New SBA Rule Bans Contract Clause Prohibiting Subcontractor Contact With Contracting Officer - Articles

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Posted by: Lynn Pointer on Sep 26, 2013

Effective immediately, prime contractors on federal construction may not prohibit their subcontractors from asking the federal contracting officer about the status of payment.  The prohibition was included in a new rule governing small business contracting, which was issued by the U.S. Small Business Administration on July 15.  This rule complements laws enacted in the 1990s that explicitly permit a subcontractor to contact a contracting officer to obtain information on payment and to obtain a copy of the general contractor’s payment bond.  In response, some general contractors added a clause to their subcontractors prohibiting such subcontractor contact.  The new SBA rule, which took effect on Aug. 15, states:  “. . . A prime contractor selected for award of a contract or contract modification that exceeds . . . $1,500,000 in the case of construction of a public facility, is responsible for the following:  The Contractor may not prohibit a subcontractor from discussing any material matter pertaining to payment or utilization with the contracting officer . . .”  The SBA and the contracting agencies are working to incorporate this new prohibition into the Federal Acquisition Regulation (FAR).