Navigating FAR 52.244-2: Consent to Subcontract and Advance Notification in Government Contracts

Given the HUGE number of entities registered to do business with the government in versus the tiny number of entities with approved purchasing systems, it is highly probable your company does not have an approved purchasing system. While not subject to a Contractor Purchasing System Review (CPSR), you may still have the Consent and Advance Notice requirement pursuant to FAR Subpart 44.201.  Although scaled-back, you’re going to be held to standards very similar to the CPSR.  This article will help you understand what may be required and provide tools that simplify and automate daily efforts.

What to Look For

For pre-award efforts, you need to:

  • Review the solicitation for FAR clause 52.244-2, Subcontracts[1].
  • Identify the type of contract the government intends to issue you as the prime contractor.
  • Understand whether your company has an approved purchasing system.

These three (3) pieces of information will guide you on whether and/or what consent and advance notice requirements may apply to the specific effort.

If the Prime Contract has already been awarded, look in the award document for FAR 52.244-2(j).   Subcontractors which were evaluated during the prime’s negotiations with the government customer will be listed in this paragraph.  Subcontractors identified under FAR 52.244-2(j) do not require advance notice and consent. 

What is Meant by Advance Notice and Consent?

Advance Notice:  If your prime contract is a cost-reimbursement type, a contractor is required, by statute, to notify the contracting officer BEFORE awarding any cost-plus-fixed-fee subcontract or fixed-price subcontract.  Depending on the Department or Agency, the subcontracted dollar value at which advance notice is required varies.  See FAR Subpart 44.201-2.  Regardless if your company has an approved purchasing system, Advance Notice is a requirement under these circumstances.

Consent:  If your company does not have an approved system and your prime contract type is cost-reimbursement, time-and-material, labor-hour, letter contract, or an unpriced action under a fixed price contract exceeding the Simplified Acquisition Threshold (SAT), prior consent is required before issuing any of the following subcontract types:

  • Cost-reimbursement
  • Time-and-materials
  • Labor-hour
  • Fixed-price exceeding the greater of SAT or 5% of the total estimated cost [1]of the contract (applies to contracts awarded by DoD, Coast Guard, and NASA)
  • Fixed-price exceeding either the SAT or 5% of the total estimated cost of the contract (applies to contracts awarded by civilian agencies other than Coast Guard and NASA)

What do you Need in an Advance Notice and Consent Package?

The required elements of a consent package are discussed in FAR 52.244-2(e)(1).  They are as follows:

(i) A description of the supplies or services to be subcontracted.

(ii) Identification of the type of subcontract to be used.

(iii) Identification of the proposed subcontractor.

(iv) The proposed subcontract price.

(v) The subcontractor’s current, complete, and accurate certified cost or pricing data and Certificate of Current Cost or Pricing Data, if required by other contract provisions.

(vi) The subcontractor’s Disclosure Statement or Certificate relating to Cost Accounting Standards when such data are required by other provisions of this contract.

(vii) A negotiation memorandum reflecting-

(A) The principal elements of the subcontract price negotiations;

(B) The most significant considerations controlling establishment of initial or revised prices;

(C) The reason certified cost or pricing data were or were not required;

(D) The extent, if any, to which the Contractor did not rely on the subcontractor’s certified cost or pricing data in determining the price objective and in negotiating the final price;

(E) The extent to which it was recognized in the negotiation that the subcontractor’s certified cost or pricing data were not accurate, complete, or current; the action taken by the Contractor and the subcontractor; and the effect of any such defective data on the total price negotiated;

(F) The reasons for any significant difference between the Contractor’s price objective and the price negotiated; and

(G) A complete explanation of the incentive fee or profit plan when incentives are used. The explanation shall identify each critical performance element, management decisions used to quantify each incentive element, reasons for the incentives, and a summary of all trade-off possibilities considered.

FAR 15.406-3 outlines the principal elements of a negotiated agreement.  One of these principal elements is documentation of fair and reasonable pricing.  How do you document a price is fair and reasonable when you don’t have adequate price competition and a cost analysis is not required?  A price analysis.  

Additionally, under FAR Subpart 44.202-2, during the review of a consent package, the KO will look to see whether an absence of price competition is properly justified.   In other words, have you provided a properly documented source justification. 

Tools to Make Your Job Easier

SpendLogic provides you with the tools to meet the price analysis and source justification elements of a consent package.  Our report generation modules simplify and automate the task of creating these documents and when combined with our Documentation Folder module, our tools ensure that affected procurements include the correct information making it easy to assemble and submit it to the Contracting Officer.

By using SpendLogic’s tools, you and your company will master the art of the Advance Notification and Consent to Subcontract process.  Furthermore, as your company grows and eventually trips the revenue threshold for a Contractor Purchasing System Review (CPSR) or even a PERT (DOE’s version of a CPSR), you’ll be ready with systems that are already in place and can scale quickly!

Schedule a quick, no-obligation, 15-minute demo to see how SpendLogic can add value to your company today.

[1] Note: FAR 52.244-2 (Alt I) is used when civilian agencies (other than Coast Guard and NASA) issue cost type contracts.  When included, subparagraph (e)(2) is replaced.

[2] FAR 31.201-1(a) defines total cost as: The total cost, including standard costs properly adjusted for applicable variances, of a contract is the sum of the direct and indirect costs allocable to the contract, incurred or to be incurred, plus any allocable cost of money pursuant to 31.205-10, less any allocable credits. In ascertaining what constitutes a cost, any generally accepted method of determining or estimating costs that is equitable and is consistently applied may be used.

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