Flowdown Clauses for Commercial Items

First, congratulations to your and your firm, ThomCons. Could you please elaborate as to whether your firm does DOD work (or FAR only) and exactly how this DCMA information was communicated i.e., observation, finding, comment, significant deficiency, etc., and whether your firm has formally responded to DCMA with the arguments presented above? By the way, DFARS 252.244-7000 states as follows: "The Contractor is not required to flow down the terms of any Defense Federal Acquisition Regulation Supplement (DFARS) clause in subcontracts for commercial items at any tier under this contract, unless so specified in the particular clause."

My firm does DOD and NASA work.  DCMA communicated it as a finding and deficiency.  We submitted the above stated language to our Lead Auditor via email, but have not received a response.  We did not formally submit it in our response, as we did not want to jeopardize receiving an approved system.  Now that we have the approved system, we are looking to receive relief from this requirement.

My view:

1. I don't think you will be successful in obtaining any relief from DCMA because DCMA can not change your contracts. FAR Part 44 is not a prime contract provision and is instructive as to reviews.

2. FAR 52.244-6 merely including a basic list of clauses that must be flowed. However, it does not state that all other mandatory flowdown clauses included in your contract are deleted from your contract in cases where your are procuring a commercial item.

3. To be compliant with your contract, mandatory flowdowns must be flowed as indicated, whether they are FAR, NASA, DOD or some other Agency clause. This is reinforced for DOD clauses per 252.244-7000, when included in your contract.  

4. The "may flow additional clauses" language in 52.244-6 and 252.244-7000 refers to clauses other than mandatory flowdown clauses. It says "may" because it is up to you whether you wish to be in breach of contract or not. Example: Your end item starts out as an automobile, your prime states that all end items must be made in the USA (and is not a mandatory flowdown clause), and your end item automobile is qualified as made in the USA. if your end item under this contract eventually is a spare end steering wheel which itself never qualified as made in the USA, you may be in breach of contract for purchasing it and delivering it to the Government under this contract.

Neil, I'm not quite sure I follow your point 2. when you state that FAR 52.244-6 "does not state that all other mandatory flowdown clauses included in your contract are deleted from your contract in cases where your are procuring a commercial item."  Are you saying that clauses in the prime contract that by their terms are to be included in subcontracts must be included in subcontracts for commercial items even if they are not a clause listed in 52.244-6?

yes, Retreadfed.

Neil Roberts said:

yes, Retreadfed.

Neil,

See FAR 44.402( b ):

Quote

The clause at 52.244-6, Subcontracts for Commercial Items, implements the policy in paragraph (a) of this section. Notwithstanding any other clause in the prime contract, only those clauses identified in the clause at 52.244-6 are required to be in subcontracts for commercial items or commercial components.

To explain. My yes is most clearly the case for DFARS flowdown clauses per 252.244-7000. FAR clauses, less clear. However, as a procurement system business model, I would not choose the risk of a breach of contract claim for failing to do so. Also, what would you do if DFARS 252.244-7000 and FAR 52.244-6 are included in the same prime? Would you go so far as to say that 52.244-6 takes precedence and nullifies 252.244-7000 and that only the specified FAR clauses in 52.244-6 are required to be flowed?

Neil, isn't that statement a little overly broad?  Some mandatory flowdown clauses, such as 52.215-2 are not authorized for use in contracts for commercial items but do not contain language that says the clause is not required in subcontracts for commercial items.

Neil, my reading of 252.244-7000(a) is that the other DFARS clause in the prime contract must specify that it is to be included in subcontracts for commercial items in order for it to be inserted in such subcontracts.  It is narrower than a requirement to include all DFARS flowdown clauses from the prime contract into subcontracts for commercial items.

Don Mansfield said:

Neil,

See FAR 44.402( b ):The clause at 52.244-6, Subcontracts for Commercial Items, implements the policy in paragraph (a) of this section. Notwithstanding any other clause in the prime contract, only those clauses identified in the clause at 52.244-6 are required to be in subcontracts for commercial items or commercial components.

Don, This language is not included in the contract. Also, how do you see the flowdown situation when DFARS 252.244-7000 is also included in the prime?

On 5/10/2017 at 2:25 PM, ThomCons said:

DCMA informed us that if our prime contract is issued under FAR Part 15, all required flowdown clauses are applicable to the procurement of commercial items under the contract, regardless of FAR 521.244-6 being included.

What you say that DCMA told you is patently false. I do not believe that DCMA told you that. I think you misunderstood them.

Neil Roberts said:

Don, This language is not included in the contract. Also, how do you see the flowdown situation when DFARS 252.244-7000 is also included in the prime?

So what? Any contracting officer requiring a prime to include clauses other than those identified in FAR 52.244-6 in subcontracts for commercial items or commercial components would be deviating from FAR 44.402(b).

If the contract contained DFARS 252.244-7000, then the prime would not be required to flow down any DFARS clauses in subcontracts for commercial items unless the DFARS clause specifically stated that it was to be included in subcontracts for commercial items.

Don Mansfield said:

So what? Any contracting officer requiring a prime to include clauses other than those identified in FAR 52.244-6 in subcontracts for commercial items or commercial components would be deviating from FAR 44.402(b).

