contractor purchasing system reviews not so different from 1991 In 1991,

Transcription

1 22 Contract Manageent May 2013

2 Contract Manageent May

3 contractor purchasing syste reviews not so different fro 1991 In 1991, the world was not connected the way it is today. There was no Facebook, LinkedIn, or Twitter. Social edia eant talking to soeone on your landline. And Mark Zuckerberg, the founder of Facebook, was just seven years old. 24 Contract Manageent May 2013

4 contractor purchasing syste reviews not so different fro 1991 In 1991, if a governent contract specialist or federal contractor eployee was trying to interpret a Federal Acquisition Regulation (FAR) clause or figure out which clauses to flow to subcontractors, he or she would refer to a paper version of the FAR and discuss the issue with colleagues. The Hill Air Force Base FARSite 1 didn t exist. Best value source selection was in its infancy. FAR Part 12, Acquisition of Coercial Ites, wasn t yet part of the FAR. It was during this era of federal governent procureent that I wrote Being Audited by the Governent Can Increase Contractor Profitability, 2 an article published by Contract Manageent Magazine that won NCMA s Charles J. Delaney Meorial Award for the best Contract Manageent Magazine article in Since then, I have reained active in federal contracting, both in industry and as a contractor purchasing syste review (CPSR) consultant. While the Internet age has transfored inforation gathering, and blogs have opened up soeties serious though not always accurate discussions about federal procureent topics, I believe that one thing has reained pretty uch the sae in the last 22 years; naely, CPSRs. Here, I will briefly discuss the current guidance in the FAR about CPSRs, who ight be audited, and what the significant paraeters for an audit are. I will then review the ajor topics fro y 1991 article and illustrate their applicability today while identifying topics that either didn t exist or weren t ephasized by governent CPSR auditors at that tie. Finally, I will point out soe of the audit areas getting close scrutiny today. CPSR Applicability FAR 44.3, Contractors Purchasing Systes Reviews, identifies the objective of a CPSR as a way the governent can evaluate contractor efficiency and effectiveness by exaining the way a contractor spends taxpayer oney and coplies with governent policy when subcontracting. Three of the ost significant concerns of the governent in 1991 were: Whether a contractor was providing the axiu practicable opportunity for sall businesses to copete for contractor business, 3 Whether contractors paid a fair and reasonable price when they bought products or services fro subcontractors, 4 and Whether contractors were flowing the requisite clauses to vendors that were providing products or services in support of a governent contract. These issues are still relevant today. The governent s adinistrative contracting officer deterines the need for a CPSR based on such things as contractor past perforance, volue, coplexity, and dollar value of subcontracts. If a contractor s sales to the governent are expected to exceed $25 illion in the next 12 onths, excluding copetitively awarded fir-fixed-price and copetitively awarded fixed-price with econoic price adjustent contracts and sales of coercial ites pursuant to FAR Part 12, a CPSR could be requested by the adinistrative contracting officer. 5 If a CPSR has been perfored previously, the next CPSR will typically occur three years later. Contractors receive several benefits fro having an approved purchasing syste. Fro a sales perspective, especially to foreign custoers, a governent-approved purchasing syste adds creditability to a copany and helps for a positive feeling with prospective custoers that the copany knows what it is doing and will provide products or services at fair prices. An approved purchasing syste also eliinates various consent to subcontract and advance notification requireents before awarding certain subcontracts. 6 The Scope of a CPSR in 1991 My contention in y 1991 article was that by aking sure your purchasing syste eets CPSR requireents, your copany can buy ore effectively at lower prices; thus, adding profit to your botto line. That is still true today. Unfortunately, as I review contractor purchasing systes, I continue to see that any copanies still don t negotiate with vendors as a standard practice and/or don t adequately justify that prices are fair and reasonable. In 1991, a CPSR looked at the following aspects of a copany s purchasing departent: Written policies and procedures, Purchase order ters and conditions, Control of single and sole-source purchases, Extent of adequate copetition, Price and cost analysis ethods, Copliance with public laws, Docuentation of purchase order files, and Socioeconoic progras. These topics are essentially the sae areas reviewed today, but a governent contractor still has to ake sure that the governent s requireents for these various topics are copletely understood. Purchasing Manual and Policies and Procedures Requireents Start with the purchasing anual when exaining the effectiveness of your supply chain. A contractor can find out what the governent expects to see in such a anual by siply searching the Internet. A good initial source of inforation is the Defense Contract Manageent Agency s (DCMA) CPSR Guidebook. Do a Web search for DCMA CPSR Guidebook and you ll find various PowerPoint presentations, checklists, and Defense Contract Audit Agency (DCAA) audit guides. While reviewing the DCMA CPSR Guidebook, you will coe across a policies and procedures checklist that identifies the topics that govern- Contract Manageent May

