3.503-1
Policy
Prime contractors cannot unreasonably restrict subcontractors from making direct sales to the Government, except where such restrictions are legally authorized.
Overview
FAR 3.503-1 establishes the policy that subcontractors must not be unreasonably restricted from making direct sales to the Government for supplies or services they provide under a contract. This policy is grounded in statutory requirements (10 U.S.C. 4655 and 41 U.S.C. 4704) and aims to promote fair competition and prevent prime contractors from imposing undue limitations on their subcontractors. However, the regulation also clarifies that contractors retain the right to assert any restrictions that are otherwise authorized by law or regulation, ensuring a balance between open competition and legitimate business protections.
Key Rules
- No Unreasonable Restrictions on Subcontractor Sales
- Prime contractors cannot unreasonably prevent subcontractors from selling directly to the Government.
- Permitted Legal Restrictions
- Contractors may still enforce restrictions that are specifically allowed by law or regulation.
Responsibilities
- Contracting Officers: Ensure contract terms do not include unreasonable restrictions on subcontractor direct sales to the Government.
- Contractors: Must not impose unreasonable limitations on subcontractors' ability to sell directly to the Government, except as permitted by law.
- Agencies: Oversee compliance and address any reported violations of this policy.
Practical Implications
- This policy exists to foster competition and prevent anti-competitive practices in federal contracting.
- Contractors should carefully review their subcontract agreements to ensure compliance.
- Common pitfalls include overreaching non-compete clauses or blanket prohibitions on direct sales that are not supported by law.