The contracting officer does not know whether or if a prime will be procuring commercial items. The prime contract in my experience, necessarily includes the clauses needed or required per the prescription for each clause corresponding to the contract work, contract type, etc. Those clauses in the prime are not necessarily limited to only the clauses in FAR 52.244-6. Including those clauses is not a deviation from FAR 44.402(b). Some of those required clauses may include mandatory flowdowns.

Neil Roberts said:

The contracting officer does not know whether or if a prime will be procuring commercial items. The prime contract in my experience, necessarily includes the clauses needed or required per the prescription for each clause corresponding to the contract work, contract type, etc. Those clauses in the prime are not necessarily limited to only the clauses in FAR 52.244-6. Including those clauses is not a deviation from FAR 44.402(b). Some of those required clauses may include mandatory flowdowns.

Emphasis added.

Absolutely wrong.

The prime contract clauses tell the prime what it must flow down. But the prime contract must be read as a whole and in light of policy. FAR 44.402(b) and 52.244-6 are unequivocal about clauses the government requires the prime to flow down to subcontracts for commercial items, and they override individual clause flowdown prescriptions. They implement statutory policy--41 U.S.C. § 3307. According to FAR 44.402(b):

Quote

Notwithstanding any other clause in the prime contract, only those clauses identified in the clause at 52.244-6 are required to be in subcontracts for commercial items or commercial components.

How is that not clear?

FAR 52.244-6 allows the prime to flowdown additional clauses at its own initiative so that it can meet its obligations to the government, but it does not require flowdown of any clauses except in accordance with its terms.

As for what the CO knows about the nature of a subcontract--commercial or noncommercial--the determination of whether a subcontract is for a commercial item is a matter of contract interpretation and is subject to claim and dispute. If the CO thinks that a subcontract is not commercial and that clauses other than those listed in 52.244-6 should have been flowed down he or she can file a government claim.

Retreadfed said:

Neil, my reading of 252.244-7000(a) is that the other DFARS clause in the prime contract must specify that it is to be included in subcontracts for commercial items in order for it to be inserted in such subcontracts.  It is narrower than a requirement to include all DFARS flowdown clauses from the prime contract into subcontracts for commercial items.

Retreadfed, I respect your reading of 252.244-7000(a), but I think the clause is ambiguous and I feel it to be too risky to adopt your view at this time. My reading is that the Contractor is not required "to flow...unless so specified." My reading of "so specified" is that any mandatory flowdown is required to be flowed because it is specified. It doesn't have to specify that it be flowed in commercial items. Would be receptive to your reading if there was some definitive guidance other than our opinions. I have not had time to research this further. In my experience, those that I would flow can be challenged by the subcontractor and deleted during negotiations if warranted as inoperative/inapplicable.

On 6/1/2017 at 10:22 PM, Neil Roberts said:

Retreadfed, I respect your reading of 252.244-7000(a), but I think the clause is ambiguous and I feel it to be too risky to adopt your view at this time. My reading is that the Contractor is not required "to flow...unless so specified." My reading of "so specified" is that any mandatory flowdown is required to be flowed because it is specified. It doesn't have to specify that it be flowed in commercial items.

DFARS 252.244-7000 (JUN 2013) says:

Quote

SUBCONTRACTS FOR COMMERCIAL ITEMS (JUN 2013)

      (a)  The Contractor is not required to flow down the terms of any Defense Federal Acquisition Regulation Supplement (DFARS) clause in subcontracts for commercial items at any tier under this contract, unless so specified in the particular clause.

      (b)  While not required, the Contractor may flow down to subcontracts for commercial items a minimal number of additional clauses necessary to satisfy its contractual obligation.

      (c)  The Contractor shall include the terms of this clause, including this paragraph (c), in subcontracts awarded under this contract, including subcontracts for the acquisition of commercial items.

(End of clause)

The language at issue between Neil and Retread is highlighted. The sentence in which it appears is not ambiguous. An illustration of "specified in the particular clause" can be seen in DFARS 252.223-7008 (JUN 2013), paragraph (d):

Quote

(d)  Subcontracts.  The Contractor shall include the substance of this clause, including this paragraph (d), in all subcontracts, including subcontracts for commercial items, that are for supplies, maintenance and repair services, or construction materials.

Absent the highlighted phrase, there is no mandatory flowdown under DFARS 252.244-7000 (JUN 2013). This is clear if you follow the development of DFARS 252.244-7000 in the Federal Register since the earliest version of the current clause.

At present 18 DFARS clauses contain the highlighted language. All are dated on or after "JUN 2013," the date of the current version of 252.244-7000. See, e.g., DFARS 252.247-7023 (APR 2014):

Quote

(h) In the award of subcontracts for the types of supplies described in paragraph (b)(2) of this clause, including subcontracts for commercial items, the Contractor shall flow down the requirements of this clause as follows:

(1) The Contractor shall insert the substance of this clause, including this paragraph (h), in subcontracts that exceed the simplified acquisition threshold in part 2 of the Federal Acquisition Regulation.

(2) The Contractor shall insert the substance of paragraphs (a) through (e) of this clause, and this paragraph (h), in subcontracts that are at or below the simplified acquisition threshold in part 2 of the Federal Acquisition Regulation.

