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Prime Contractor Is Liable for Subcontractor’s Failures Prime Contractor is liable for total performance regardless of what is subcontracted [See FAR 9.604(3)] Subcontractor’s violation of laws or ethics can put Prime Contractor at Risk


Government’s Remedies 1. Contractual 2. Administrative 3. Civil Litigation 4. Criminal Litigation


Contractual Reduce Payments (Deductions) Withhold Payments Deductive Change Termination for Convenience Termination for Default 5

Administrative • Poor Contractor Performance Assessment Report (CPAR) • Finding of Non-Responsibility • Suspension • Debarment 6

Civil Litigation Civil False Claims Contract Disputes Act


Criminal Litigation Monetary Fines Imprisonment


Potential Penalties Company Individual


Company Liability Fines Damages Reduction of Payment (Contract Amount, Change Order, Claim) Forfeiture of Claim Disqualified from Contract Award 10

Annulment of Contract Termination of Contract Suspension Debarment Criminal Liability


Individual Liability Lose Job Personal Debarment Fines Damages Prison




Find Out All You Can

Do It Before Becoming “Wedded” to Partner


What You Learn Could Affect Risks You Are Willing to Take Contract Terms You Are Willing to Accept Price You Quote (Commensurate with Risk)


Personnel Assignments Qualities and Experience Staffing Levels Staffing Mix




Optimum Benefits from Competitive Negotiation


Best Value Investment Required in Solicitation for Proposals Complexity of Scope Guides RFP Requirements Only Ask for What You Are Prepared and Able to Evaluate 19

Entertain Discussions Wherever Appropriate Timing Resources


Introduction to New Companies Better Deal Challenge Incumbent Complacency Resource for Future Needs Keep Selected Source in Line 21

Learn About Improved Methods Seek Technical Proposals Encourage Innovation in Evaluation Factors


Helps Ensure Competitive Pricing Creates Leverage for Acceptance of Favorable Contract Terms




Beware of “Agreements to Agree”


Do You Have a Deal (or Only a Lawsuit?) Memorandum of Understanding Letter of Intent Teaming Agreement


Get Binding Agreements to Extent Possible Essential Elements Scope Price Term 27

Timing Before Committing to Project Before Agreeing on Price Before Getting Married


Limitations on Promissory Estoppel (Detrimental Reliance) If Required, Make Agreement Subject to Conditions Objective Few in Number


Subcontractor Protections of Data in Proposal Prevent Bid Shopping


Advance Confidentiality Agreements Intellectual Property Technical Data Pricing Proprietary and Business Sensitive Information


Limited License Quid Pro Quo for Award Cannot Be Used to Subcontractor’s Disadvantage


Remedies Injunction for Actual or Threatened Misappropriation Damages Royalties


Points Agreed upon Cannot Be Changed during Negotiations Seat at the Table Prior Written Authorization to Change


Focus on Key Provisions


What Are You Going to Do?

How Are You Going to Do It?


When and Under What Conditions Are You Going to Get Paid? Prime Contractor: Pay If Paid Only What Government Pays Only If Government Pays


Subcontractor: “X” Days after Invoice Prime Must Pay Even If Government Hasn’t (or Won’t) Not Subject to Problems Caused by Others Timing Amounts Pay When Paid


Who Has What Risks?


Risk Shifting Provisions Flow Down Clause “Remedy” Granting Clauses


Disputes Forum Duty to Proceed Recovery Limitations


Risk Mitigation/Protections Insurance Indemnity Bonds or Other Guarantees




Prime Contract Educate Government Early Incorporate Protections into Prime Contract


Subcontracting Procurement List Services


SPECIAL PROVISIONS FOR ABILITYONE CONTRACTS Committee Jurisdiction Pursuant to the Javits-Wagner-O’Day Act, 41 U.S.C. §§46-48c (“JWOD Act”) and implementing regulations, particularly 41 C.F.R. §51,the Subcontracted Services have been set aside on the Procurement List by the Committee for Purchase from People Who Are Blind or Severely Disabled (“Committee”). 46

Notwithstanding anything to the contrary in the Prime Contract, in the Federal Acquisition Regulation, or any other document, the Committee has exclusive and plenary jurisdiction and authority over all aspects of the Subcontracted Services, , including but not limited to scope of work, all issues of performance, pricing, Subcontract terms, Subcontract administration, modifications, and disputes between the Prime Contractor and the Subcontractor with respect to the Subcontracted Services. By way of example and not limitation, the Committee’s jurisdiction and authority over the Subcontracted Services control over and supersede the Prime Contract clauses concerning Changes, Disputes, and Termination. 47

Further in this regard, all price and price-related terms of the Subcontracted Services are subject to Committee review and approval on the following intervals: (1) for the initial performance period; (2) no less than annually thereafter; and (3) as requested by the Subcontractor. Any Committee-approved price change or economic adjustment to the Subcontracted Services shall be reflected in an amendment to this Subcontract, to be effective upon a date designated by the Committee.


