Part 44 - Subcontracting Policies and

Procedures

44.000 Scope of part.

Subpart 44.1 - General

44.101 Definitions.

Subpart 44.2 - Consent to Subcontracts

44.201 Consent and advance notification requirements.

44.201-1 Consent requirements.

44.201-2 Advance notification requirements.

44.202 Contracting officer’s evaluation.

44.202-1 Responsibilities.

44.202-2 Considerations.

44.203 Consent limitations.

44.204 Contract clauses.

Subpart 44.3 - Contractors’ Purchasing Systems Reviews

44.301 Objective.

44.302 Requirements.

44.303 Extent of review.

44.304 Surveillance.

44.305 Granting, withholding, or withdrawing approval.

44.305-1 Responsibilities.

44.305-2 Notification.

44.305-3 Withholding or withdrawing approval.

44.306 Disclosure of approval status.

44.307 Reports.

Subpart 44.4 - Subcontracts for Commercial Products and Commercial Services

44.400 Scope of subpart.
44.401 Applicability.

44.402 Policy requirements.

44.403 Contract clause.

Parent topic: Federal Acquisition Regulation

44.000 Scope of part.

(a) This part prescribes policies and procedures for consent to subcontracts or advance notification

of subcontracts, and for review, evaluation, and approval of contractors’ purchasing systems.

(b) The consent and advance notification requirements of subpart 44.2 are not applicable to prime

contracts for commercial supplies or commercial services acquired pursuant to part 12.

Subpart 44.1 - General

44.101 Definitions.

As used in this partApproved purchasing system means a contractor’s purchasing system that has been reviewed and

approved in accordance with this part.

Contractor means the total contractor organization or a separate entity of it, such as an affiliate,

division, or plant, that performs its own purchasing.

Contractor purchasing system review (CPSR) means the complete evaluation of a contractor’s

purchasing of material and services, subcontracting, and subcontract management from

development of the requirement through completion of subcontract performance.

Subcontract means any contract as defined in subpart 2.1 entered into by a subcontractor to furnish

supplies or services for performance of a prime contract or a subcontract. It includes but is not

limited to purchase orders, and changes and modifications to purchase orders.

Subcontractor means any supplier, distributor, vendor, or firm that furnishes supplies or services to

or for a prime contractor or another subcontractor.

Subpart 44.2 - Consent to Subcontracts

44.201 Consent and advance notification requirements.

44.201-1 Consent requirements.
(a) If the contractor has an approved purchasing system, consent is required for subcontracts

specifically identified by the contracting officer in the subcontracts clause of the contract. The

contracting officer may require consent to subcontract if the contracting officer has determined that

an individual consent action is required to protect the Government adequately because of the

subcontract type, complexity, or value, or because the subcontract needs special surveillance. These

can be subcontracts for critical systems, subsystems, components, or services. Subcontracts may be

identified by subcontract number or by class of items (e.g., subcontracts for engines on a prime

contract for air-frames).

(b) If the contractor does not have an approved purchasing system, consent to subcontract is

required for cost-reimbursement, time-and-materials, labor-hour, or letter contracts, and also for

unpriced actions (including unpriced modifications and unpriced delivery orders) under fixed-price

contracts that exceed the simplified acquisition threshold, for-

(1) Cost-reimbursement, time-and-materials, or labor-hour subcontracts; and

(2) Fixed-price subcontracts that exceed-

(i) For the Department of Defense, the Coast Guard, and the National Aeronautics and Space

Administration, the greater of the simplified acquisition threshold or 5 percent of the total estimated

cost of the contract; or

(ii) For civilian agencies other than the Coast Guard and the National Aeronautics and Space

Administration, either the simplified acquisition threshold or 5 percent of the total estimated cost of

the contract.

(c) Consent may be required for subcontracts under prime contracts for architect-engineer services.

(d) The contracting officer’s written authorization for the contractor to purchase from Government

sources (see part 51) constitutes consent.

44.201-2 Advance notification requirements.

