FedSubK Feature: Prime or Subcontractor? What to Know About Each Role
Updated: Jun 18, 2024
Embarking on the journey of Federal contracting can be overwhelming. FOMO (Fear of Missing Out) can push you into going after prime contract opportunities before your business may be ready for the litany of reporting and other administrative contractual requirements that must be completed during performance of the work. Being a subcontractor does not sound glamorous but, in the Federal marketplace, it can be a lucrative role without all the headaches and hassles of being a prime. Understanding the roles of prime contractors and subcontractors is essential for success in the complex Federal acquisition process.
Prime Contractor: The Responsible Company
When a federal agency contracts with a business to provide products and/or perform services to the Government, that entity is known as the “prime contractor” (or “Prime,” for short). Primes are the party ultimately responsible for the performance of all work under contract and management of the project budget, regardless of what entity (prime, subcontractor, or supplier) performs work as part of the Prime’s team. Being a prime contractor establishes direct privity of contract with the Government (FAR 9.104-1). This legal relationship distinguishes prime contractors in their direct engagement with federal agencies. Primes direct and control all engagements and communications with the Government client. This level of responsibility and control also results in:
- Increased Government scrutiny during performance.
- Increased administrative burden due to
- communications timelines,
- timely and accurate reporting requirements, and
- general compliance procedures for Federal contracts found in the Prime contract from the Federal Acquisition Regulation (FAR) and the agency’s FAR supplement (as applicable).
- Oversight responsibility and the requirement to flow down these same contract provisions and clauses to subcontractors and suppliers for compliance, when applicable.
- Subcontracting reporting (applicable to large businesses only).
Part of the reporting and compliance required by a Prime is covered by the Representations and Certifications your business completed as part of its System for Award Management (SAM.gov) registration. These would be (among others):
- Representation of business size by NAICS, and
- Executive Compensation.
Other reporting and compliance required by the Prime is dictated by clauses found in the contract. These would be (among others):
- Submissions of invoices.
- Whistleblower protections.
- Government property.
- Prohibitions on–
- Contracting for hardware, software, and services developed or provided by Kaspersky Lab and other covered entities,
- Contracting for certain telecommunications and video surveillance services or equipment,
- Certain internal confidentiality agreements or statements,
- Contracting with inverted domestic corporations,
- Use of ByteDance covered applications during performance (aka “No Tik Tok”),
- Segregated facilities,
- Banning text messaging while driving, and
- Certain foreign purchases.
- Reporting on first-tier subcontract awards, employment of veterans, and service employees.
- Limitations on subcontracting (applicable to small business primes).
- Making accelerated payments to small business subcontractors.
- Equal opportunity, to include veterans, workers with disabilities, and employee notification of rights.
- Employment eligibility verification.
- Minimum wage and Department of Labor wage requirements (e.g., Service Contract Labor Standards (SCLS) or Davis-Bacon and other Related Acts (DBRA) prevailing wages).
- Privacy training.
Subcontractor: The Team Player
Primes routinely collaborate with other entities and suppliers to enhance project capabilities. The Prime contracts with these entities, called “Subcontractors,” to provide a portion of the product and/or service required by the Government under the Prime’s contract. Subcontractors must remember that in this role they:
- Have no privity of contract with the Government under this relationship; only with the Prime. Prime contractors communicate and negotiate with the Government, while subcontractors communicate and negotiate with Primes.
- Should not directly engage the Government in any manner and all requests from the subcontractor should go through the Prime for review and discussion.
- Take their sole direction from the Prime, not the Government (Contracting Officer (CO or KO) or Contracting Officer’s Representative (COR)).
While Subcontractors may have reporting requirements that flow down to them under Federal contracts, that reporting is most often to the Prime contractor with few exceptions where reporting is done as part of the Subcontractor’s System for Award Management (SAM.gov) registration (i.e., Executive Compensation).
Being a subcontractor on a federal contract has definite benefits:
- Less reporting requirements (though compliance may still be required).
- Learning about the Federal contracting process through the Prime’s actions (i.e., client needs, communications with the Government, modifications and change order process, etc.).
- Gaining valuable project and past performance experience on a federal contract that you can use on future opportunities when you decide to quote or propose as a Prime yourself.
- Gaining valuable name recognition and earning capital to expand business opportunities in both the Federal and private sectors.
