Subcontract Management &
Administration
Breakout Session # 205
Name: The Federal Market Group
Daniel M. Jacobs, CPCM, CMC
Chairman/CEO
www.fmg-ltd.com
Date: Monday, July 19
Time: 2:30 – 3:45
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Subcontract Management &
Administration
Session Objectives:
Provide a Proven Proactive,
Problem Avoidance Approach to
Subcontract Management & Administration
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© The Federal Market Group
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Subcontract Management &
Administration
WHAT IS A SUBCONTRACT?
• Broadly Defined . . . Any Contract or Agreement To Perform
Work or Provide Material in Support of A Prime Contract.
• Far Part 44.101 . . . Any Contract (Including Purchase Orders)
by a Subcontractor (I.E.. Supplier, Distributor, Vendor, or
Firm) to Furnish Supplies or Services for Performance of a
Prime Contract or a Subcontract.
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Subcontract Management &
Administration
CURRENT BUSINESS ENVIRONMENT
Old Government Business Paradigm:
ZERO DEFECT - RISK AVERSION
New Government Business Paradigm:
RISK MANAGEMENT!
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© The Federal Market Group
Subcontract Management &
Administration
• The Government’s Role is to Hold a Prime Accountable for
the Performance of its Subs.
• The Principle of “Privity of Contract” : the Government has
no Relationship (Unless it is set forth) with a Prime’s Subs.
• How Does the Government Demonstrate Interest in
Subcontract Management Practices?
1)
2)
3)
4)
Pre-award Surveys.
Advance Notifications/Consent-to Determinations.
Periodic Contractor Purchasing System Reviews.
Reviews of Purchasing/Contracting Procedures and
Manuals.
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Subcontract Management &
Administration
PRIVITY
BUYER
YES
SELLER
YES
SUBS
Privity (Contractual Relationship) exists only between the
Buyer & Seller - Privity does not exist between Buyer and
the Seller’s Subcontractors
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NO!
Subcontract Management &
Administration
F
A
C
T
S
1. The Prime Contractor Rules
0
F
7. The government is very concerned about how primes manage subcontracts
L
I
F
E
2. The Prime Contract is a Federal Procurement Contract
3. The Subcontract is a Commercial Contract
4. Their are very few mandatory flow down clauses
5.
60-80%
Of U.S.
Procurement $
are Spent
On Subs
Primes tend to flow down all Federal Procurement Clauses
6. The Subcontractor has no legal standing with the government
8. The government can partially terminate a contract
9. No one reads the contract
10. Most contracts (prime and sub) fail because they do not properly plan and
in particular, they fail to baseline the contract from the outset
11. Primes and subs must perform as partners, with the sub totally integrated into
the effort -- a seamless solution.
12. Prime and subcontractor must be a high-performance team!
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Subcontract Management &
Administration
Take a Proactive, Problem
Avoidance Approach
Establish a Community of
Practice and Hold People
Accountable
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© The Federal Market Group
Subcontract Management &
Administration
SIX STEPS TO CREATING A SUBCONTRACT MANAGEMENT
COMMUNITY OF PRACTICE
STEP 1 – Standardize Subcontract Management Body of
Knowledge and the Subcontract Procurement Process
STEP 2 – Establish Subcontract Manager/Subcontract
Administrator Performance Standards and Formally Appoint
Technical Representatives from Using Organizations
STEP 3 – Establish Internal Certification, Train Personnel and
Hold Them Accountable
STEP 4 – Create Community of Practice (PM, Contracts,
Finance, HR, Quality/Safety, Subcontracts) – Breakdown the
Stovepipes
STEP 5 – Establish and Maintain a Toolbox of Checklists and
Performance Support Tools
STEP 6 – Institutionalize Succession Planning & Mentoring
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© The Federal Market Group
Subcontract Management &
Administration
STEP 1 – Standardize Subcontract
Management Body of Knowledge
and the Subcontract Procurement
Process
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© The Federal Market Group
Subcontract Management &
Administration
SUBCONTRACT MANAGEMENT
BODY O F KNOWLEDGE (SCMBOK)
1.0
Contracts
2.0
Regulatory/
Statutory
Foundation
1.1 Formation Of
Contracts
1.2 Types of
Contracts
1.3 Federal
Procurement
Contracts
1.4 Subcontracts/
Commercial
Contracts
1.5 International
Subcontracts
1.6 Contract
Pricing
1.7 Negotiations
1.8 Ethics &
Integrity
2.1 Federal
Procurement
Law
2.2 Federal
Acquisition
Regulation
System
2.3 Uniform
Commercial
Code (UCC)
2.4 Cost Accounting
Standards (CAS)
2.5 Intellectual
Property Rights
2.6 International
Procurement
Law
2.7 Disputes/Claims
2.8 Standards of
Conduct
3.0
Program
Management
3.1
3.2
3.3
3.4
3.5
3.6
3.7
3.8
3.9
Integration
Scope Mgmt.
