FAR-Compliant Subcontract Agreement

FAR-Compliant Subcontract Agreement

Drafts a subcontract between a prime contractor and subcontractor under a U.S. federal government prime contract with full regulatory compliance and appropriate risk allocation.

Prerequisites

Gather before drafting:

1. Prime contract — number, agency, contract type (FFP/CR/T&M), period of performance, value, Section I clause list
2. Parties — legal names, DUNS/UEI, CAGE codes, SAM registration for both prime and sub
3. Scope — SOW portions subcontracted, deliverables, milestones, labor categories
4. Security — clearance levels (facility/personnel), CUI/CDI handling, NIST SP 800-171 status
5. Special — Buy American/TAA, small business goals, ITAR/EAR applicability, key personnel

Quick Start

1. Identify contract type — drives pricing, termination, cost accounting, and clause selection
2. Pull Section I clause list from prime contract — flow down only what actually applies
3. Check FAR 52.244-2 — if CO consent required, make agreement contingent on approval
4. Draft using the document structure and flow-down schedule below

Document Structure

Flow-Down Clause Schedule

Include clause number, title, and date for each. Adapt to contract type:

Substitution rule: Replace "the Government," "the Contracting Officer," and "the Contractor" with the prime contractor — except where the U.S. Government retains direct rights (audit, inspection, data rights).

Contract-Type Pricing

Payment Terms

Invoice must include: subcontract and prime contract numbers, CLIN/milestone ID, work description, amounts per CLIN, cost backup (CR/T&M only), authorized certification.

• Prime reviews within [14] business days of proper invoice
• Payment within [30] days of approval, subject to receipt of corresponding government payment
• Prompt Payment Act flow-down if applicable

Withholding triggers: defective deliverables, failure to pay lower-tier subs, disputed amounts. Cure period required before withholding (except disputed amounts).

T4C Recovery Formula

Recovery = accepted-work price + allowable WIP costs (FAR Part 31) + reasonable settlement expenses + reasonable profit on work performed − prior payments − setoffs.

• Cap: total subcontract price
• Sub must mitigate (stop work, cancel orders, settle lower-tier claims)
• Submission deadline: [1 year] from effective termination date

Insurance Minimums

Prime as additional insured (CGL, auto); waiver of subrogation; 30-day cancellation notice; certificates before work starts.

Critical Checks

• Contract type first — determines pricing, termination, CAS, and flow-down selection
• Verify Section I — flow down only clauses actually in the prime contract plus mandatory by-operation-of-law clauses
• CO consent (FAR 52.244-2) — if required above threshold, make agreement contingent on approval
• Pay-when-paid vs. pay-if-paid — some jurisdictions void pay-if-paid; use "subject to receipt of corresponding government payment" formulation
• Order of precedence — subcontract terms > FAR/DFARS clauses > attachments/exhibits > SOW (confirm with client)
• Incorporate by reference — cite clause number, title, date; do not reproduce full FAR text
• CAS (CR only) — applies above $2M (FAR 52.230-2) unless exempt [VERIFY current threshold]
• Cybersecurity (defense) — DFARS 252.204-7012 and CMMC must flow to any sub handling CDI/CUI; confirm SPRS score or CMMC level
• Export controls — if ITAR/EAR applies, prohibit disclosure to foreign persons without authorization (separate from classification requirements)
• Record retention — minimum 3 years after final payment; longer if prime contract specifies or claims pending
• Small business plans — if FAR 52.219-9 in prime and sub is other-than-small, sub may need its own plan
• Mark [VERIFY] — on current dollar thresholds, CMMC implementation dates, and recently amended clauses