Primes and Subcontractors During the Proposal Process. It is crucial that Primes create and communicate a clear and streamlined proposal process to their subcontractors and suppliers to ensure the development of a viable and timely quote or offer meeting the Government’s performance requirements, price, and schedule needs. The Prime should clearly delineate roles in this process and establish a timeline for subcontractors and suppliers to provide personnel and price information early.
!!!A Word of Caution on “bait and switch” tactics!!!
What is it? When a Prime includes a desirable Subcontractor (or personnel) in a proposal for the purpose of winning the quote or offer then after winning the award, the Prime changes out Subcontractors (or personnel) for a different company (or individual). That's "bait and switch". The Government is getting wise to these tactics and has been adding language to classify Subcontractors as “Key Subcontractors” or their personnel as “Key Personnel” which requires the Prime to replace the subcontractors or personnel with companies or employees with equal or better experience, education, performance history, and skills. Put simply, don't do it (or you'll be remembered, and not in a good way).
Prime / Subcontractor Agreements.
Written agreements between the Prime and any subcontractors are important to ensure not only the Prime’s terms and conditions are met, but the required flowdown provisions and clauses from the Government are met by subcontractors at all tiers (or as indicated) under a federal contract. The requirement to comply for subcontractors is usually based on statute, type of work, types of employees, or dollar threshold of the subcontract agreement.
The Prime is typically responsible for drafting the agreement between the Prime and Subcontractor and it should contain, as a minimum,
- Identification of the Prime’s Federal contract, by number, order number (as applicable), and Federal agency.
- Scope of work or services that clearly defines the Subcontractor's role and scope of work on the contract.
- Terms related to deliverables, timelines, and compensation.
- Flow down provisions and clauses from the Federal contract.
- Compliance with prime contract requirements and how compliance is assured.
- Clear lines of communication between the parties to include the Prime’s communication of project needs and expectations to the Subcontractor.
- Define the roles and responsibilities of both parties during performance.
- Recordkeeping requirements and document control.
- Modifications and change order processes and pricing of the same.
- Resolution of disagreements, use of Alternative Dispute Resolution (ADR), and legal authority for disagreements.
FAR and agency provisions and clauses typically state at the end of the provision or clause language when the compliance or reporting requirement flows down to subcontractors, at what tier, and any instructions for the Prime for wording or language to be used or substituted in the flowdown.
Subcontractors must further flow down any Federal contract provision or clause that requires applicable at lower subcontract tiers. Agreements between first tier and lower-tier subcontractors are the responsibility of the parties in question, not the Prime. The first-tier subcontractor may also be responsible for upwards reporting and ensuring compliance of lower-tier subcontractors. This adds an administrative burden to the Subcontractor, but not near that required of the Prime.
Know Your Readiness.
Before diving in to win a Prime contract, be real and ask yourself–
- Is my company financially stable enough and has enough available capital that it can wait 30 or 60 days, or more, to get paid? Waiting for payments is not uncommon, unfortunately.
- Do you have the breadth of experience needed to perform successfully?
- Are you known or proven in your industry, particularly under the NAICS code that classifies the products and/or services you wish to sell to the Government?
- Do you have knowledge of the Federal marketplace for your industry or NAICS?
- Do you have existing relationships with agency personnel (i.e., buyers, program personnel, small business specialists, etc.)?
- What is the extent of our experience and successful performance on Federal contracts as a subcontractor?
- Does the company have the internal administrative infrastructure (i.e., resources, time, management, and operations structure) such that the offer, compliance, and reporting requirements of a Prime can be met timely?
- Can we meet any bonding requirements?
- Can we self-perform, or do we need a team, and what will that team look like?
- For bid/proposal preparation?
- For performance?
- For any specialized requirements?
- For administrative support?
- Has the Prime and its team performed together?
If you answer any of these questions in the negative, consider if proposing as a Prime on a Federal contract is the best avenue to participate in the opportunity. These questions merely expose gaps your business may have that need filled in order to participate as a Prime. Get those gaps filled before you propose!
Navigating Federal contracting, whether a prime or a subcontractor, is a business decision. Know before you jump in the deep end; starting in the shallow end is always a safe bet and, before long, you will be swimming with the big fishes. It is a time-consuming and complex business to report and comply with all the Federal Government’s requirements and that complexity grows every day (aka, look at the new cybersecurity rules forthcoming). Better understanding the roles of Primes and Subcontractors is a crucial first step to growing a lucrative and successful relationship with the Federal Government. Being realistic about the role that best fits your business now and as it grows is key for a successful Federal contracting journey.
