New guidance issued for those Federal Contractors that subcontract out more than 70% of their work

On February 11, 2011, the DCAA issued new guidance on Limitations on Pass-Through Charges per FAR 52.215-22, 52.215-23, 31.203(i):

As a part of forward pricing proposal audit, the Defense Contract Audit Agency (DCAA) is being instructed to evaluate proposals whose total subcontracted cost of work performed exceeds 70% of the total cost of work on a prime contract. Their evaluation will be to review the proposed support of the prime contractor to justify “added value” for these high subcontracted contracts, per the aforementioned FAR provisions.

This new guidance will have a pervasive effect on the Construction and Engineering industry and should be carefully considered prior to entering into new contracts.

For more information you can download this PDF or visit the DCAA website.

About the author