Under cost-reimbursement contracts, the contractor is required by statute to notify the contracting

officer as follows:

(a) For the Department of Defense, the Coast Guard, and the National Aeronautics and Space

Administration, unless the contractor maintains an approved purchasing system, 10 U.S.C. 3322(c)

requires notification before the award of any cost-plus-fixed-fee subcontract, or any fixed-price

subcontract that exceeds the greater of the simplified acquisition threshold or 5 percent of the total

estimated cost of the contract.

(b) For civilian agencies other than the Coast Guard and the National Aeronautics and Space

Administration, even if the contractor has an approved purchasing system, 41 U.S.C. 3905 requires

notification before the award of any cost-plus-fixed-fee subcontract, or any fixed-price subcontract

that exceeds either the simplified acquisition threshold or 5 percent of the total estimated cost of the

contract.
44.202 Contracting officer’s evaluation.

44.202-1 Responsibilities.

(a) The cognizant administrative contracting officer (ACO) is responsible for consent to

subcontracts, except when the contracting officer retains the contract for administration or

withholds the consent responsibility from delegation to the ACO. In such cases, the contract

administration office should assist the contracting office in its evaluation as requested.

(b) The contracting officer responsible for consent shall review the contractor’s notification and

supporting data to ensure that the proposed subcontract is appropriate for the risks involved and

consistent with current policy and sound business judgment.

(c) Designation of specific subcontractors during contract negotiations does not in itself satisfy the

requirements for advance notification or consent pursuant to the clause at 52.244-2. However, if, in

the opinion of the contracting officer, the advance notification or consent requirements were

satisfied for certain subcontracts evaluated during negotiations, the contracting officer shall identify

those subcontracts in paragraph (j) of the clause at 52.244-2.

44.202-2 Considerations.

(a) The contracting officer responsible for consent must, at a minimum, review the request and

supporting data and consider the following:

(1) Is the decision to subcontract consistent with the contractor’s approved make-or-buy program, if

any (see 15.407-2)?

(2) Is the subcontract for special test equipment, equipment or real property that are available from

Government sources?

(3) Is the selection of the particular supplies, equipment, or services technically justified?

(4) Has the contractor complied with the prime contract requirements regarding-

(i) Small business subcontracting, including, if applicable, its plan for subcontracting with small,

veteran-owned, service-disabled veteran-owned, HUBZone, small disadvantaged and women-owned

small business concerns (see part 19); and

(ii) Purchase from nonprofit agencies designated by the Committee for Purchase From People Who

Are Blind or Severely Disabled 41 U.S.C.8504 (see part 8)?

(5) Was adequate price competition obtained or its absence properly justified?

(6) Did the contractor adequately assess and dispose of subcontractors’ alternate proposals, if

offered?

(7) Does the contractor have a sound basis for selecting and determining the responsibility of the

particular subcontractor?

(8) Has the contractor performed adequate cost or price analysis or price comparisons and obtained
certified cost or pricing data and data other than certified cost or pricing data?

(9) Is the proposed subcontract type appropriate for the risks involved and consistent with current

policy?

(10) Has adequate consideration been obtained for any proposed subcontract that will involve the

use of Government-provided equipment and real property?

(11) Has the contractor adequately and reasonably translated prime contract technical requirements

into subcontract requirements?

(12) Does the prime contractor comply with applicable cost accounting standards for awarding the

subcontract?

(13) Is the proposed subcontractor listed as excluded in the System for Award Management (see

subpart 9.4)?

(b) Particularly careful and thorough consideration under paragraph (a) of this section is necessary

when-

(1) The prime contractor’s purchasing system or performance is inadequate;

(2) Close working relationships or ownership affiliations between the prime and subcontractor may

preclude free competition or result in higher prices;

(3) Subcontracts are proposed for award on a non-competitive basis, at prices that appear

unreasonable, or at prices higher than those offered to the Government in comparable

circumstances; or

(4) Subcontracts are proposed on a cost-reimbursement, time-and-materials, or labor-hour basis.

