In the fourth quarter, prime contractors often need help quickly: a new task order, a funding increase that adds scope, a surge in orders under an existing contract. When that happens, the subcontractors who get the work are frequently the ones with an agreement already in place. Negotiating a full subcontract from scratch can take weeks. A master subcontract agreement, signed in advance, can reduce the paperwork for a new assignment to a short work order. This is general information; have an attorney review any agreement before you sign it.
How a master agreement works
A master subcontract agreement, sometimes called a master services agreement, sets out the terms that will govern all work the subcontractor performs for the prime. It does not by itself commit the prime to buying anything. Instead, each assignment is issued as a separate work order, task order or purchase order under the master agreement, specifying the prime contract it supports, the scope, the period of performance, the price or rates and any terms unique to that assignment.
The advantage is speed with consistency. Once the general terms are settled, each new assignment needs only its specific details, which can often be agreed in days.
What the master agreement usually covers
- Payment terms, invoicing requirements and the documentation the prime needs to bill the government
- Confidentiality, protection of proprietary information and rules on use of the government’s information
- Intellectual property and data rights, consistent with the prime contracts the work will support
- Insurance, indemnification and limitations of liability
- Termination, including termination for convenience mirroring the government’s rights
- Dispute resolution, including how disputes that turn on government decisions will be handled
- Compliance obligations, such as ethics, cybersecurity, labor and security requirements
- Non-solicitation of employees and other relationship terms
Flowdowns belong in the work order
Flowdown clauses depend on the prime contract and the nature of the subcontracted work. A master agreement can include clauses that flow down to every subcontract and state that additional clauses will be identified in each work order. Each work order should then attach or list the specific clauses from the prime contract that apply. Subcontractors should read those lists carefully, because a clause flowed from a defense prime, for example, can carry cybersecurity or reporting obligations that a civilian assignment did not.
Federal rules also address timely payment of small business subcontractors, including provisions encouraging accelerated payments when the prime receives them and, in some cases, notice to the contracting officer when payments to small business subcontractors are reduced or significantly late. Know what your prime’s contracts provide.
Getting ready before the call
- Ask primes you work with, or hope to, whether they use master agreements, and negotiate them during quieter months.
- Keep current labor rates or price lists ready to attach to work orders.
- Maintain certificates of insurance, representations and registration information in a ready-to-send folder.
- Track each master agreement’s renewal or expiration date.
When the call comes in September, the firm with a signed master agreement can often say yes the same week. The FAR’s subcontracting policies are in Part 44, and the related clauses are in Part 52, at acquisition.gov.