Schedule Mgmt.
Cost Mgmt.
Quality Mgmt.
HR Mgmt.
Risk Mgmt.
Comm. Mgmt.
Procurement
Mgmt.
4.0
Subcontract
Process
5.0
Subcontract
Administration
4.1 Planning
4.2 Solicitation
4.3 Evaluation &
Award
4.4 Subcontract
Administration
5.1 Assignment
5.2 System
Compliance
5.3 Performance
Monitoring
5.4 Change Mgmt.
5.5 Disputes/Claims
5.6 Closeout
5.7 Subcontract Files
& Documentation
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6.0
Contingency
Contracting
6.1 Contracting
Methods and
Instruments
62 Funding
Considerations
6.3 Administration
of Contingency
Contracts
6.4 Ethics & Integrity
6.5 Other
Considerations
7.0
Policies
& Procedures
7.1 Operating System
7.2 Subcontracting
Policies
7.3 Performance
Support Tools &
Techniques
7.4 Standards of
Conduct
Subcontract Management &
Administration
SUBCONTRACT PROCUREMENT PROCESS
PROCUREMENT PLANNING
Requirement
Determination
Requirement
Specification
Requirement
Authorization
SOLICITATION
Solicitation
SELECTION AND AWARD
Evaluation
Negotiation
Selection
Award
CONTRACT MANAGEMENT and ADMINISTRATION
Assignment
System
Compliance
Performance
Measurement
Contract
Modification
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© The Federal Market Group
Completion
& Payment
Closeout
Subcontract Management &
Administration
SUBCONTRACT PLANNING – A CRITICAL PHASE
Best practices clearly indicate that the most critical phase of
the Subcontracting Process is the Planning Phase
Cost overruns, schedule delays, technical failures, regulatory and
statutory noncompliance, product substitution, legal disputes,
termination, claims, and customer dissatisfaction are but a few of
the results of poor planning.
It is important to accurately and thoroughly define your
requirements early, then communicate them to all the players
throughout the entire Subcontracting Process – from
requirements determination to closeout.
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Subcontract Management &
Administration
STEP 2 – Establish Subcontract Manager/
Subcontract
Administrator
Performance
Standards and Formally Appoint Technical
Representatives from Using Organizations
STEP 3 – Establish Internal Certification
Program, Train Personnel and Hold Them
Accountable
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© The Federal Market Group
Subcontract Management &
Administration
FORMALIZE ASSIGNMENT PROCESS
The Subcontract Manager’s Technical Representatives (TR) perform critical
acquisition and technical functions, and SCMs rely on them to ensure that
subcontracts are managed properly to meet mission needs.
It is essential that the TR Letter of Appointment clearly set forth the
responsibilities and what the TR can and cannot do.
Sample TR Responsibilities:
1. Read the subcontract and be thoroughly familiar with company and
Subcontractor obligations set forth in that document.
2. Develop and execute a Subcontract Quality Assurance Surveillance
Plan (QASP). Review subcontractor Quality Control procedures.
3. Monitor subcontractor performance and document acceptance of
deliverables.
4. Verify subcontractor invoice amounts against actual performance.
5. Validate subcontractor requests for change orders.
6. Facilitate contract closeout.
7. Not authorized to modify the subcontract.
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© The Federal Market Group
Subcontract Management &
Administration
STEP 4 – Create Community of Practice
(PM, Contracts, Finance, HR, Quality/Safety,
Subcontracts) – Breakdown the Stovepipes
STEP 5 – Establish and Maintain a Toolbox
of Checklists and Performance Support
Tools
STEP 6 – Institutionalize Succession
Planning & Mentoring
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© The Federal Market Group
Subcontract Management &
Administration
WORK BREAKDOWN
STRUCTURE (WBS)
CONTRACT
What must be
done?