5 contractor purchasing syste reviews not so different fro 1991 Part I: General Supply Chain Policy 1. Anti-kickback Act of Authorized Dollar Approvals/Coitent Authority 3. Conflict of Interest a. Standards of Conflict and Gratuities b. Rotation of Buyers c. Internal Audit (irregular or questionable conduct) d. Hotline (outside of purchasing chain) 4. Reporting unethical conduct and restitution to governent 4. Purchasing s Role as the Sole Authority to Make Coitents 5. Supply Chain Manageent 6. Intra/Inter-Copany Transactions Part II: Pre-Solicitation to Subcontract Award 1. Best Value 2. Certifications/Representations Packages 3. Coercial Acquisitions 4. Copetition 5. Adinistrative Contracting Officer Advance Notification and Consent 6. Adinistrative Contracting Officer Notification when awarding to CAS-Covered Subcontractors 7. Public Law , Cost Accounting Standards (Disclosure Stateent and Flowdown Clauses) 8. Aerican Recovery and Reinvestent Act 9. Consent Considerations, not otherwise addressed in procureent anual 10. Cost Accounting Standard Credit Cards 12. Debarred, Suspended, Ineligible Vendor Certification 13. Defense Priority and Allocation Requireents 14. Processing Requisitions 15. Processing Requests for Quotation 16. Progress Payents to Vendors/Subcontractors Selection of Subcontract Type 18. Teaing Agreeents/Anti-trust 19. Discounts for Propt Payent 20. General Services Adinistration Sources 21. Letter Subcontracts 22. Make or Buy 23. Micro-Purchases 24. Price/Cost Realis/Price Analysis 25. Public Law , Truth in Negotiations Act 26. Vendor Rating, Including Financial Stability 27. Electronic Purchases 28. Single/Sole-Source Procureents and Justification 29. Equal Opportunity a. Affirative Action b. Pre-Award Equal Eployent Opportunity 30. Restrictions on Lobbying (over $100,000) (anti-lobbying) 31. Patent Rights Provisions in Subcontracts 32. Prie Contract Flowdown Clauses and Provisions 33. Ters and Conditions Part III: Subcontract Adinistration 1. Docuentation Checklist/File Docuentation 2. Expediting and Follow-Up 3. Governent Source Inspection 4. Receipt of Materials 5. Subcontract Manageent/Adinistration 6. Terinations 7. Processing Changes/Modifications Part IV: Special Interest Ites and Subcontract Closeout 1. Counterfeit Parts 2. Earned Value Manageent 3. Huan Trafficking 4. Retention of Records 5. Sall Business/Minority Business 2 6. Excessive Pass-Through 7. Governent Property Adinistration 8. Reporting Executive Copensation 9. Safeguarding Classified Inforation 10. Specialty Metals (Berry Aendent) 11. Reporting of Foreign Subcontracts (>$550,000) 12. Conflict Minerals 13. Net Acquisition Savings (VECP) 1. CPSR auditors differentiate between vendors and subcontractors, yet the definition of a subcontractor and the definition of a vendor is a subject of debate today. 2. The FAR doesn t currently use the ter inority ; instead, the ter sall disadvantaged business is used. FIGURE 1. suggested purchasing anual orientation 26 Contract Manageent May 2013