See also DFARS 252.237.7010 (JUN 2013):

Quote

(c) Subcontracts. The Contractor shall include the substance of this clause, including this paragraph (c), in all subcontracts, including subcontracts for commercial items, that may require subcontractor personnel to interact with detainees in the course of their duties.

On 6/1/2017 at 2:56 PM, Neil Roberts said:

Also, what would you do if DFARS 252.244-7000 and FAR 52.244-6 are included in the same prime? Would you go so far as to say that 52.244-6 takes precedence and nullifies 252.244-7000 and that only the specified FAR clauses in 52.244-6 are required to be flowed?

On 6/1/2017 at 3:18 PM, Neil Roberts said:

Also, how do you see the flowdown situation when DFARS 252.244-7000 is also included in the prime?

Contracts awarded by DOD that are for other than commercial items must include both FAR 52.244-6 and DFARS 252.244-7000. See the respective clause prescriptions. The FAR clause refers to FAR clauses. The DFARS clause refers to DFARS clauses. There is no conflict between them.

Even though FAR 52.244-6 does not include the sentence, "Notwithstanding any other clause in the prime contract, only those clauses identified in the clause at 52.244-6 are required to be in subcontracts for commercial items or commercial components"  from FAR 44.402(b), a CO must interpret the FAR as a whole and integrate its parts. FAR 44.402(b) is binding on COs and prohibits them from interpreting FAR 52.244-6 differently.

Good comments by contributors above which can serve you well in your defense. It is all about risk to me. I would rather reduce or eliminate: (a) customer allegations that a prime contract clause requirement was breached and harmed the customer (is anyone aware of any federal case, statute or FAR regulation holding a prime contractor insulated from all prime contract liability caused by furnishing the customer with a commercial item which was not compliant with a prime contract clause?) (b) risk to an approved procurement system due to DCMA allegations of flowdown deficiency or (c) receiving mid-course allegations by a customer that the subcontractor goods or services are not commercial. My experience is that when the customer perceives that a prime contractor caused a serious or possibly embarrassing problem, people just run to the contract and look at the plain words in the four corners of the document. During negotiations with a commercial item subcontractor, it's objection to clauses can be examined by the prime contractor for risk and deleted if the prime contract risk is acceptable. Also, the subcontractor can view many flowed clauses as little risk due to it being inapplicable. They should have no objection to its inclusion.All clauses that help satisfy the prime contractor's contractual obligation to the customer should be flowed.

Neil:

I am not aware of any action by the Government against a prime contractor based on failure to to flow down a clause, but I have not researched it properly.

DCMA might hold it against you for needlessly flowing down clauses to commercial items contractors. They might think that it inhibits such contractors from  working under Government prime contracts or subcontracts, which the Government is desperate for them to do. As an ACO, I might complain that needlessly flowing down noncommercial clauses to commercial items contractors might raise their prices.

I agree that all clauses that help satisfy the prime contractor's obligation to the customer should be flowed, which is why clauses should not be needlessly flowed contrary to statute and regulation. FAR 52.244-6 is a mandatory flowdown clause.

Government prime contractors should know the regulations and the clauses in their contracts well enough to know what they must do, must not do, and need not do.

Basically, you're telling us that because your company is not sure about the proper interpretations of FAR and of its contracts it is engaging in what it considers to be risk reducing behavior, but it is also cost increasing behavior. Putting needless clauses into subcontracts requires the prime to take responsibility for enforcing them and for subcontractor noncompliance. Remember, if a sub does not comply the government usually goes after the prime.

Vern Edwards said:

What you say that DCMA told you is patently false. I do not believe that DCMA told you that. I think you misunderstood them.

I think you place too much confidence in the DCMA reviewers. Contractor horror stories about bogus deficiencies abound. As the OP noted, contractors will tend to agree to anything, no matter how patently wrong, if their business system approval is on the line. That mandatory 5% payment withhold is draconian.

Although this quote from FAR 1.102-2 is directed toward contracting officers, it should be considered by prime contractors in their relationships with subs "To achieve efficient operations, the System must shift its focus from “risk avoidance” to one of “risk management.” The cost to the taxpayer of attempting to eliminate all risk is prohibitive. The Executive Branch will accept and manage the risk associated with empowering local procurement officials to take independent action based on their professional judgment."

here_2_help said:

I think you place too much confidence in the DCMA reviewers.

No. I don't.

I think that people who represent companies that do business with the government should know the business. No excuses.

Vern, I agree with your last sentence.  However, I hope you will agree that the big problem today is not contractors' lack of knowledge concerning government procurement, but an all too common lack of knowledge by both contractors and government personnel.  As H2H indicated, there are numerous horror stories that contractors can tell concerning CPSRs where the government personnel were absolutely clueless.  The same can be said for PCOs, ACOs, property administrators, and auditors.  A prime example of this was the ASBCA's decision in http://www.asbca.mil/Decisions/2016/59508, 59509 Lockheed Martin Integrated Systems, Inc. 12.20.16.pdf. where the Board said ""In this case, we are presented with a claim based on a legal theory, originated by an auditor, . . . [The government] has gone forward with a claim for over $ 100,000,000 that is based on nothing more than a plainly invalid legal theory."