Requirements
&
Objectives
Deliverables?
Metrics?
Costs?
MOST EFFECTIVE
ORGANIZATION (MEO)
RESOURCES
Who?
Materials
Facilities
Equipment Data
Resources Requirements?
Work and
Resource Plan
When?
SCHEDULE
Where?
Sequence?
Risks?
BUDGET
How Much?
REPORTS
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How is it Going?
Metrics?
Subcontract Management &
Administration
THE SURVEILLANCE PLAN
The Surveillance Plan is a proven performance support tool.
It sets forth the Prime’s plan to monitor subcontractor
compliance with contract provisions. It identifies the critical
work processes, the delivery schedule, deliverables, costs for
the effort and assists in identifying the risks inherent in the
contract performance.
Best practices clearly indicate that proper planning,
selection of a reputable subcontractor, and appropriate
oversight of subcontractor performance, will most likely
result in best value for your organization and the USG.
You should rely upon the subcontractor for Quality
Control – your responsibility is Quality Assurance!
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© The Federal Market Group
Subcontract Management &
Administration
SUBCONTRACTING IN TODAY’S ENVIRONMENT
1. Primes and Subs must place more emphasis on planning and
processes
2. Past Performance is a mandatory source selection evaluation
factor
3. Customer focus is essential
4. Primes and subs must perform as a high-performance team
5. Strategic Partnering is good business
6. Validate your partner’s management processes and capability
to succeed in government contracting
7. Management of government contracts must be proactive (not
reactive)
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© The Federal Market Group
Daniel M. Jacobs, CPCM, CMC
Chairman/CEO, The Federal Market Group
Recognized as one of the nation’s leading authorities on public contracting,
Daniel M. Jacobs is Chairman/CEO of The Federal Market Group (FMG),
a veteran owned company, that includes Government Business Solutions (GBS),
Federal Market Publishing (FMP), and The Federal Market Institute (FMI),
Washington, D. C. based organizations providing professional training, research,
publishing and consulting services to government and industry in public contracts
management. FMG also includes The EuroMarket Group based in Brussels,
Belgium and FMG Middle East in Tel Aviv.
He is a Fellow, past National President (1987-88), recipient of The Charles A. Dana Distinguished Service Award, the Honorary
Life Member Award and a member of the Executive Advisory Council of the National Contract Management Association
(NCMA). He is Chairman Emeritus, Board of Trustees, of the non-profit foundation, Contract Management Institute (CMI) and
Chairman, Board of Advisors of Excel Institute. He is a member of the Project Management Institute (PMI), a member of the
Institute of Management Consultants (IMC), a member of the Professional Services Council (PSC) and he is a Life Member of
The American Legion.
Mr. Jacobs holds a bachelors degree from North Carolina Wesleyan College, a Masters in Government Contracts from George
Washington University School of Government and Business Administration. He has completed additional graduate work in
engineering, business and contracts at Old Dominion University, The College of William and Mary and George Washington
University. In addition, through examination, he earned the designation of Certified Professional Contracts Manager (CPCM)
and Certified Management Consultant (CMC). He served three years active duty with the U. S. Army and attained the rank of
Captain.
Mr. Jacobs is the subject-matter-expert for the General Services Administration Federal Acquisition Institute (GSA/FAI)
government-wide training program on Source Selection and is a consultant to the President’s Committee for Purchases From
People Who Are Blind Or Severely Disabled. He is a recipient of the “Hammer Award” for contributions to the National
Partnership for Reinventing Government (NPR). He is co-director of training for the FAI FAC-C VA Intern Development
Program and adjunct faculty at the George Mason University School of Public Policy.
Widely published, he co-authored the acclaimed series of contracts-business perspective articles on the Strategic Defense
Initiative (SDI) appearing in Contract Management magazine. He is principal author of Building a Contract: Solicitations/Bids
and Proposals - A Team Effort?, NCMA, 1990. He is the author of, Federal Government Contracting: The System/The Process,
FMP, 1989; The Integrated Project/Team (IPT), FMP, 2000; The Desktop Reference Guide for Contract Management, FMP,
2001 and The Art of the Possible: Create and Organization with No Limitations, FMP/Amazon.com, 2010.
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© The Federal Market Group
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