ITAA questions time-and-materials subcontracting rule

Proposed Rule

Proposed restrictions on the use of subcontractors in some federal contracts are unnecessary and could affect the quality of services that contractors can offer, according to the Information Technology Association of America.

ITAA, a trade group that represents industry, said the rules set rigid conditions regarding the amount of money that contractors can charge for work subcontractors perform when the subcontractors are not listed in the original contract. ITAA made the comments in a written submission to the General Services Administration in response to the publication of the proposed rule.

The Defense Acquisition Regulations Council and the Civilian Agency Acquisition Council published the proposed rule in the Federal Register Sept. 26.

The rule applies to contractors working under time-and-materials contracts, which allow contractors to charge agencies for the actual time worked and materials used rather than setting a fixed price in advance.

“These rules are a cure in search of a disease,” said ITAA President Harris Miller in a written statement. “Federal agencies use time-and-material contracts under limited conditions, and their industry partners bill for subcontract services responsibly. As drafted, these measures would merely add time and expense to the process, making it more difficult for companies to respond to their customers’ complex and evolving needs.”

The proposed rule requires prime contractors to negotiate a list of subcontractors that it will use on the contract. If the prime contractor later needs to bring in a subcontractor that was not anticipated at the beginning, the rule states that the prime contractor can charge only the subcontractor's actual rates. Called a pass-through, the provision forbids the prime contractor from adding additional costs for program management or other considerations.

The proposal also requires the prime contractor to get government approval for the unlisted subcontractor, which ITAA believes would cause needless contract delays.

ITAA argued that the proposed rule will discourage contractors from hiring subcontractors, making it harder for small businesses to join contractor teams.

The organization submitted its comments today, the deadline date.