If I have read correctly conclusions of this thread is that DCMA may not be doing an adequate job of understanding and providing advice on implementation of the FAR with regard to clauses and contractors should know and understand the FAR in the conduct of government business.  Raised as well is whether the FAR in and of itself provides less than adequate and clear advice on the specific matter of flow down of clauses to subcontracts for commercial items/components.

As illustration of the latter consider the wording in FAR 52.224-2 Privacy Act at paragraph (a)(3) and balancing the Privacy Act  clause with FAR 52.244-6,especially that at paragraph (d), and the language of FAR 44.402(b)? 

FAR 52.224(a)(3)....... Include this clause, including this subparagraph (3), in all subcontracts awarded under this contract which requires the design, development, or operation of such a system of records.

Shall a prime contractor include or not include FAR 52.224-2 in all subcontracts or not?

Retreadfed said:

Vern, I agree with your last sentence.  However, I hope you will agree that the big problem today is not contractors' lack of knowledge concerning government procurement, but an all too common lack of knowledge by both contractors and government personnel.

Retread:

I agree that ignorance is a big problem. But... Contractors cannot control what government personnel know and do not know. They can control only their own decisions to pursue particular government contracts and their own knowledge and conduct when performing them. In my opinion, contractors must decide what is and is not correct and (1) prepare written explanations of their positions, provide them to COs and to COs' bosses and lawyers, and then (2) either (a) stand up for their rights before a board of a court or (b) shut the hell up and do as they're told.

If a contractor is convinced that a CO is wrong about something and then goes along to get along  it reinforces the very ignorance that it wants to complain about and it surrenders all complaining rights in my eyes. Once a bully learns that the other guy will fight and win the bully might listen more carefully to the other guy's argument next time. At the very least, a contractor should file a firm, well-documented claim, even if it doesn't pursue an appeal. The best examples in my experience are construction contractors, most of which seem willing take your butt to court in a heartbeat. But that's a tough industry. Aerospace and defense contractors will fight over some things (cost allowability, CAS compliance, defective pricing), but not others (specification interpretation).

One reason some smaller or inexperienced contractors get pushed around is that some managers simply do not believe in the need to employ knowledgeable and experienced government contracting veterans. They think government contracting is just like commercial contracting, and they will not pay for training for their people. They will not study their contracts and the regulations that govern them. That is especially true of firms that have dealt primarily in commercial markets, because their managers don't understand the heavily regulated and bureaucratic world of government contracting and won't spend money for books and training. Their people, however, fear their own ignorance, which is why they come to Wifcon to seek free advice about what are really simple issues. Sadly, they sometimes get unsound answers or, just as bad, sound answers that are unsupported.

I fully understand that my position is harsh, perhaps unrealistic. But so was the position of my 7th grade woodshop teacher, who punched me in the side of the head and knocked me down because I leaned on a table saw table while a buddy was cutting. I was 12, I think. I never leaned on a table saw again, and I've got all my fingers and no big scars on my forearms. When a guy is working on a table saw around me I tend to get no closer than six feet away.

C Culham said:

If I have read correctly conclusions of this thread is that DCMA may not be doing an adequate job of understanding and providing advice on implementation of the FAR with regard to clauses and contractors should know and understand the FAR in the conduct of government business.  Raised as well is whether the FAR in and of itself provides less than adequate and clear advice on the specific matter of flow down of clauses to subcontracts for commercial items/components.

As illustration of the latter consider the wording in FAR 52.224-2 Privacy Act at paragraph (a)(3) and balancing the Privacy Act  clause with FAR 52.244-6,especially that at paragraph (d), and the language of FAR 44.402(b)? 

FAR 52.224(a)(3)....... Include this clause, including this subparagraph (3), in all subcontracts awarded under this contract which requires the design, development, or operation of such a system of records.

Shall a prime contractor include or not include FAR 52.224-2 in all subcontracts or not?

I assume that the prime contract entails "design, development, or operation of a system of records on individuals" that is required to accomplish an agency function. I further assume that your question is whether the prime is contractually obligated to flow FAR 52.224-2 down to subcontracts for commercial items. If that is your question, then please answer the following questions. Please limit the answers to yes or no, if possible.

1. Was the prime contract awarded pursuant to FAR Part 12?
2. If so, does any subcontract in question entail "design, development, or operation of a system of records on individuals that is subject to the Act"?
3. If so, were the terms of the prime contract altered to include FAR 52.224-2?
4. If so, was the alteration to include FAR 52.224-2 done in compliance with FAR?
5. If the prime contract was not awarded pursuant to FAR Part 12, does the contract include FAR 52.244-6?
6. If so, does any subcontract in question entail "design, development, or operation of a system of records on individuals that is subject to the Act"?
7. If so, did the agency supplement FAR 52.244-6 to include FAR 52.224-2 in accordance with FAR 44.402(c)?

Vern Edwards said:

In my opinion, contractors must decide what is and is not correct and (1) prepare written explanations of their positions, provide them to COs and to COs' bosses and lawyers, and then (2) either (a) stand up for their rights before a board of a court or (b) shut the hell up and do as they're told. ...Once a bully learns that the other guy will fight and win the bully might listen more carefully to the other guy's argument next time. At the very least, a contractor should file a firm, well-documented claim, even if it doesn't pursue an appeal.

