9.405-2 Restrictions on subcontracting
Source: FAR 9.405-2 on acquisition.gov
Contractors must not subcontract over $45,000 to debarred or suspended parties without compelling justification and written notification to the contracting officer.
Overview
FAR 9.405-2 establishes strict restrictions on subcontracting with parties that are debarred, suspended, proposed for debarment, or voluntarily excluded from government contracting. The regulation aims to protect the Government’s interests by limiting the ability of contractors to engage such entities as subcontractors, especially for subcontracts exceeding $45,000, unless there is a compelling reason and proper notification is provided.
Key Rules
- Consent for Subcontracts
- Contracting officers cannot consent to subcontracts with debarred, suspended, or excluded parties unless the agency head provides a written justification of compelling reasons.
- Prohibition on Subcontracting
- Contractors are prohibited from entering into subcontracts over $45,000 (except for commercially available off-the-shelf items) with debarred, suspended, or excluded parties unless there is a compelling reason.
- Notification Requirement
- If a contractor intends to subcontract with such a party, a corporate officer or designee must notify the contracting officer in writing before proceeding, providing specific information and justification.
- Review of Compliance
- Contractor compliance with these requirements is subject to review during Contractor Purchasing System Reviews.
Responsibilities
- Contracting Officers: Must withhold consent for subcontracts with excluded parties unless justified in writing by the agency head.
- Contractors: Must avoid prohibited subcontracts, notify the contracting officer with required details if exceptions apply, and maintain systems to protect the Government’s interests.
- Agencies: Must review contractor compliance during purchasing system reviews and approve exceptions only with compelling justification.
Practical Implications
This section exists to prevent government funds from flowing to entities deemed untrustworthy or ineligible. Contractors must carefully vet subcontractors, maintain robust compliance systems, and document any exceptions thoroughly. Failure to comply can result in contract violations, system review findings, or further exclusion actions.
(a) When a contractor debarred, suspended, proposed for debarment, or voluntarily excluded, is proposed as a subcontractor for any subcontract subject to Government consent (see subpart 44.2), contracting officers shall not consent to subcontracts with such contractors unless the agency head states in writing the compelling reasons for this approval action. (See 9.405 concerning declarations of ineligibility affecting sub-contracting.)
(b) The Government suspends or debars contractors to protect the Government’s interests. Contractors are prohibited from entering into any subcontract in excess of $45,000, other than a subcontract for a commercially available off-the-shelf item, with a contractor that has been debarred, suspended, proposed for debarment, or voluntarily excluded, unless there is a compelling reason to do so. If a contractor intends to enter into a subcontract in excess of $45,000, other than a subcontract for a commercially available off-the-shelf item, with a party that is debarred, suspended, proposed for debarment, or voluntarily excluded, as evidenced by the party's having an active exclusion record in SAM (see 9.404), a corporate officer or designee of the contractor is required by operation of the clause at 52.209-6, Protecting the Government’s Interest when Subcontracting with Contractors Debarred, Suspended, Proposed for Debarment, or Voluntarily Excluded, to notify the contracting officer, in writing, before entering into such subcontract. For contracts for the acquisition of commercial products, the notification requirement applies only for first-tier subcontracts. For all other contracts, the notification requirement applies to subcontracts at any tier. The notice must provide the following:
(1) The name of the subcontractor;
(2) The contractor’s knowledge of the reasons for the subcontractor having an active exclusion record in SAM;
(3) The compelling reason(s) for doing business with the subcontractor notwithstanding its having an active exclusion record in SAM; and
(4) The systems and procedures the contractor has established to ensure that it is fully protecting the Government’s interests when dealing with such subcontractor in view of the specific basis for the party’s debarment, suspension, proposed debarment, or voluntary exclusion.
(c) The contractor’s compliance with the requirements of 52.209-6 will be reviewed during Contractor Purchasing System Reviews (see subpart 44.3).