A hallmark of subcontracting in government contracts is the requirement to flow-down certain provisions of the prime contract to subcontractors. The FAR outlines mandatory and suggested flow-downs, but the prime will also want to evaluate with counsel whether to include additional requirements in subcontracts.
One example is termination for convenience, a key aspect of procurement contracting which is not a required flow-down but one that a prime will certainly want to include in its subcontracts. If the government terminates the prime contract for convenience and the subcontract does not include a parallel provision, the prime may face opposition from its subcontractor regarding termination. The subcontractor may argue that the government’s termination for convenience is not adequate cause for the prime to terminate the subcontract.
The easy fix (and one I see in most subcontracts) is to simply include a provision that allows the prime to terminate the subcontract for convenience. Subcontractors will want to ensure that the termination for convenience flow-down is based on similar action from the government and that the clause includes the same rights for submitting settlement proposals.
Our government contracts posts are published by Attorney Kristi Morgan Aronica. She serves as counsel to prime contractors and subcontractors in the government contracts market throughout Texas and nationally.