not relieve the prime of this responsibility.
NCMA - National Contract Management Association Subcontract Management Questions and Answers
A subcontractor on a fixed-price government contract is dissatisfied with a payment delay from the prime contractor.
The subcontractor contacts the government's Contracting Officer directly to demand payment for services rendered.
What is the Contracting Officer's most appropriate response based on the principle of privity of contract?