Vern, in your opinion, is a business system determination made pursuant to 252.242-7005 a Contracting Officer Final Decision as contemplated in the Contract Disputes Act? Or is a contractor required to submit a certified claim to the contracting officer disputing that determination in order to appeal?

From my research the DAR Council was not exactly forthcoming on that question. At 77 CFR 11361 (2012) the comment reads: "Nothing in the rule negates the contracting parties’ rights and obligations under the Contract Disputes Act and disputes clause, the availability of other avenues of dispute resolution, or the entitlement to Contract Disputes Act interest on contractor claims." However, I have never heard of any contractor actually appealing a business system determination. It's come up in some bid protests, but that's the only thing I've seen. I would hazard a guess that a 10% payment withhold is too onerous to sustain through a lengthy dispute/litigation process.

Vern Edwards said:

• Was the prime contract awarded pursuant to FAR Part 12?
• If so, does any subcontract in question entail "design, development, or operation of a system of records on individuals that is subject to the Act"?
• If so, were the terms of the prime contract altered to include FAR 52.224-2?
• If so, was the alteration to include FAR 52.224-2 done in compliance with FAR?
• If the prime contract was not awarded pursuant to FAR Part 12, does the contract include FAR 52.244-6?
• If so, does any subcontract in question entail "design, development, or operation of a system of records on individuals that is subject to the Act"?
• If so, did the agency supplement FAR 52.244-6 to include FAR 52.224-2 in accordance with FAR 44.402(c)?

1.  No

5. Yes

6. Yes

7. No 52.224-2 is in the contract as a separate clause

C Culham said:

1.  No

5. Yes

6. Yes

7. No 52.224-2 is in the contract as a separate clause

Carl:

Okay, here is your question as I restated it:

Is the prime contractor contractually obligated to flow FAR 52.224-2 down to subcontracts for commercial items?

My answer is no, based on FAR 52.244-6 and this from FAR 44.402:

Quote

(b) The clause at 52.244-6, Subcontracts for Commercial Items, implements the policy in paragraph (a) of this section. Notwithstanding any other clause in the prime contract, only those clauses identified in the clause at 52.244-6 are required to be in subcontracts for commercial items or commercial components.

(c) Agencies may supplement the clause at 52.244-6 only as necessary to reflect agency unique statutes applicable to the acquisition of commercial items.

By your answers to my questions 5 and 7 you indicated that (a) FAR 52.244-6 is in the prime contract but that (b) the agency did not supplement it to add FAR 52.224-2. That being the case, the prime has not agreed to flow the clause down to subcontracts for commercial items and need not do so.

However, if I were the prime I would flow it down anyway, or something like it, based on FAR 52.244-6(c)(2):

Quote

While not required, the Contractor may flow down to subcontracts for commercial items a minimal number of additional clauses necessary to satisfy its contractual obligations.

I think that inclusion of FAR 52.224-2 in all subcontracts for "design, development, or operation of a system of records on individuals that is subject to the [Privacy] Act", including subcontracts for commercial items, is necessary in order for the prime to satisfy its contractual obligations to the government and to protect itself from liability as a "Government employee." I would want the sub to promise to comply with the Privacy Act and to indemnify my company from any liability in that regard arising from its performance.

Vern – Your thinking to get to the conclusion to include  the clause 52.224-2 in subcontracts of the prime is understood with but my read is that 44.402 is less than clear and inconsistent with its own direction.   As such I believe, in a departure with your view, that 52.224-2 is to be flowed down as a contract obligation.

Policy as stated in 44.402(a)(ii) is subcontractors  shall not be required  to apply any clause to their subcontracts except those  “__(i) Required to implement provisions of law or executive orders applicable to subcontractors furnishing commercial items or commercial components” .  FAR 52.224-2 is required by law when applicable and is not simply an agency unique requirement yet 52.244-6 does not include it.  

 I find it inconsistent with FAR stated policy at 44.402 and by direction of 52.244-6 that 52.224-3, inclusive of it’s Alt 1, is to be flowed down “when” contractor employees have access, create, design a system that includes privacy information but 52.224-2 is not.

I do understand the whole of this thread so there is no need to go further, it is just my opinion as to the obligation of the prime to include a clause such as  52.224-2. Another such clause is 52.223-18.  As such I am not as confident as you and others in this thread that the meaning of 52.244-6 is a clear contract clause in putting forth the policy stated in FAR 44.402.  That's it.

C Culham said:

Your thinking to get to the conclusion to include  the clause 52.224-2 in subcontracts of the prime is understood with but my read is that 44.402 is less than clear and inconsistent with its own direction.

Well, Carl, I've learned two things through participation in this forum:

The first is that if people will argue about what the Ten Commandments mean they'll argue about any text. Some people read a text and think it's clear and its meaning definite, while others read it, find it obscure (ambiguous, murky, unclear, vague), and then decide that it definitely means something else. Jacques Derrida was right.

The second thing I've learned is that, contrary to popular belief, discussion does not ensure resolution.

So, bottom line for this thread, I wonder if ThomCons, who started this thread, got what he needed out of it. If you are still with us Thom, what can you tell everyone?

Carl, why do you say that 52.224-2 is required to be included in contracts "by law"?  I have read the Privacy Act and can find nothing in it that refers to contract clauses.

