We're about to sign our first federal subcontract, a services contract for a civilian agency, 541611, Administrative Management and General Management Consulting Services, a total small business set-aside. The prime sent over their standard subcontract agreement, and it's twenty pages of dense text. Beyond the statement of work and the pricing, it has a ton of flowdown clauses, a pay-when-paid clause, a non-solicitation of employees clause, and a termination for convenience clause. I've only done state and county sub work before, and those agreements were much simpler. Are these types of clauses standard for federal work? What should I be looking for or trying to negotiate to protect my company, especially if the prime's contract gets cut short?
What should a subcontract agreement under a federal prime include beyond the scope of work and price?
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A federal subcontract will typically include flowdown clauses, a pay-when-paid clause, a non-solicitation of employees clause, and a termination for convenience clause, and these are standard for federal work. The Federal Acquisition Regulation (FAR) governs federal contracts, and many clauses from the prime contract must flow down to subcontractors, particularly for services contracts. State and local procurements follow their own state procurement codes, which often have fewer mandatory flowdown requirements.
To protect your company, you should carefully review all flowdown clauses to understand your obligations under the prime contract. Pay-when-paid clauses, while common, can impact your cash flow; consider negotiating for a more favorable payment schedule or a clear definition of when payment is considered "received" by the prime. The non-solicitation clause is also standard to prevent primes and subs from poaching each other's talent. Termination for convenience clauses allow the government, and by extension the prime, to end the contract at any time; ensure the subcontract outlines fair compensation for work performed and costs incurred up to the termination date. You can negotiate for clear terms regarding inventory, work in progress, and demobilization costs if the contract is terminated early.