44.203 Consent limitations.

(a) The contracting officer’s consent to a subcontract or approval of the contractor’s purchasing

system does not constitute a determination of the acceptability of the subcontract terms or price, or

of the allowability of costs, unless the consent or approval specifies otherwise.

(b) Contracting officers shall not consent to-

(1) Cost-reimbursement subcontracts if the fee exceeds the fee limitations of 15.404-4(c)(4)(i);

(2) Subcontracts providing for payment on a cost-plus-a-percentage-of-cost basis;

(3) Subcontracts obligating the contracting officer to deal directly with the subcontractor;

(4) Subcontracts that make the results of arbitration, judicial determination, or voluntary settlement

between the prime contractor and subcontractor binding on the Government; or

(5) Repetitive or unduly protracted use of cost-reimbursement, time-and-materials, or labor-hour

subcontracts (contracting officers should follow the principles of 16.103(c)).

(c) Contracting officers should not refuse consent to a subcontract merely because it contains a
clause giving the subcontractor the right of indirect appeal to an agency board of contract appeals if

the subcontractor is affected by a dispute between the Government and the prime contractor.

Indirect appeal means assertion by the subcontractor of the prime contractor’s right to appeal or the

prosecution of an appeal by the prime contractor on the subcontractor’s behalf. The clause may also

provide that the prime contractor and subcontractor shall be equally bound by the contracting

officer’s or board’s decision. The clause may not attempt to obligate the contracting officer or the

appeals board to decide questions that do not arise between the Government and the prime

contractor or that are not cognizable under the clause at 52.233-1, Disputes.

44.204 Contract clauses.

(a)

(1) The contracting officer shall insert the clause at 52.244-2, Subcontracts, in solicitations and

contracts when contemplating-

(i) A cost-reimbursement contract;

(ii) A letter contract that exceeds the simplified acquisition threshold;

(iii) A fixed-price contract that exceeds the simplified acquisition threshold under which unpriced

contract actions (including unpriced modifications or unpriced delivery orders) are anticipated;

(iv) A time-and-materials contract that exceeds the simplified acquisition threshold; or

(v) A labor-hour contract that exceeds the simplified acquisition threshold.

(2) If a cost-reimbursement contract is contemplated, for civilian agencies other than the Coast

Guard and the National Aeronautics and Space Administration, the contracting officer shall use the

clause with its Alternate I.

(3) Use of this clause is not required in-

(i) Fixed-price architect-engineer contracts; or

(ii) Contracts for mortuary services, refuse services, or shipment and storage of personal property,

when an agency-prescribed clause on approval of subcontractors’ facilities is required.

(b) The contracting officer may insert the clause at 52.244-4, Subcontractors and Outside Associates

and Consultants (Architect-Engineer Services), in architect-engineer contracts.

(c) The contracting officer shall, when contracting by negotiation, insert the clause at 52.244-5,

Competition in Subcontracting, in solicitations and contracts when the contract amount is expected

to exceed the simplified acquisition threshold, unless-

(1) A firm-fixed-price contract, awarded on the basis of adequate price competition or whose prices

are set by law or regulation, is contemplated; or

(2) A time-and-materials, labor-hour, or architect-engineer contract is contemplated.
Subpart 44.3 - Contractors’ Purchasing Systems Reviews

44.301 Objective.

The objective of a contractor purchasing system review (CPSR) is to evaluate the efficiency and

effectiveness with which the contractor spends Government funds and complies with Government

policy when subcontracting. The review provides the administrative contracting officer (ACO) a basis

for granting, withholding, or withdrawing approval of the contractor’s purchasing system.

44.302 Requirements.

(a) The ACO shall determine the need for a CPSR based on, but not limited to, the past performance

of the contractor, and the volume, complexity and dollar value of subcontracts. If a contractor’s sales

to the Government (excluding competitively awarded firm-fixed-price and competitively awarded

fixed-price with economic price adjustment contracts and sales of commercial supplies and

commercial services pursuant to part 12) are expected to exceed $25 million during the next 12

months, perform a review to determine if a CPSR is needed. Sales include those represented by

prime contracts, subcontracts under Government prime contracts, and modifications. Generally, a

CPSR is not performed for a specific contract. The head of the agency responsible for contract

administration may raise or lower the $25 million review level if it is considered to be in the

Government’s best interest.

