Who Am I?
A philosophical question that people have asked themselves for centuries is, “Who am I?” A big question that arguably we spend our lives trying to answer but never really get there.
A question that is closely related to “Who am I” that you may be asking of your business is, “Am I federal government contractor or federal government subcontractor?”
Unlike the unanswerable “Who am I”, this is a question that can be answered.
In fact, you should answer it because if you are a federal government contractor or subcontractor, you must follow the Federal Acquisition Regulations, the FAR. If you are not, you need not follow these regulations.
Businesses often start this inquiry by trying to determine if they are a contractor/subcontractor, a vendor or a consultant for the federal government. For many exploring this question, a conclusion that they are a subcontractor, vendor or consultant leads them to determine they are not a government contractor beholden to the FAR.
However, a review of the FAR establishes that just as a rose by any other name is still a rose, a federal government contractor by any other name, subcontractor or vendor for example, is still a federal government contractor.
Please note as we embark on this analysis that the FAR, unfortunately, does not have a single definition for subcontractors, vendors and consultants. At times, the regulations even use these terms interchangeably. Even so, a business will not find a safe haven in this lack of clarity if it is a contractor or subcontractor and is not following the regulations.
Nonetheless, an overview of these regulations enables an organization to determine just who they are.
Federal Government Subcontractor
Generally, if your business performs services or provides supplies based on a contract with the federal government, you are a federal government contractor or subcontractor, to include if you are providing services or supplies to a prime contractor or higher tiered subcontractor. Said another way, federal government contractors/subcontractors provide goods or services to the federal government as specified by the prime contract. As part of this, they also must meet the deliverable schedule, quality, cost, pricing and other requirements as defined in the prime contract.
This applies no matter how far down the supply chain you are – if your goods go to fulfill a federal government contract, you are a federal government subcontractor and must follow the FAR.
Federal government prime contractors must flowdown the Federal Acquisition Regulations that apply to their subcontractors in the subcontract. Primes must also monitor to assure their subcontractors follow the regulations.
On the other hand, if you or your business partners provide supplies or services that enable your overall business operations or provide supplies or services over several contracts and these supplies and services are applied to your overhead or indirect costs, generally you are most likely a vendor and not a federal government subcontractor.
In other words, vendors provide goods or services that are not directly part of producing the required deliverables of the federal government contract. And, they are not a subcontractor based on FAR definitions.
Vendors are not required to comply with the federal government contracting regulations that must be flowed down by the prime contractor to the subcontractor.
Although the Federal Acquisition Regulations at times define a vendor in the same way the regulations define a subcontractor, there is a difference. So, you should take care to distinguish whether you and your business partners are a vendor or a subcontractor.
You should never determine that you or your subcontractors are a vendor simply to avoid the Federal Acquisition Regulations. Rather, you should assess, based on the work you are doing or based on the work a business partner is doing, whether you or your business partner are a vendor or subcontractor.
Remember just because you call yourself a vendor or call your business partners vendors, if you are indeed providing goods and services even at a subcontractor level, you are still a subcontractor.
“Consultants” may be viewed in one of two ways. First, if the consultant is providing services not directly related to a federal government prime contract but rather is providing services that enable the prime contractor’s overall mission and business operations, then, the consultant is not a federal government subcontractor.
However, if the consultant is providing services related to the performance of a federal government contract, then the consultant would be considered a subcontractor. So, when you retain a consultant to provide services as identified in a federal government contract and the consultant is meeting the deliverable dates and deliverable requirements, then that consultant is a subcontractor.
Why Does It Even Matter?
It matters because:
- If you or your business partners are subcontractors– then you must follow the Federal Acquisition Regulations
- If you or your business partners are vendors, then you need not follow the regulations
- If you are a subcontractor, your prime contractor must flow the applicable regulations down to you in your subcontract. At times, prime contractors include FAR regulations that do not apply to subcontractors in the subcontract. When that is the case, a subcontractor should push back.
Subcontractors, remember this – even if your prime tries to force you to register in SAM, the System for Award Management, be sure to check whether you really must register or not because, the FAR, in the sections making SAM mandatory, only make it mandatory for “offerors”. Subs are not making offers to the government but instead offer to the prime.
And on that question of “Who I am?”, well… from long ago, we got a kind of answer:
I think (about whether I am a federal government contractor or not) therefore I am. Descartes, a 17th-century thinker.