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FAR Purchasing Subcontracts

Technically, every purchase – no matter how small – reimbursed with funding from the U.S. Government (USG) must comply with the Federal Acquisition Regulations (FAR). Every contractor, subcontractor, and grantee constrained by FAR purchasing and subcontracts shoulders the burden of proof that every Purchase/Change Order is compliant.

FAR purchasing and subcontracts are direct for a particular contract – or indirect for the company as a whole, with only an allocation to the USG contract. The terms and conditions of the award document require compliance with FAR; FAR requires purchasing and subcontracts – for example – be based on competition. That competition is adequately documented. Absent competition, other justification for the responsive and responsible source plus for the fairness and reasonableness of price is adequately documented.

Historically accepted means of justifying source include evidence of similar products/services from that supplier; high costs (such as First Article Test) to change suppliers for a follow-on award; and use of copyrighted/proprietary intellectual property owned by the supplier. Historically accepted means of justifying price include evidence that the supplier sells the same products/services in substantial quantities to the general public; comparable prices on recent, competitively awarded similar products/services; and negotiation between the parties, with each offer and counter-offer (and the reasons for each, if known) supported by a Negotiation Memorandum.

The FAR purchasing and subcontracts requirement for documented competition, or justifications, applies to Orders of any dollar amount. As a practical matter, management decides, based on internal and customer-review risk, the extent of documentation for Order type and dollar amount.