AbilityOne Program The Subcontractor is a qualified and participating nonprofit agency within the meaning of the JWOD Act, implementing regulations, policies, and procedures, and in accordance with the requirements of the Committee and of NISH, including the AbilityOne Program.


The Contractor acknowledges and agrees that the Subcontractor has the responsibility and decision-making authority for ensuring that the requirements of the AbilityOne Program are met and that purposes and intent of the AbilityOne Program are satisfied with regard to performance of Subcontracted Services


Both parties agree to endeavor to create a harmonious work environment and cooperation among their respective employees and Subcontractor’s AbilityOne Workers.


“AbilityOne Workers” “AbilityOne Workers” are persons employed by the Subcontractor who meet the following criteria: Have a documented disability within the meaning of applicable federal and state law, including but not limited to the JWOD Act and implementing regulations, policies, and guidelines;


Are considered participants of the Community Rehabilitative Program/ AbilityOne Program receiving services under such programs from the Subcontractor; Are employed at the job site in a rehabilitative environment for rehabilitative purposes; and May be employed under special certificates issued by the U.S. Department of Labor, Wage and Hour Division.


It is the intention and understanding of the parties to this Subcontract that (i) Subcontractor’s AbilityOne Workers will be employed and will work at the site of performance of Subcontracted Services under conditions which are primarily rehabilitative; (ii) Subcontractor will provide onsite supervisors to oversee the work of AbilityOne Workers and will provide other counseling and rehabilitative services in accordance with the AbilityOne Program and Subcontractor’s standard services; and (iii) Subcontractor may apply productivity and other permissible standards to AbilityOne Workers in accordance with subminimum wage requirements of the Department of Labor and as otherwise permitted by law.


Notwithstanding anything to the contrary in the Prime Contract or elsewhere, the Subcontractor shall have control over and full decision-making authority to all matters pertaining to or affecting AbilityOne Workers, subject to Committee jurisdiction and approval, including but not limited to employment, training, counseling, rehabilitative services, placement, work assignment, staffing levels and ratios, conflict or grievance procedures, discipline, and payments concerning AbilityOne Workers.


Modifications of Procurement List Services Subject to Committee Approval The Contractor may not, without the Subcontractor’s prior written consent, make any modification to Subcontracted Services or execute or agree to any amendment, modification, or alteration of the Prime Contract which affects the Subcontracted Services, including but not limited to scope of services, statement of work, description of services to be performed, times or duration of performance, frequency of performance, place of performance, manner or method of performance, or in any other respect which makes the Subcontractor’s performance of Subcontracted Services more costly, more difficult, more time-consuming, or less efficient or which adversely affects the revenue or profitability derived by the Subcontractor from performance of Subcontracted Services.


The Prime Contractor shall equitably adjust the Subcontract price for all modifications to Subcontracted Services, including any increases in Subcontractor’s cost of performance, together with reasonable allowances for markup. The substance, provisions, and pricing of any modification are subject to Committee approval. Conditions on Amendments This Subcontract sets forth the entire and integrated agreement and understanding between the parties hereto, and supersedes any prior and contemporaneous understandings and agreements, whether written or oral with respect to the subject matter herein. The terms and conditions of this Subcontract may be amended only (a) by written instrument executed by both parties hereto or (b) by direction of the Committee.


Restriction on Adverse Action The Contractor may not assert or take a deduction, withhold or reduce payments due the Subcontractor hereunder, or take any other action adverse to Subcontractor with respect to Subcontracted Services (“Adverse Action”) except (i) to the extent the Government has taken Adverse Action against the Contractor for which the Subcontractor is at fault, (ii) before such Adverse Action is taken, the Subcontractor had been given sufficient advance notice and reasonable opportunity to cure any alleged deficiency in Subcontracted Services giving rise to the Adverse Action, and (iii) the Committee approves the Adverse Action. Subcontractor shall not be liable to Contractor for delays or other problems in performance of Subcontracted Services which are occasioned by causes beyond Subcontractor’s reasonable control and without its negligence, including but not limited to acts of God, acts of a public authority in its sovereign capacity, or any other matters of force majeure.


Contractor and Subcontractor shall immediately report in writing to the other party any problems which could prevent it from performing its respective work in accordance with the requirements of this Subcontract. At a minimum, the report shall identify the problem, its potential impact on performance, proposed methods to remedy the problem, and when the proposed method is expected to remedy the problem. However, the reporting of problems shall not absolve the responsible party from complying with its obligations under this Subcontract.


The Contractor and Subcontractor shall keep each other timely informed of substantive communications with the Government pertaining to or affecting Subcontracted Services. Neither party shall make any response or commitment to the Government on any matter which affects the other party's performance without first obtaining the other party's consent.