(b) Once an initial determination has been made under paragraph (a) of this section, at least every

three years the ACO shall determine whether a purchasing system review is necessary. If necessary,

the cognizant contract administration office will conduct a purchasing system review.

44.303 Extent of review.

A CPSR requires an evaluation of the contractor’s purchasing system. Unless segregation of

subcontracts is impracticable, this evaluation shall not include subcontracts awarded by the

contractor exclusively in support of Government contracts that are competitively awarded firm-fixedprice, competitively awarded fixed-price with economic price adjustment, or awarded for commercial

supplies and commercial services pursuant to part 12. The considerations listed in 44.202-2 for

consent evaluation of particular subcontracts also shall be used to evaluate the contractor’s

purchasing system, including the contractor’s policies, procedures, and performance under that

system. Special attention shall be given to-

(a) The results of market research accomplished;

(b) The degree of price competition obtained;

(c) Pricing policies and techniques, including methods of obtaining certified cost or pricing data, and

data other than certified cost or pricing data;

(d) Methods of evaluating subcontractor responsibility, including the contractor’s use of the System

for Award Management Exclusions (see 9.404) and, if the contractor has subcontracts with parties

on the Exclusions list, the documentation, systems, and procedures the contractor has established to
protect the Government’s interests (see 9.405-2);

(e) Treatment accorded affiliates and other concerns having close working arrangements with the

contractor;

(f) Policies and procedures pertaining to small business concerns, including small disadvantaged,

women-owned, veteran-owned, HUBZone, and service-disabled veteran-owned small business

concerns;

(g) Planning, award, and postaward management of major subcontract programs;

(h) Compliance with Cost Accounting Standards in awarding subcontracts;

(i) Appropriateness of types of contracts used (see 16.103);

(j) Management control systems, including internal audit procedures, to administer progress

payments to subcontractors; and

(k) Implementation of higher-level quality standards.

44.304 Surveillance.

(a) The ACO shall maintain a sufficient level of surveillance to ensure that the contractor is

effectively managing its purchasing program.

(b) Surveillance shall be accomplished in accordance with a plan developed by the ACO with the

assistance of subcontracting, audit, pricing, technical, or other specialists as necessary. The plan

should cover pertinent phases of a contractor’s purchasing system (preaward, postaward,

performance, and contract completion) and pertinent operations that affect the contractor’s

purchasing and subcontracting. The plan should also provide for reviewing the effectiveness of the

contractor’s corrective actions taken as a result of previous Government recommendations.

Duplicative reviews of the same areas by CPSR and other surveillance monitors should be avoided.

44.305 Granting, withholding, or withdrawing approval.

44.305-1 Responsibilities.

The cognizant ACO is responsible for granting, withholding, or withdrawing approval of a

contractor’s purchasing system. The ACO shall-

(a) Approve a purchasing system only after determining that the contractor’s purchasing policies

and practices are efficient and provide adequate protection of the Government’s interests; and

(b) Promptly notify the contractor in writing of the granting, withholding, or withdrawal of approval.

44.305-2 Notification.

(a) The notification granting system approval shall include-
(1) Identification of the plant or plants covered by the approval;

(2) The effective date of approval; and

(3) A statement that system approval-

(i) Applies to all Federal Government contracts at that plant to the extent that cross-servicing

arrangements exist;

(ii) Waives the contractual requirement for advance notification in fixed-price contracts, but not for

cost-reimbursement contracts;

(iii) Waives the contractual requirement for consent to subcontracts in fixed-price contracts and for

specified subcontracts in cost-reimbursement contracts but not for those subcontracts, if any,

selected for special surveillance and identified in the contract Schedule; and

(iv) May be withdrawn at any time at the ACO’s discretion.