“When an agency provides by a contract for the operation by or on behalf of the agency of a system of records to accomplish an agency function, the agency shall, consistent with its authority, cause the requirements of this section to be applied to such system.  For purposes of subsection (i) of this section any such contractor and any employee of such contractor, if such contract is agreed to on or after the effective date of this section [9-27-75], shall be considered to be an employee of an agency.”  5 U.S.C. § 552a(m)(1).

Thanks, Carl.  Note that this section only mentions "operation" of a system of records although the term "operation" is not defined in the statute.  It does not mention the design or development of a system as the clause does.  Also, this section only mentions contractor.  It does not mention subcontractors.  When congress wants a statute to apply to subcontractors, it usually mentions subcontractors in the law.  Thus, it is not clear that a definitive statement can be made that 52.224-2 is required to be included in subcontracts by law.

Retread:

You're wasting your time and breath.

FAR 44.402(b) says: "Notwithstanding any other clause in the prime contract, only those clauses identified in the clause at 52.244-6 are required to be in subcontracts for commercial items or commercial components."

FAR 52.224-3, Privacy Training, is among the clauses listed at FAR 52.244-6. FAR 52.224-2, Privacy Act, is not.

Case closed.

The following just posted LinkedIn CPSR Forum group. I do not know if this is coming from a different firm than ThomCons posted here on this thread:

DCMA's Latest Changes to Commercial Item Flow Down Clauses

Just want to give everyone a heads up in preparations for your next CPSR. We went through an audit in Dec 2016, and were cited a finding for not flowing down all required clauses for commercial items. Apparently, DCMA has taken the position that if your prime contract is issued under FAR Part 15, not only is 52.244-6 required to be flowed down for commercial items, but also all other mandatory flow downs from the prime contract. We are in disagreement with this, but are proceeding accordingly. It is causing great difficulty getting our commercial vendors to accept all the additional terms and conditions. Please let me know if others are having the same findings and issues.

Appendix 19 of the DCMA CPSR Guidebook dated May 9, 2017, does not appear to clearly instruct the DCMA review team whether or not flowdowns the team is evaluating for inclusion in subcontracts are limited by whether or not the subcontract is for a commercial item. The Appendix is a "job aid." Appendix 19 Practice section, for example, reads as follows:

"The CPSR analyst is required to utilize the Contract Flow Down tab of the DATA workbook for reference while reviewing each file. Compare the mandatory flow downs for the prime contract the procurement is being purchased for to the actual file being reviewed. Record the results of the file being reviewed in the DATA workbook for the mandatory FAR and DFARS flow downs and whether or not they were adequately flowed down to the subcontractor."

The above may be the source of the DCMA position initiated in this thread.

Vern Edwards said:

Retread:

You're wasting your time and breath.

FAR 44.402(b) says: "Notwithstanding any other clause in the prime contract, only those clauses identified in the clause at 52.244-6 are required to be in subcontracts for commercial items or commercial components."

FAR 52.224-3, Privacy Training, is among the clauses listed at FAR 52.244-6. FAR 52.224-2, Privacy Act, is not.

Case closed.

I fought a similar and equally frustrating battle at my first assignment over which provisions/clauses might be necessary for inclusion in contracts for commercial items.  FAR 12.301(d) has similar language:

Quote

(d) Other required provisions and clauses. Notwithstanding prescriptions contained elsewhere in the FAR, when acquiring commercial items, contracting officers shall be required to use only those provisions and clauses prescribed in this part. The provisions and clauses prescribed in this part shall be revised, as necessary, to reflect the applicability of statutes and executive orders to the acquisition of commercial items.

Yet still, individuals would use the entire FAR and DFARS provision/clause matrices when writing the solicitations/contracts.  I couldn't (and still can't) understand how the definition of "notwithstanding" and the language that follows was unclear, but it doesn't surprise me that some are facing a challenge in this case given the similarities.  I suppose this might be one of the procurement lore versus procurement rule issues and some people just get stuck in the way of doing things without knowing why or whether that way is proper or improper.  It's such a shame that some would rather be right instead of doing things right.

Matthew Fleharty said:

Yet still, individuals would use the entire FAR and DFARS provision/clause matrices when writing the solicitations/contracts.  I couldn't (and still can't) understand how the definition of "notwithstanding" and the language that follows was unclear, but it doesn't surprise me that some are facing a challenge in this case given the similarities.  I suppose this might be one of the procurement lore versus procurement rule issues and some people just get stuck in the way of doing things without knowing why or whether that way is proper or improper.  It's such a shame that some would rather be right instead of doing things right.

Matthew:

We are at war with promulgators of aggravated absurdities. They make everyone in our career field subjects of contempt. 

I say, Take no prisoners.

Retreadfed said:

Thanks, Carl.  Note that this section only mentions "operation" of a system of records although the term "operation" is not defined in the statute.  It does not mention the design or development of a system as the clause does.  Also, this section only mentions contractor.  It does not mention subcontractors.  When congress wants a statute to apply to subcontractors, it usually mentions subcontractors in the law.  Thus, it is not clear that a definitive statement can be made that 52.224-2 is required to be included in subcontracts by law.