Limitations on Incorporation by Reference This Subcontract incorporates by reference the terms and conditions of the Prime Contract between the Government and Contractor, insofar as is applicable to the Subcontracted Services, except that (a) nothing in the Prime Contract shall limit, supersede, or nullify Committee jurisdiction and (b) this Subcontract controls over any conflict, discrepancy, or inconsistency between the Prime Contract and the Subcontract.


With respect to Subcontracted Services, Subcontractor assumes toward Contractor all the rights and obligations which, under the Prime Contract, Contractor assumes toward the Government, and Contractor assumes toward Subcontractor all the rights and obligations which, under the Prime Contract, the Government assumes toward Contractor, unless otherwise provided in this Subcontract and except to the extent of the Committee’s jurisdiction.


Special Disputes Procedures Any claim, disagreement, assertion of right, matter of controversy, or dispute (collectively “dispute�) arising under, relating to, or existing with respect to this Subcontract or to the Subcontracted Services shall be resolved by the Contractor and Subcontractor as provided in this paragraph.


Contractor and Subcontractor agree to use their best efforts to resolve any dispute following these principles: (i) consistent with the intent of this Subcontract, (ii) at the lowest level of organization or management, (iii) as expeditiously as circumstances allow, (iv) as fairly as possible, (v) avoiding undue prejudice to the rights or interests of the other party, and (vi) minimizing damages to the maximum extent reasonable.


Contractor and Subcontractor agree that disputes should be resolved whenever possible at the project level and should therefore first be submitted to the parties’ most senior on-site representatives. If the dispute cannot be resolved at the project level, then either party may request that the dispute be presented to the chief executive officers of the respective parties for resolution. If the chief executive officers are unable to resolve the dispute within five business days after submission to them or as otherwise mutually agreed, either party may seek determination by the Committee, in accordance with the procedure prescribed in 41 CFR 51-6.15, for disputes between contracting activities and non-profit agencies, of any dispute which involves or affects Subcontracted Services, and such determination shall be final and binding upon both Contractor and Subcontractor. If the Committee determines it does not have jurisdiction over the dispute, either party may seek redress of the dispute by filing an action but only in a court of competent jurisdiction located in the [Name of State]. 65

Both parties shall continue performance of their respective obligations pursuant to this Subcontract during the pendency of any dispute, with the exception that if Contractor fails to pay Subcontractor without justification amounts as and when due under this Subcontract, Subcontractor has the right (but not the obligation) to suspend its performance until such time as such payments are made, provided Subcontractor delivers written notice of the proposed suspension at least 5 days in advance of the date of suspension.


Nothing in this Subcontract shall limit the authority of the Committee (or NISH as the Committee’s authorized agent) to take actions regarding disputes between the Contractor and Subcontractor to ensure proper performance of Subcontracted Services and preservation of the Subcontract.


Limitation on Forum Selection Clause This Subcontract shall be construed and governed in accordance with the laws of the [Name of State], excluding its choice of law rules, and in accordance with the Federal Government contracting law, including the authority of the Committee, as appropriate.




Contracting Officer All Powerful


Sole Authority Changes Suspension of Work Stop Work Terminations Convenience Default 71

Warrant Limitations Subject to Availability of Funds Anti-Deficiency Act Appropriation Data on Documents


Contracting Officer’s Representative Authority Limited by Letter of Appointment Scope of Authority Specified What COR Can Order Dollar Limit 73

Commanders, Technical Advisors, Inspectors Tend to Want to Run the Show No Authority to Go Outside Contract


Maintain Positive, Regular Communications During Performance Make “Marriage� Work Work on Relationship


Hallmarks of Good Relationship Candor Trust Mutual Respect Politeness


Cooperation Positive Attitude “Collegeality”


Partnering Principles Goals Are the Same Efficient Performance Good Results Minimum Problems


Problems Are Inevitable Strike Quickly Lowest Levels First Elevate as Needed


Inherent Government Limitations Authority Notice Requirements Lesson: Pick Your Spots


No Surprises!


Trust, But Verify (Ronald Reagan)


Nip It in the Bud (Barney Fife) Problems Seldom Get Better Over Time


Early Recognition Systems Develop Disclosure Culture Performance Problems Dividends for Ethics Problems


Quality Assurance Inspections Frequent Meetings Open Dialogue with Upstream and Downstream Partners


Deal with Problems Promptly and Effectively Solve Problems Rather than Fix Blame Cure Causes as Well as Symptoms Devote Appropriate Resources Follow the Contract


Art of Giving Effective Notice Factual Timely Compliance with Contract “I expect you to pay for it”


Top-Down Commitment If Top Management Does Not Believe in It, Success Is Unlikely Make Employee Acceptance a Priority


Session Evaluation Information


CRP-W1045-Managing Relationships-Presentation