12.001
Definition
Under FAR 12.001, internal transfers of commercial products or services between a contractor's divisions, subsidiaries, or affiliates are considered subcontracts and must comply with all applicable requirements.
Overview
FAR 12.001 provides a specific definition of the term "subcontract" as it applies to Part 12, which governs the acquisition of commercial products and commercial services. The definition clarifies that a subcontract is not limited to traditional third-party agreements but also includes transfers of commercial products or services between divisions, subsidiaries, or affiliates of a contractor or subcontractor. This broadens the scope of what is considered a subcontract under Part 12, ensuring that internal corporate transfers are subject to the same regulatory requirements as external subcontracts.
Key Rules
- Definition of Subcontract
- A subcontract includes transfers of commercial products or services between divisions, subsidiaries, or affiliates of a contractor or subcontractor, not just external third-party agreements.
Responsibilities
- Contracting Officers: Must apply this broad definition when determining subcontracting relationships and compliance obligations under Part 12.
- Contractors: Must recognize that internal transfers within their corporate structure may be treated as subcontracts and comply with all applicable requirements.
- Agencies: Should ensure oversight includes internal transfers as subcontracts where relevant.
Practical Implications
- This definition ensures that internal corporate transfers are not used to circumvent subcontracting requirements.
- Contractors must carefully track and report all qualifying transfers, even those within their own corporate family.
- Misunderstanding this definition could lead to noncompliance with subcontracting rules under Part 12.