Counsel Commentary: DoD Limits Flowdown Clauses for Commercial Subcontracts

The federal government relies on its prime contractors to “flow down” certain requirements to subcontractors by incorporating Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS) clauses in their subcontracts. This is a common practice for prime contractors, and simplifies compliance for prime contractors, but places a significant burden on subcontractors throughout the supply chain, specifically small companies that provide commercial products and services. 

In late 2023, the Department of Defense (DoD) published a rule to address this burden and implement the National Defense Authorization Act of Fiscal Year 2017, which prohibits the inclusion of non-mandatory flowdown clauses in subcontracts for commercial items. 

RJO shareholder Stephen Bacon tackled this topic in his May Contract Management Magazine column, “DoD Limits Flowdown Clauses for Commercial Subcontracts” (subscription required). In the article, Bacon analyzes the rule, its impacts on subtractors, and the DFARS compliance obligations. 

“The new DFARS rule represents a major victory for companies that provide commercial products and services to DoD prime contractors,” Bacon writes. “The rule gives commercial subcontractors much greater leverage in their negotiations with prime contractors regarding the inclusion of FAR and DFARS clauses in their subcontracts.”

The piece, which appears in the magazine’s May issue (subscription required), is the latest entry in Bacon’s monthly Counsel Commentary column and is published by the National Contract Management Association. It was used with permission.

Read Bacon’s latest Contract Management article here.