When a fourth-quarter award arrives with a start date a few days away, a prime contractor may need to issue several subcontracts at once. Each one must carry the federal requirements the prime contract obliges the prime to pass down, and no more than is appropriate. Getting that right under time pressure is hard. Getting it right in June, by building a flowdown matrix for the kinds of contracts you expect to win, is much easier.
Why flowdowns matter to the prime
The government holds the prime responsible for performance and compliance on the entire contract, including the portions performed by subcontractors. Many FAR and agency supplement clauses state that the contractor must include the clause, or its substance, in subcontracts that meet certain conditions. If the prime fails to do so, it may be in breach of its own contract, and the government’s requirements may never reach the people actually doing the work. Over-flowing creates problems too: burdening a small supplier with clauses that do not apply can raise costs, slow negotiations and confuse everyone about what really matters.
Mandatory, conditional and protective clauses
It helps to sort clauses into three groups:
- Mandatory flowdowns. Clauses the prime contract requires to be included in subcontracts, often above a dollar threshold or for certain kinds of work. Labor standards, safeguarding of contractor information systems, the prohibition on certain telecommunications equipment and anti-trafficking provisions are common examples, depending on the contract.
- Conditional flowdowns. Clauses that apply only if the subcontract involves certain activities, such as handling controlled unclassified information, working on a government site, using government property or accessing classified information.
- Protective flowdowns. Clauses the prime is not required to pass down but chooses to, so that its rights against the subcontractor match the government’s rights against it, such as changes, termination, inspection and audit provisions.
For subcontracts for commercial products and services, the FAR identifies a limited set of clauses that primes must flow down, consistent with the policy of keeping government-unique terms out of commercial supply chains where possible.
Building the matrix
Start with the clauses in a typical prime contract you expect to win, or in the solicitations you are currently pursuing. For each clause, record:
- The clause number, title and date
- Whether flowdown is mandatory, conditional or protective
- The trigger, such as a dollar threshold, type of work or location
- Any required changes to the text, such as substituting the prime for the government in certain places
- Whether the subcontractor must flow it further to lower tiers
Then create subcontract templates for the arrangements you use most, such as services, commercial products, consulting and construction. Each template carries the clauses that typically apply, with a checklist for the conditional ones.
Keep it current and explain it
Clauses change through FAR updates, agency supplements and contract modifications. Assign someone to review the matrix whenever a new prime contract arrives and at least twice a year. When you send a subcontract, include a short explanation of which flowdowns carry real obligations, such as reporting or cybersecurity requirements, so the subcontractor can price and perform them. Clear flowdowns make for better partners. Current clause text is available at acquisition.gov, and an attorney experienced in government contracts can review your templates.