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name: far-subcontract language: en description: Drafts FAR-compliant subcontract agreements between prime contractors and subcontractors under U.S. federal government prime contracts. Handles mandatory flow-down of FAR/DFARS/agency clauses, contract-type pricing, security/clearance, IP/data rights, and termination. Use when drafting government subcontracts, FAR flow-down clauses, or prime-sub agreements. tags:

• agreement
• drafting
• regulatory

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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

Section	Key Contents
Preamble & Recitals	Effective date, legal names per SAM, prime contract number, agency, sub's acknowledgment of prime contract review
Statement of Work	Tasks, performance standards, deliverable specs, acceptance criteria, milestones, labor categories, GFP/GFI, work location
Flow-Down Clauses	Incorporation by reference with substitution rules (see schedule below)
Pricing & Payment	CLIN structure, invoicing, payment terms, withholding rights, retention, final payment/release
Warranties & Reps	Workmanship, SAM registration, no debarment/suspension, OCI disclosure
Indemnification & Insurance	Mutual indemnity (broad for sub, narrow for prime), minimums, additional insured, waiver of subrogation
IP & Data Rights	Background IP licenses, foreground IP ownership, government data rights per FAR/DFARS, Bayh-Dole
Personnel & Security	Key personnel, clearances, NISPOM/DD-254, cybersecurity controls, CUI handling
Lower-Tier Subcontracting	Consent thresholds, flow-down obligations, sub remains responsible
Changes & Equitable Adjustments	Written change orders, REA procedures (30-day submission), constructive changes, duty to proceed
Inspection & Acceptance	QA requirements, government inspection rights, rejection/correction, written acceptance
Termination	T4C and T4D mirroring FAR clauses, cure notice, conversion of improper T4D to T4C
Disputes	Written claim → escalation (30–60 days) → binding resolution; duty to proceed; sponsorship of prime claims
General Provisions	Integration, order of precedence, notices, severability, force majeure, confidentiality, record retention (3+ years), audit rights
Execution	Signature blocks, authority reps, government consent contingency, counterparts/e-signatures

Flow-Down Clause Schedule

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

Category	Key Clauses
Contract Admin	FAR 52.243-1 (Changes—FFP) or 52.243-2 (Changes—CR)
Termination	FAR 52.249-2 (T4C—FFP) or 52.249-6 (T4C—CR); 52.249-8 (T4D—FFP)
Disputes	FAR 52.233-1
Socioeconomic	FAR 52.219-8/9 (Small Business); 52.222-26 (EEO); 52.222-35 (Veterans); 52.222-36 (Disabilities); 52.222-50 (Trafficking)
Data Rights	FAR 52.227-14 or DFARS 252.227-7013/7014 (defense)
Cybersecurity (defense)	DFARS 252.204-7012 (CDI); 252.204-7019/7020 (NIST 800-171); 252.204-7021 (CMMC)
Cost Accounting (CR)	FAR 52.230-2/3/6 (CAS); 52.216-7 (Allowable Cost)
Audit	FAR 52.215-2

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

Type	Provisions
FFP	Total price by CLIN/milestone; all-inclusive; no cost breakdown in invoices
CR	Allowable costs per FAR Part 31; fee structure; funded/unfunded ceiling; limitation of funds/cost; adequate accounting system required
T&M	Fully burdened labor rates by category; materials at cost (or with handling rate); ceiling price; labor mix controls

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

Coverage	Minimum
CGL	$1M/occurrence, $2M aggregate
Workers' Comp	Statutory
Auto	$1M CSL
Professional (if services)	$1M/claim
Cyber (if CUI/CDI)	$2M/claim

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