#federalcontracting #subcontractor #prime #rolesincontracting
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DoD Reduction In Force (RIF) Guidance
Just when you thought it couldn't get any more confusing, some agencies also have their own RIF guidance separate from the OPM guidance that is what we've heard the most about. DoD is one of those agencies.
A copy of the current DoD RIF guidance, DoD Instruction 1400.25, Volume 351, is found at: https://www.esd.whs.mil/Portals/54/Documents/DD/issuances/140025/140025_V351.PDF?ver=DgEFMmb9dLDV7OV-PLb7VQ%3D%3D
This guide establishes policy, assigns responsibilities, and prescribes procedures for reduction in force (RIF) actions taken under Part 351 of Title 5, Code of Federal Regulations (CFR), as modified by Section 1597(f) of Title 10, United States Code (U.S.C.).
This guidance does not, in full, apply to DoD employees covered by an alternative personnel system (e.g., the Acquisition Demonstration; Science and Technology Reinvention Laboratories; and the Defense Civilian Intelligence Personnel System). Those systems will develop their own policies and procedures for RIF that comply with the law, as approved by the Under Secretary of Defense for Personnel and Readiness (USD(P&R)). This guide also does not apply to Senior Executive Service (SES) positions.
The policy statement in 1.2 states that, "For any RIF of civilians in the competitive and excepted services in the DoD, the determination as to which employees will be separated from employment must be made primarily on the basis of performance."
In accordance with 10 U.S.C. 1597, DoD must report to Congress 45 days prior to implementing an approved RIF.
DoD will comply with 5 CFR 351.402 and 351.403 when establishing competitive areas and competitive levels, respectively. Competitive service employees and excepted service employees are placed on separate retention registers established in accordance with 5 CFR 351.404 and 351.405.
For purposes of DoD RIF, employees are placed in one of two categories:
- employees with a period of assessed performance of less than 12 months, and
- employees with a period of assessed performance of 12 months or more.
An employee’s period of assessed performance for purposes of RIF will be the sum of the months of assessed performance associated with the employee’s performance appraisals within the most recent 4-year period preceding the cutoff date established for the RIF. However, periods of time in a rating cycle for which an employee’s performance was not assessed are not included in the employee’s period of assessed performance.
For example, if an employee receives a rating after serving 10 months of the 12-month cycle, the employee’s period of assessed performance is 10 months for that rating cycle.
For employees absent for military service, periods of time during the rating period may be treated as periods of assessed performance if they meet the requirements of Paragraph 3.3.c.(1) under Paragraph 3.3.b.(2) of the DoD guide.
Retention Factors
Competing employees are listed on a retention register based on--
- Rating of Record. See Section 3.3.c. for rating of record examples based on cutoff dates, military service, time frames for ratings to be used, and ratings from a system other and the Defense Performance Management Program (DPMAP).
- Tenure Group. This follows the definitions found in 5 CFR 351.501(b) for competitive service and 5 CFR 351.502(b) for excepted service.
- Average Score. In general, an employee’s average score for one performance appraisal is derived by dividing the sum of the employee’s performance element ratings by the number of performance elements. The average of the average scores drawn from the two most recent performance appraisals received by the employee, except when the performance appraisal reflects an “unacceptable” rating of record will be reviewed. When the most recent performance appraisal reflects an “unacceptable” rating of record, only that performance appraisal will be considered for purposes of the employee’s average score.
- Veterans’ Preference. This follows the procedures in 5 CFR 351.501(c) with three veterans' preference subgroups:
- AD - 30% or more disabled veteran
- A - eligible for veterans' preference for the purpose of RIF but not for placement in the AD category (i.e., less than 30% disabled veteran determination)
- B - not eligible for veterans' preference for purpose of RIF
- DoD Service Computation Date-Reduction in Force (DoD SCD-RIF). Follows rules of credible service as found in 5 CFR 351.503(a) and (b). DoD does not follow 5 CFR 351.504, which grants additional retention service credit in RIF based on an employee's ratings of record.
Rounds in Reduction in Force (RIF)
Two rounds of RIF will be conducted. Round One, Release from Competitive Level, and Round Two, Assignment Rights, are explained in the document in detail related to types of appointments, order of release from the competitive level, and exceptions that may apply. They are found in sections 3.5 and 3.6, respectively.
