You're a Subcontractor. The FAR Isn't Your Contract.

Melissa Jones

Aug 24

9 min read

If you're a subcontractor on a federal contract, I have some news:

The FAR isn't your contract.

Before anyone starts typing an angry comment — no, I am not saying the FAR doesn't apply to subcontractors.

It absolutely can.

But there is an important distinction between working on a federal contract and having a contract with the federal government.

If you're a subcontractor, your contractual relationship is generally with the prime contractor — or, if you're a lower-tier subcontractor, with another subcontractor.

And understanding that distinction matters a lot more than you might think.

Prime Contractor vs. Subcontractor: Who Is Your Customer?

A federal prime contractor has a direct contractual relationship with the Government.

A subcontractor generally does not.

In contracting terms, the Government and the prime contractor have privity of contract. The subcontractor's contractual relationship is with the prime — not the Government.

The SBA describes the distinction pretty simply: prime contractors work directly with the Government and are responsible for managing their subcontractors. Subcontractors work for other contractors rather than directly for the Government.

So if ABC Company receives a federal prime contract and hires XYZ Company to perform part of the work:

Government → ABC Company → XYZ Company

ABC has a contract with the Government.

XYZ has a subcontract with ABC.

That distinction affects far more than who signed which document.

It affects who can direct work, who receives contractual notices, who submits invoices, who negotiates changes, who communicates contractual matters to the Government and who has contractual rights against whom.

XYZ may be performing work that ultimately benefits the Government.

XYZ employees may even work alongside Government personnel every day.

But that doesn't make XYZ a party to ABC's contract with the Government.

XYZ's subcontract establishes the contractual relationship between ABC and XYZ — including scope, price, invoicing, deliverables, period of performance, terms and conditions, and applicable FAR, DFARS or agency-specific requirements incorporated into the agreement.

This sounds basic.

In practice, the lines get blurry surprisingly fast.

"But We're Working on a Government Contract."

You are.

And that matters.

But working on a federal contract doesn't automatically make every term of the prime contract your contractual obligation.

This is where flowdown clauses enter the picture.

Certain FAR, DFARS and agency-specific requirements must be included in applicable subcontracts when the conditions of the clause require it. Other requirements may be incorporated because they're necessary for the prime contractor to meet its own obligations to the Government.

Whether a particular clause belongs in a subcontract can depend on a number of factors, including:

What is being purchased
Whether the subcontract is for commercial products or commercial services
Subcontract value and applicable dollar thresholds
The type of work being performed
The agency
The requirements of the prime contract
The language of the individual clause
The subcontract tier

In other words:

"It's in our prime contract" does not automatically mean "it applies to every subcontractor."

But the opposite can be equally dangerous:

"We're only a subcontractor, so the FAR doesn't apply to us" isn't correct either.

The better questions are:

Which requirement? Under what circumstances? And what does your subcontract actually say?

Flowdowns Aren't a Find-and-Replace Exercise

There's a practice I see, particularly with companies newer to federal prime contracting, that seems logical on the surface.

Take the prime contract.

Replace references to the "Government" with "Prime Contractor."

Replace "Contractor" with "Subcontractor."

Include all of the terms and FAR clauses from the prime contract.

Send it to the subcontractor.

Done.

The thinking is understandable:

If we flow everything down, we can't accidentally miss something we're required to flow down...right?

Unfortunately, it isn't that simple.

Not every requirement in a prime contract belongs in every subcontract.

Some clauses are mandatory flowdowns when specified conditions are met.

Some apply only above certain dollar thresholds.

Some depend on the type of work, product or service being purchased.

Some apply differently to commercial products and commercial services.

Some clauses expressly require particular language or appropriate substitutions when incorporated into a subcontract.

And sometimes a prime may need to include a requirement that isn't a mandatory FAR flowdown because the prime needs a corresponding obligation from its subcontractor in order to satisfy the prime contract.

That's why a proper flowdown analysis isn't:

CTRL + H: Government → Prime Contractor.

It's an applicability review.

And Subcontractors Can Fall Into the Same Trap

There's another side to this problem.

A small business receives a subcontract containing pages of FAR and DFARS clauses.

It looks official.

It's supporting a federal contract.

The prime included the clauses.

So the subcontractor assumes:

"I guess all of this is required."

And signs it.

