52.215-22
Limitations on Pass-Through Charges-Identification of Subcontract Effort
Offerors must disclose and justify costs and added value for any proposal where more than 70% of the work is subcontracted, ensuring no excessive pass-through charges are included.
Overview
FAR 52.215-22 requires offerors to identify and justify subcontracted work in their proposals to prevent excessive pass-through charges. The provision mandates that proposals must exclude excessive pass-through charges and requires detailed disclosure of the cost breakdown between the prime contractor and each subcontractor. If more than 70% of the total contract cost is subcontracted (either by the offeror or any subcontractor), the offeror must specify the indirect costs and profit/fee applied to the subcontracted work and describe the added value provided by both the offeror and any relevant subcontractors. This ensures transparency and that the government is not paying for unnecessary layers of cost without corresponding value.
Key Rules
- Exclusion of Excessive Pass-Through Charges
- Offerors must ensure their proposals do not include excessive pass-through charges.
- Identification of Subcontract Effort
- Proposals must detail the total cost of work performed by the offeror and each subcontractor.
- Disclosure for High Subcontracting Levels
- If more than 70% of the work is subcontracted, the proposal must include indirect costs, profit/fee, and a description of added value for both the offeror and any subcontractor who further subcontracts over 70% of their work.
Responsibilities
- Contracting Officers: Ensure offerors comply with disclosure and justification requirements for subcontracted work.
- Contractors: Accurately report cost breakdowns, indirect costs, profit/fee, and added value for all significant subcontracting.
- Agencies: Review proposals for compliance and prevent payment of excessive pass-through charges.
Practical Implications
- This provision exists to prevent the government from paying for unnecessary markups on subcontracted work.
- Contractors must be prepared to justify their role and value when subcontracting large portions of work.
- Failure to comply can result in proposal rejection or contract issues during performance.