(b) In exceptional circumstances, consent to certain subcontracts or classes of subcontracts may be

required even though the contractor’s purchasing system has been approved. The system approval

notification shall identify the class or classes of subcontracts requiring consent. Reasons for

selecting the subcontracts include the fact that a CPSR or continuing surveillance has revealed

sufficient weaknesses in a particular area of subcontracting to warrant special attention by the ACO.

(c) When recommendations are made for improvement of an approved system, the contractor shall

be requested to reply within 15 days with a position regarding the recommendations.

44.305-3 Withholding or withdrawing approval.

(a) The ACO shall withhold or withdraw approval of a contractor’s purchasing system when there are

major weaknesses or when the contractor is unable to provide sufficient information upon which to

make an affirmative determination. The ACO may withdraw approval at any time on the basis of a

determination that there has been a deterioration of the contractor’s purchasing system or to

protect the Government’s interest. Approval shall be withheld or withdrawn when there is a

recurring noncompliance with requirements, including but not limited to-

(1) Certified cost or pricing data (see 15.403);

(2) Implementation of cost accounting standards (see 48 CFR chapter 99); 

(3) Advance notification as required by the clauses prescribed in 44.204; or

(4) Small business subcontracting (see subpart 19.7).

(b) When approval of the contractor’s purchasing system is withheld or withdrawn, the ACO shall

within 10 days after completing the in-plant review (1) inform the contractor in writing, (2) specify

the deficiencies that must be corrected to qualify the system for approval, and (3) request the

contractor to furnish within 15 days a plan for accomplishing the necessary actions. If the plan is

accepted, the ACO shall make a follow-up review as soon as the contractor notifies the ACO that the

deficiencies have been corrected.
44.306 Disclosure of approval status.

Upon request, the ACO may inform a contractor that the purchasing system of a proposed

subcontractor has been approved or disapproved, but shall caution that the Government will not

keep the contractor advised of any changes in the approval status. If the proposed subcontractor’s

purchasing system has not been reviewed, the contractor shall be so advised.

44.307 Reports.

The ACO shall distribute copies of CPSR reports; notifications granting, withholding, or withdrawing

system approval; and Government recommendations for improvement of an approved system,

including the contractor’s response, to at least-

(a) The cognizant contract audit office;

(b) Activities prescribed by the cognizant agency; and

(c) The contractor (except that furnishing copies of the contractor’s response is optional).

Subpart 44.4 - Subcontracts for Commercial Products and

Commercial Services

44.400 Scope of subpart.

This subpart prescribes the policies limiting the contract clauses a contractor may be required to

apply to any subcontractors that are furnishing commercial products, including commercial

components, or commercial services in accordance with 41 U.S.C. 3307.

44.401 Applicability.

This subpart applies to all contracts and subcontracts. For the purpose of this subpart, the term

"subcontract" has the same meaning as defined in part 12.

44.402 Policy requirements.

(a) Contractors and subcontractors at all tiers shall, to the maximum extent practicable:

(1) Be required to incorporate commercial products, commercial services, or nondevelopmental

items as components of items delivered to the Government; and

(2) Not be required to apply to any of its divisions, subsidiaries, affiliates, subcontractors or

suppliers that are furnishing commercial products or commercial services any clause, except those-

(i) Required to implement provisions of law or Executive orders applicable to subcontractors
furnishing commercial products or commercial services; or

(ii) Determined to be consistent with customary commercial practice for the item being acquired.

(b) The clause at 52.244-6, Subcontracts for Commercial Products and Commercial Services,

implements the policy in paragraph (a) of this section. Notwithstanding any other clause in the

prime contract, only those clauses identified in the clause at 52.244-6 are required to be in

subcontracts for commercial products or commercial services.

(c) Agencies may supplement the clause at 52.244-6 only as necessary to reflect agency unique

statutes applicable to the acquisition of commercial products and commercial services.

44.403 Contract clause.

The contracting officer shall insert the clause at 52.244-6, Subcontracts for Commercial Products

and Commercial Services, in solicitations and contracts other than those for commercial products or

commercial services.