But the fact that a clause appears in a proposed subcontract doesn't necessarily mean the Government required that particular clause to be flowed down to that particular subcontract.

The subcontractor is still responsible for understanding the agreement it's signing.

That doesn't mean every subcontractor needs to become a FAR expert before accepting federal work.

It does mean someone should be asking questions such as:

Is this a mandatory flowdown?
Does the clause apply at this subcontract value?
Does it apply to the product or service we're providing?
Does it apply to commercial products or commercial services?
Does the clause require flowdown to lower tiers?
Has the clause been appropriately modified for the prime-subcontractor relationship?
Is this requirement here because the FAR requires it, or because the prime is contractually requiring it?
What operational obligation are we actually accepting?

There's an important distinction here:

A clause doesn't have to be a mandatory FAR flowdown for the prime and subcontractor to agree that it will apply.

If you sign a subcontract containing additional contractual requirements, the question may no longer be simply whether the FAR required the clause to be flowed down.

You agreed to the subcontract.

That's why the time to understand those requirements is before you sign it.

More Isn't Always Better

Prime contractors sometimes approach flowdowns conservatively because they don't want to miss something.

That's understandable.

Missing a required flowdown can create compliance risk for the prime.

But blindly including every clause isn't necessarily better subcontract administration.

Commercial products and commercial services provide a good example.

FAR 52.244-6 identifies clauses that must be flowed down in applicable subcontracts for commercial products and commercial services. It also contemplates including only a minimal number of additional clauses necessary for the prime contractor to satisfy its contractual obligations.

In other words, the federal procurement system itself recognizes that every clause in the prime contract does not automatically belong in every subcontract.

A good flowdown review asks:

What must be flowed down?

What else does the prime need to include to satisfy its own contractual obligations?

What is appropriate for this particular subcontract?

What doesn't belong here?

And then both parties need to understand what those requirements actually mean.

A twelve-page list of FAR and DFARS clauses doesn't accomplish much if nobody on either side knows what obligations they create.

Privity Matters — Especially When Talking to the Government

The lack of privity between the subcontractor and the Government isn't just a legal technicality.

It affects day-to-day contract performance.

Subcontractor employees may interact with Government personnel regularly. Depending on the work, they may attend meetings together, work at the same location, participate in technical discussions or communicate about routine performance matters.

But working with the Government isn't the same thing as having contractual authority to deal directly with the Government.

Many subcontracts specifically restrict or control communications between the subcontractor and Government personnel, particularly communications involving contractual matters.

Why?

Because the prime contractor is the party in privity with the Government and is ultimately responsible for performance of the prime contract.

The prime needs visibility into — and often control over — communications that could affect scope, schedule, cost, deliverables, contractual interpretation or performance.

For the subcontractor, that means reading the subcontract carefully enough to understand:

What am I permitted to discuss directly with the Government?

What needs to go through the prime?

That distinction becomes particularly important when a conversation starts moving from routine coordination into contractual direction.

"The Government Asked Us To..." Can Be a Dangerous Sentence

Imagine you're performing as a subcontractor and a Government representative asks your employee to make a change.

Maybe it's:

"Can you add this to the report?"

Or:

"We need your team to start doing this every week."

Or the ever-popular:

"It's a small change. Just take care of it."

The request may be completely reasonable.

The Government representative may even believe the request falls within the existing requirement.

But the subcontractor should be very careful about treating that conversation as authorization to change its contractual performance.

Remember the contractual chain:

Government → Prime Contractor → Subcontractor

If the request affects scope, cost, schedule, staffing, deliverables or another contractual requirement, the subcontractor should bring it back through the prime contractor and follow the change process established in the subcontract.

There are really two potential problems with simply acting on the Government's request.

First, the subcontractor may be accepting direction from someone who doesn't have authority under the subcontract to direct the subcontractor's work.

Second, communicating or negotiating directly with the Government about the contractual issue may itself conflict with the subcontract's communication requirements.

That's how you can end up in an uncomfortable situation:

The Government asked for the work.

The subcontractor performed the work.

The prime didn't authorize the change.

And now there's a disagreement about who's paying for it.

That is not the time you want to start figuring out who actually had authority to authorize the change.

A much safer response is:

"Let me coordinate that through our prime."

That doesn't mean subcontractors shouldn't communicate with Government personnel.