Displacement may occur during Round Two. Displacement is the assignment of an employee to a continuing position in a different competitive level that is held by another employee with a lower retention standing (i.e., “bumping” another employee). Displacement may be at the same grade or at a grade up to three grades or grade intervals (or equivalent) below the position of the released employee.
Right of Only One Offer
Employees released from a retention register are only eligible for one offer of assignment (similar to OPM rules), with some exceptions. If the employee accepts and offer, rejects an offer, or fails to reply to an offer in a timely manner, they are not entitled to further offers. However, the DoD Component must make a better offer of assignment to a released employee (i.e., to a position with a higher representative rate) if a position becomes available before, or on, the RIF effective date.
Sample retention registers and scenarios are found in the guide in Appendix 3A. Employees have the right to request a review of retention registers and have representation also be allowed to review the registers, as requested by the employee.
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DISCLAIMER: Info is provided for awareness. I am NOT an HR professional but an HR enthusiast having started in HR and being a Federal supervisor and hiring manager. Before taking any action that changes your status, please seek the advice of an attorney knowledgeable in Federal employment law.
Voluntary Separation Incentive Payment (VSIP)
Voluntary Separation Incentive Payment (VSIP) allows agencies that are downsizing or restructuring to offer employees lump-sum payments up to $25,000 as an incentive to voluntarily separate. The amount received is reduced by Fed and state taxes, social security, and Medicare, as applicable.
The full guide on the program is found at the OPM website https://www.opm.gov/policy-data-oversight/workforce-restructuring/voluntary-separation-incentive-payments/guide.pdf
Eligibility for VSIP requires an employee be employed by an Executive Branch agency for at least three (3) continous years without a time limit and not be--
▶️ a reemployed annuitant;
▶️ otherwise be eligible for disability retirement;
▶️ recipient of a notice of involuntary separation for misconduct or poor performance;
▶️ recipient of any previous VSIP from the Federal Government;
▶️ on a service agreement for which--
➡️ a student loan repayment benefit was paid, or is to be paid, during the 36-months preceding the date of separation;
➡️ a recruitment or relocation incentive was paid, or is to be paid, during the 24-months preceding the date of separation; and
➡️ a retention incentive was paid, or is to be paid, during the 12-months preceding the date of separation.
If you receive a VSIP and later come back to Federal Service within 5 years of the date of the separation on which the VSIP is based, you must repay the entire amount before your first day of reemployment. This includes working under a personal services contract or other direct contract with the Government.
The top 10 questions related to VSIP can be found at https://www.opm.gov/policy-data-oversight/workforce-restructuring/voluntary-early-retirement-authority/top-10-frequently-asked-questions-about-vera-and-vsip.pdf
OPM's page on VSIP is at https://www.opm.gov/policy-data-oversight/workforce-restructuring/voluntary-separation-incentive-payments/
DISCLAIMER: Information is provided for situational awareness. I am not an HR professional but an HR enthusiast having been a Chief of Contracting and Federal supervisor. Please consult with an attorney knowledgeable in Federal employment law before making any decisions that impact your Federal employment status.
Separate Your Government and Personal Communications
Feds...if you haven't separated your Government communications from your personal communications yet, now is the time to do it.
There has never been an expectation of privacy while using Government Furnished Equipment (GFE). But GFE has been allowed to be used for quick personal calls or emails to check in with children or with family members during the work day. And over time, you may have blended your Government and personal communications more than you realize.
Now, however, it appears your every digital and possibly physical move may be tracked, recorded, and stored. Software and hardware that tracks employee activity, digital behavior, and even movements within Government office space should be expected. Tracking software has (allegedly) already been pushed at some agencies or is (allegedly) expected to be pushed soon.
Computer monitoring programs are expected to track:
🔸️Key stroke loggers to record what is typed or edited
🔸️Analyze chats for flagged words
🔸️Network activity, file access, login, and online behaviors
🔸️Application usage and websites visited and what was searched
Expect software applications to be employed that will analyze this information and generate behavior risk scores by employee. Also expect that all online meetings and chats will be recorded, transcribed, and stored / archived for review without the choice to turn those features off.
Several employees at one prominent agency are reporting their GFE laptop cameras and possibly mics are being turned on during their work day without their consent and outside of active video meetings.
Highly suggest --
▶️ using a privacy cover for your webcam.
▶️ monitoring the activation light.
▶️ taking all personal calls away from your work space on a personal device.
▶️ taking other precautions to protect sensitive conversations, business and personal such as only using a personal device.