Thanks Retread.....FAR 44.402  provides for mandatory clauses.  Per the same subpart the Government has the iallowance (may)  to include other clauses as appropriate.   Likewise a prime may include clauses they prefer in their subcontracts.  

As to those that the Government and a prime may feel obligated to include I will leave it to each to determine.  For me it is a slippery slope if by example the Government and the prime elect  not to include  52.224-2 in certain prime/subcontracts to which the Privacy Act would be applicable.

Right, wrong or in different application of FAR who knows as by example of statements in this thread the dang clause  (224-2) may end up in the prime/subcontract anyway.

That is it!

Carl, I do not disagree that a prime contractor may for whatever reason rightly or wrongly, include 52.224-2 in a subcontract.  My issue was with your statement that it is required to be included in subcontracts by law.  I can find no support for that statement and from your last response to me, it seems you have backed away from that position.

Okay, somewhere this conversation took a left turn.  I want to confirm to Vern that it was not a misunderstanding on my part.  This was a frank discussion between the Lead Analyst, the Analyst, my Quality Manager and myself.  The DCMA Analyst were very clear that if our prime is awarded under FAR Part 15, ALL mandatory flow down clauses are required for ANY subcontract/purchase order regardless if it is commercial or non-commercial, even if FAR 52.244-6 is in the prime contract.  DCMA further stated that 52.244-6 could not be IBR, but must be flowed down in full text, which is also questionable in my professional opinion.

I have been in this profession for over 30 years, and I have never been told or heard of this requirement.  I do believe they are wrong in their interpretation, and that maybe it is the new Appendix 19 causing DCMA some confusion.

ThomCons, were these comments made in the context of a CPSR or an evaluation of your purchasing system under DFARS 252.244-7001?  If the latter, have you received notice that your system has significant deficiencies and that you are required to develop a corrective action plan?

Yes and Yes.  We had several findings and recommendations.  We busted our butts implementing all of the corrections prior to the Initial Report being issued.  Accordingly, when we responded to our Initial Report, our actions were deemed adequate and was granted an approved system.  We did not want to rock the boat at the time of our formal response, as we weighed the risks, and decided to further address this issue after receiving an approved system.  This decision was based, in part, of our company also being assigned a new DCMA ACO whom had never dealt with a CPSR.  Now that we have the approved system, we are working to get relief from this direction, not only for ourselves, but for all other companies that have forthcoming CPSRs.  (NOTE:  ThomCons is my former consulting business, it is not the company of which I am currently employed.)

ThomsCons:

As for incorporation by reference, here is the FAR rule:

Quote

52.102 Incorporating provisions and clauses.

(a) Provisions and clauses should be incorporated by reference to the maximum practical extent, rather than being incorporated in full text, even if they—

(1) Are used with one or more alternates or on an optional basis;

(2) Are prescribed on a “substantially as follows” or “substantially the same as” basis, provided they are used verbatim;

(3) Require modification or the insertion by the Government of fill-in material (see 52.104); or

(4) Require completion by the offeror or prospective contractor. This instruction also applies to provisions completed as annual representations and certifications.

(b) Except for provisions and clauses prescribed in 52.107, any provision or clause that can be accessed electronically by the offeror or prospective contractor may be incorporated by reference in solicitations and/or contracts. However, the contracting officer, upon request, shall provide the full text of any provision or clause incorporated by reference.

(c) Agency approved provisions and clauses prescribed in agency acquisition regulations, and provisions and clauses not authorized by Subpart 52.3 to be incorporated by reference, need not be incorporated in full text, provided the contracting officer includes in the solicitation and contract a statement that—

(1) Identifies all provisions and clauses that require completion by the offeror or prospective contractor;

(2) Specifies that the provisions and clauses must be completed by the offeror or prospective contractor and must be submitted with the quotation or offer; and

(3) Identifies to the offeror or prospective contractor at least one electronic address where the full text may be accessed.

(d) An agency may develop a group listing of provisions and clauses that apply to a specific category of contracts. An agency group listing may be incorporated by reference in solicitations and/or contracts in lieu of citing the provisions and clauses individually, provided the group listing is made available electronically to offerors and prospective contractors.

(e) A provision or clause that is not available electronically to offerors and prospective contractors shall be incorporated in solicitations and/or contracts in full text if it is—

(1) A FAR provision or clause that otherwise is not authorized to be incorporated by reference (see Subpart 52.3); or

(2) A provision or clause prescribed for use in an agency acquisition regulation.

(f) Provisions or clauses may not be incorporated by reference by being listed in the—

(1) Provision at 52.252-3, Alterations in Solicitations; or

(2) Clause at 52.252-4, Alterations in Contract.

Moreover, the FAR clause matrix clearly indicates that 52.244-6 is to be incorporated by reference. So I don't know what the DCMA people are talking about in that regard.

Here's what I think:

You are dealing with professional ignoramuses. Ignoramuses are quite common in our business, as you may have noticed by reading other posts in this thread. Here's how I would deal with them: I would write a letter to the boss of the team that visited you, addressing only the topic of 52.244-6, flowdowns to subcontracts for commercial items, and IBR (keep it simple for simple minds). I would cite the appropriate references in FAR and in any applicable agency supplement. I would state my conclusions. I would ask that if they disagree with any of my conclusions that they provide a written explanation.