It means everyone needs to understand the boundaries of those communications and respect the contractual chain.

Your Invoice Goes to the Prime, Too

The same concept applies to payment.

In a normal prime-subcontractor relationship, the subcontractor invoices the party it contracted with.

The Government pays the prime contractor under the prime contract.

The prime pays the subcontractor according to the terms of the subcontract.

Those subcontract terms matter.

They may establish:

Invoice format and submission requirements
Supporting documentation
Billing frequency
Payment terms
Withholding provisions
Approval requirements
Allowable cost requirements
Funding limitations
Procedures for disputed invoices

A subcontractor shouldn't assume that because the Government approved something, funded the prime contract or paid the prime, the subcontractor's payment rights automatically work the same way.

Read the payment terms in your subcontract.

Preferably before you're trying to collect an overdue invoice.

What Happens When the Prime Contract Changes?

Here's another reason subcontract administration matters after award.

Prime contracts change.

Funding changes.

Periods of performance get extended.

CLINs are added or modified.

Requirements change.

Options are exercised.

Work gets stopped.

Contracts get terminated.

None of that means a subcontract should simply sit untouched in a folder for three years.

The prime contractor needs to determine whether a change to its contract affects its subcontractors and, when appropriate, modify the subcontract accordingly.

Likewise, subcontractors shouldn't assume that every prime contract modification automatically changes their subcontract.

If the Government extends the prime contract's period of performance, for example, that doesn't magically rewrite the dates in a separately executed subcontract.

Someone still needs to administer the subcontract.

The Prime Has Responsibilities, Too

This isn't just a warning for subcontractors.

Prime contractors have responsibilities when they decide to subcontract work.

Subcontract management includes much more than selecting a vendor, issuing a purchase order and paying invoices.

Depending on the contract and subcontract, primes may need to manage:

Applicable FAR, DFARS and agency-specific flowdowns
Subcontract consent requirements
Small-business subcontracting requirements
Funding
Deliverables
Changes and modifications
Invoice review
Compliance requirements
Cybersecurity requirements
Subcontractor performance
Lower-tier subcontracting
Government communications
Closeout

FAR Part 44's definition of a Contractor Purchasing System Review describes subcontract management as extending from development of the requirement through completion of subcontract performance.

Signing the subcontract isn't the end of subcontract administration.

It's the beginning.

And Subcontractors Need to Read More Than the Statement of Work

For subcontractors, the lesson is equally important.

Don't just read your scope and your price.

Read the entire subcontract.

Understand:

What requirements have been flowed down to you
What deliverables you're responsible for
Who can authorize changes
What communications with Government personnel are permitted
What communications must go through the prime
How and when you invoice
What happens if work is delayed or stopped
What notice requirements apply
What records you must maintain
What compliance obligations you've accepted
What happens if the prime contract is terminated
What your subcontract says about disputes and termination

And if your subcontract incorporates another document by reference?

Go read that too.

You don't want to discover a requirement for the first time because someone says:

"Well, it's in the subcontract."

The FAR Matters. But So Does the Contract You Actually Signed.

Federal subcontracting comes with layers.

There's the prime contract.

There's the FAR and, depending on the agency, supplements such as the DFARS.

There are mandatory flowdowns.

There may be additional requirements the prime needs to impose to meet its own contractual obligations.

There is a contractual chain that determines who has rights and responsibilities to whom.

And then there's the subcontract that establishes the agreement between the prime and subcontractor.

Understanding how those pieces fit together is part of good contract administration — on both sides of the subcontract.

So yes, if you're performing on a federal contract, you should understand the federal requirements affecting your work.

But don't make the mistake of thinking that working on a Government contract means you have a contract with the Government.

Read the prime contract to understand the environment you're operating in.

Read your subcontract to understand the agreement you're actually operating under.

And if you're the prime?

Make sure the subcontract you're issuing actually reflects the obligations you need your subcontractor to perform — and establishes clear boundaries for how that subcontractor interacts with your Government customer.

Because "we flowed down the whole FAR" isn't a subcontracting strategy.

Find & Replace isn't contract administration.

And "the Government told us to" isn't a substitute for contractual authority.

This article provides general information regarding federal contracting and subcontract administration and is not legal advice. Applicability of specific FAR, DFARS or agency requirements depends on the prime contract, subcontract, acquisition and individual clause.