Federal Subcontract Agreement Guide & Template
Your prime contract obligations don't necessarily stop with you.
Winning a federal prime contract is exciting.
Hiring subcontractors to help perform it creates another layer of responsibility.
A federal subcontract should do more than describe the work and state how much the subcontractor will be paid.
It may also need to address:
This resource teaches contractors how to think through those responsibilities and provides an editable starting template.
This is educational, not legal advice.
Federal subcontract requirements vary significantly based on:
GovCon Learning strongly recommends having a qualified government-contracts attorney review your subcontract template and flowdown provisions before use.
Lesson 1
This Isn't Just a Vendor Agreement.
Your company signed a contract with the federal government. That contract contains obligations.
When another company performs part of that work for you, some of those obligations may need to follow the work to the subcontractor. This is commonly called:
FLOWDOWN
- A flowdown provision passes an applicable prime-contract requirement down to a subcontractor.
- Some clauses expressly require flowdown.
- Some apply only under particular circumstances.
- Some may need to be incorporated because the Prime cannot satisfy its own obligations without requiring corresponding subcontractor performance.
- And some prime-contract clauses should NOT simply be copied indiscriminately into every subcontract.
Lesson 2
More Clauses Isn't Automatically Better Compliance.
The Prime should determine which requirements actually apply to the subcontract. Work through these questions clause by clause:
FLOWDOWN REVIEW REQUIRED
Do not automatically populate every clause from the prime contract into every subcontract.
Lesson 3
Wage Determinations
DO NOT FORGET THE WAGE DETERMINATION.
Certain federal contracts are subject to federal labor standards requiring minimum wages and/or fringe benefits. Depending on the work, this may include requirements under:
- Service Contract Labor Standards
- Davis-Bacon / Wage Rate Requirements for Construction
- Related labor requirements
When applicable, these obligations may extend to subcontractor employees performing covered work. The subcontract must appropriately incorporate applicable requirements.
Service Contract Labor Standards
For covered service contracts, applicable wage determinations establish minimum monetary wages and fringe-benefit requirements for covered service employees. The Prime should determine whether subcontract work is covered and ensure applicable labor requirements are appropriately flowed down.
Potential responsibilities include:
- Providing applicable wage determination
- Identifying appropriate labor classifications
- Ensuring wage rates are followed
- Ensuring fringe-benefit requirements are addressed
- Employee notification / posting where required
- Recordkeeping
- Monitoring subcontractor compliance
- Addressing revised wage determinations when applicable
Construction / Davis-Bacon
For covered construction work, applicable prevailing wage determinations and labor standards can also flow to subcontractors.
"MY SUBCONTRACTOR HANDLES THEIR OWN PAYROLL" IS NOT A COMPLIANCE STRATEGY.
The Prime should understand the labor requirements applicable to subcontracted work and establish appropriate contractual and monitoring processes.
Potential consequences of labor violations can include:
Recommend consultation with:
- - Federal contracting counsel
- - GovCon accounting/payroll professionals
- - HR/labor professionals where appropriate
Wage compliance requirements to include
Where applicable, require the subcontractor to:
- Comply with applicable wage determination
- Pay applicable monetary wages
- Provide required fringe benefits
- Maintain required payroll/time records
- Provide documentation where contractually required
- Notify employees as required
- Cooperate with lawful compliance reviews
- Notify Prime of potential violations
- Flow applicable requirements to lower-tier subcontractors
Lesson 4
Start With Your Prime Contract.
Before drafting the subcontract, review:
WHICH OF THESE APPLY TO THE SUBCONTRACTOR'S WORK?
Subcontract Setup Wizard
Answer what you know. Your answers stay in this browser, appear in the downloaded template, and surface the requirements your subcontract may need to address.
The Starter Subcontract Template
An editable Federal Prime Contract Subcontract Agreement with 37 sections and mandatory exhibits. Every blank is tagged so you know what has to be decided before execution.
[COMPLETE THIS]
A required blank. The subcontract is not usable until every one of these is filled in.
[IF APPLICABLE]
A provision that applies only in certain circumstances. Determine applicability, then keep or delete.
[BUSINESS DECISION]
The Prime must decide the business outcome before the language can be finalized.
[LEGAL REVIEW RECOMMENDED]
Language with real legal and financial consequences. Take it to counsel.
[LEGAL REVIEW REQUIRED]
Do not use placeholder language here. Counsel should draft or approve it.
Mandatory Exhibits
SUBCONTRACT STATEMENT OF WORK
PRICING / LABOR RATES
APPLICABLE WAGE DETERMINATION(S)
FAR / AGENCY FLOWDOWN MATRIX
INSURANCE REQUIREMENTS
DELIVERABLES & REPORTING SCHEDULE
KEY PERSONNEL
SECURITY / CYBER REQUIREMENTS
Exhibit D columns
Exhibit E coverage categories
Coverage limits are intentionally blank. Set them with your insurance advisor and counsel based on the prime contract, agency requirements, your insurance program, and your risk profile.
Subcontractor Acknowledgement
Have the subcontractor confirm in writing that it received each of the following, then sign.
- Scope
- Pricing requirements
- Wage determinations
- Labor standards
- Flowdown clauses
- Security requirements
- Insurance requirements
- Deliverables
Prime Contractor Pre-Award Checklist
Before subcontract execution, ask:
- Did we verify SAM / exclusion status where appropriate?
- Did we verify UEI / CAGE where needed?
- Did we verify insurance?
- Did we review the Prime Contract?
- Did we determine subcontract type?
- Did we determine commercial/noncommercial status?
- Did we identify required flowdowns?
- Did we attach current wage determination?
- Did we review labor classifications?
- Did we address lower-tier flowdowns?
- Did we address cybersecurity?
- Did we address security?
- Did we define scope?
- Did we define deliverables?
- Did we define pricing?
- Did we define invoice requirements?
- Did we define payment terms?
- Did we establish recordkeeping requirements?
- Did counsel review material legal provisions?
Signing the Subcontract Isn't the End.
During performance, track:
- Insurance expiration
- SAM/exclusion status where appropriate
- Wage determination updates
- Employee classifications
- Required payroll records
- Deliverables
- Invoices
- Funding
- Modifications
- Option periods
- Security compliance
- Cyber incidents
- Quality
- Performance
- Lower-tier subcontractors
- Prime Contract modifications
- Flowdown changes
Prime Contract Modification Alert
When the government modifies your prime contract, ask:
DOES THIS CHANGE OUR SUBCONTRACT?
Potential changes:
Downloads
Federal Subcontract Agreement Template (Word)
37-section starter subcontract with tailoring tags, exhibits, and a subcontractor acknowledgement page. Includes your setup answers when you complete the wizard above.
Subcontract Checklists (Word)
Prime contract review list, flowdown review questions, labor standards responsibilities, pre-award checklist, administration tracker, and modification alert.
Exhibit Workbook (Excel)
Pricing, wage determinations, flowdown matrix, insurance, deliverables, and an administration tracker as editable worksheets.
Teaming before award? Start with the Teaming Agreement Guide & Template, then use this resource once you hold the prime contract.
This guide and template are provided for educational and informational purposes only and are not legal advice. Federal subcontract requirements vary significantly based on the prime contract, agency, contract type, subcontract type, dollar value, commercial versus noncommercial status, type of work, place of performance, applicable labor statutes, security requirements, cybersecurity requirements, and other contractual circumstances. GovCon Learning strongly recommends having a qualified government-contracts attorney review your subcontract template and flowdown provisions before use.