Subcontractor’s rights
Subcontractors cannot claim directly against the government after a prime contract termination; their rights are only against their immediate contractor, and prompt settlement of their proposals is required.
Overview
FAR 49.108-1 clarifies the legal standing of subcontractors when a prime contract is terminated. Specifically, it states that subcontractors do not have direct contractual rights against the federal government in such cases. Instead, any rights or claims a subcontractor may have are strictly against the prime contractor or the next higher-tier subcontractor with whom they have a direct contractual relationship. The regulation also emphasizes that, upon termination, both the prime contractor and each subcontractor are responsible for promptly settling the settlement proposals of their immediate subcontractors. This ensures that lower-tier subcontractors are not left in limbo and that the settlement process moves efficiently down the contracting chain.