You could go a step further, and this may seem drastic: you could submit a claim to the contracting officer pursuant to the Disputes clause, FAR 52.233-1, demanding, as a matter of right, a final decision of the CO interpreting the contract with respect to FAR 52.244-6, flowdowns to subcontracts for commercial items, and IBR.

Some people will tell you that submitting a claim is going too far and may aggravate the people you're dealing with, but I believe in the sanctity of contracts and compliance with clear regulations. So when there is a contractual disagreement that could, or has, become serious, the parties should act in accordance with the terms of their contract. Contractors can demand a final decision on any matter that is potentially, or actually, in dispute. In the words of Michaleen Flynn, "the proprieties at all times" -- don't screw around. Get it done and over with. It won't hurt the government to learn that they're dealing with serious people.

Then again, you can go along to get along.

P.S. If you submit a claim and demand a decision interpreting the contract, demand the decision within 60 days.

Sometimes, a formal demand that the CO take a firm position will prompt some research, consultation, and rethinking by government officials.

On 6/6/2017 at 0:25 PM, Neil Roberts said:

Appendix 19 of the DCMA CPSR Guidebook dated May 9, 2017, does not appear to clearly instruct the DCMA review team whether or not flowdowns the team is evaluating for inclusion in subcontracts are limited by whether or not the subcontract is for a commercial item. The Appendix is a "job aid." Appendix 19 Practice section, for example, reads as follows:

"The CPSR analyst is required to utilize the Contract Flow Down tab of the DATA workbook for reference while reviewing each file. Compare the mandatory flow downs for the prime contract the procurement is being purchased for to the actual file being reviewed. Record the results of the file being reviewed in the DATA workbook for the mandatory FAR and DFARS flow downs and whether or not they were adequately flowed down to the subcontractor."

The above may be the source of the DCMA position initiated in this thread.

Appendix 19 cannot be the source.

I just downloaded DCMA's Contractor Purchasing System Review (CPSR) Guidebook, dated May 9, 2017.   http://www.dcma.mil/Portals/31/Documents/CPSR/CPSR_Guidebook_050917.pdf 

Appendix 19, "Mandatory FAR/DFARS Flow Down Requirements/Terms and Conditions," dated May 9, 2017, does not mention FAR 52.244-6. Appendix 19 must be read in conjunction with Appendix 21, "Commercial Item Determination," dated May 9, 2017. Appendix 21 discusses CSPR review of flowdowns to subcontracts for commercial items under noncommercial prime contracts.

Under the heading, "Review," "I Policies and Procedures," it says, in pertinent part:

Quote

Policies and Procedures 

When reviewing the contractor’s policies and procedures the CPSR Analyst should ensure that the contractor’s policy, at a minimum, requires: 

a. A written commercial item determination for both commercial supplies and services; 

b. Market research that fully supports the exercise of reasonable business judgement in the determination whether a particular item or service meets the definition of a commercial item, and whether use of commercial item is appropriate in accordance with FAR 10.002(c) and (d); 

c. The flow down of FAR 52.244-6 to subcontracts at all tiers, when applicable; 

d. The flow down of clauses specified at FAR 52.244-6(c)(1) when the prime contains the clause at FAR 52.244-6; and 

e. The flow down of DFARS 252.244-7000 in solicitations and contracts, when applicable.

 Emphasis added.

Under the heading, "Review," "II Practice," it says, in pertinent part:

Quote

When reviewing the contractor’s purchasing system, the CPSR Analyst should examine the file documentation for an indication as to whether an item and/or service is being established as commercial for the first time, or that the item and/or service is a re-procurement of an established commercial item to ascertain the documentation needed to demonstrate compliance. 

Indications that an item and/or service is being established as commercial for the first time may include the contractor’s or supplier’s assertion that an item is commercial along with the contractor’s examination of the assertion supported by market research, and subsequent written commercial item determination. 

Indications of a re-procurement of an established commercial item may include a previous subcontract/PO determination, a Government Contracting Officer’s (CO) commercial item determination and/or a statement by the contractor’s buyer/subcontract administrator that the item and/ or service is commercial with a reference to a previous procurement. 

For both initial and established commercial item and/or service procurements, the contractor’s files must demonstrate that adequate market research was conducted to determine whether the item and/or service meet the FAR 2.101 commercial item definition. 

To demonstrate compliance, the contractor’s file should minimally include: 

 The written commercial determination demonstrating that the item and/or service meets the definition in FAR 2.101; 

 Market research conducted to support the commercial item determination; 

 Support for price reasonableness of the commercial item and/or service (see the CPSR Guidebook Part 6 Appendix 10 – Price Analysis); 

 The flow down of FAR 52.244-6 to subcontracts at all tiers, when applicable; 

 The flow down of clauses specified at FAR 52.244-6(c)(1) when the prime contains the clause at FAR 52.244-6; and 

 The flow down of DFARS 252.244-7000 in solicitations and contracts, when applicable.

Emphasis added.

Nowhere does the DCMA CPSR Guidebook say that contractors with prime contracts awarded under Part 15 must flow down all mandatory slowdown clauses. Nowhere!

If somebody is interpreting Appendix 19 to require flowdown of all flowdown clauses to subcontracts for commercial items, somebody is not reading the Guidebook like a pro.