6 contractor purchasing syste reviews not so different fro 1991 ent auditors expect to see in governent contractors purchasing anuals or purchasing policies and procedures anuals. The 2012 version of this checklist includes 57 ites. I have added a few additional topics that are currently special interest ites during CPSR audits and ay be forally added to the checklist by the tie you read this article. This list of andatory topics is identified in FIGURE 1 on page 26. Depending on what you buy fro vendors, you ay decide to include additional topics that are pertinent to your line of business. In y 1991 article, I recoended dividing the purchasing anual into four subcategories: Adinistrative including such topics as gratuities, kickbacks, delegation of purchasing authority, vendor approval, and buyer training; Purchasing inforation specifically related to the issuance of quotations and placeent of orders to vendors; Pricing issues such as docuenting price reasonableness; and Subcontracting topics such as sall business subcontracting plans and order adinistration and closeout. This type of outline for the purchasing anual still works today. However, because of the electronic orientation of ost purchasing systes today, your anual layout should ephasize that the purchasing process within your copany takes into account the various electronic databases used. This process extends fro purchase requisition creation to an approved purchase requisition to a vendor purchase order or subcontract to delivery, final payent, and closeout. I ve revised the titles of the anual subcategories for this article, and the topics are not listed in any particular order. Reeber that your anual layout should reflect the process your copany follows fro creating purchase requisitions to closing out subcontracts after final payent has been ade. The topic presentation should also be buyer-oriented so buyers can best understand the requireents of the FAR they are both ipleenting and following as they buy products or services in support of governent contracts. Because supply chain buyers ay be supporting nuerous prie contract types at any given tie, it is iportant to identify the governent prie contract nuber to the purchase requisition, vendor purchase order, or subcontractor. Identifying the prie contract nuber to a purchase requisition is probleatic for soe copanies because of liitations in soe supply chain databases, but it should be addressed. Contractor Ters and Conditions and Flow Down of Governent Clauses Governent auditors also look at a contractor s ters and conditions to ake sure When you re ready to do soething bigger When you re ready to advance your career You are ready for Aerican Public University Aerican Public University is ready to help you ove your career forward. We offer respected degrees in Business Adinistration, Inforation Technology, Security Manageent, Manageent, Military Manageent and Progra Acquisition, and ore copletely online. We re also able to provide our students with opportunities beyond the virtual classroo working with select Fortune 500 copanies and governent agencies. And people are taking notice. We ve been nationally recognized by the Sloan Consortiu for effective practices in online education. When you re ready, visit StudyatAPU.co/contract We want you to ake an infored decision about the university that s right for you. For ore about the graduation rate and edian debt of students who copleted each progra, as well as other iportant inforation visit Contract Manageent May

7 contractor purchasing syste reviews not so different fro 1991 that clauses andated by a contract with the governent are flowed to vendors and subcontractors 7 when required. This review also extends to public law copliance such as affirative action, equal eployent opportunity, the Truth in Negotiations Act, and the Cost Accounting Standards. Many governent contractors do a poor job of flowing appropriate clauses to vendors. This can be caused by the business developent or contracts departent not effectively counicating specific governent contract clauses to the supply chain buyers either through the electronic purchasing database or by direct counication. Flow down is no different or ore coplicated today than two decades ago. Contractors ust siply pay attention to the clauses in their contracts and know which clauses require flow down to vendors. Several sources can help contractors better understand clause flow down. Two of the better ones are the Wolters Kluwer Guide to FAR Contract Clauses 8 and a National Defense Industrial Association publication titled A Study of the Applicability of Federal Acquisition Regulation (FAR) Clauses to Subcontracts under Prie Defense and NASA Contracts. 9 Both of these reference docuents can be purchased at a noinal cost. Supply Chain s Role as the Sole Authority to Make Coitents Purchasing should be ade by authorized eployees who are part of the purchasing departent. Many copanies, however, allow huan resources to buy travel services, IT to buy software and coputers, and progra anagers to buy supplies or services for their particular projects. I encourage y clients to allow only authorized purchasing departent eployees to obligate the copany by issuing purchase orders and subcontracts. Properly trained buyers know how to deal with vendors ore effectively and are able to negotiate better arrangeents with vendors. However, if purchases ust be ade outside of the purchasing departent, ake sure the purchasing anual specifically identifies why this happens and who is allowed to ake such purchases. If such buying is allowed, the noral purchase order/subcontract approval process should still be followed to ake sure established policy is et. Control of Single/ Sole-Source Purchases and Price Reasonableness Deterinations Two of the ost iportant aspects of a CPSR involve vendor selection and price reasonableness. A copany s supply chain, siply put, is a profit center for the copany. Negotiated savings with vendors translate to additional profit. So how should a buyer or contract adinistrator deal with vendors or subcontractors? They should do it the sae way a person would when buying a product or service for hi or herself. For exaple, when I bought y new HDTV, I identified a odel with a good track record by reviewing buyer coents and consuer publications like Consuer Reports agazine. Next, I priced the HDTV at a 28 Contract Manageent May 2013

8 contractor purchasing syste reviews not so different fro 1991 couple different stores and looked at online prices. After gathering as uch inforation as possible, the actual discussions with retailers began. Buying in support of governent contracts is no different. First, each supply chain buyer should be expected to learn as uch as he or she can about the coodities or services being purchased. Second, buyers should interface with project anagers, engineers, quality assurance representatives, and anufacturing representatives to better understand the needs of the copany. Such discussion ay also help identify prospective vendors so copetition between vendors exists ore often. Copetition historically brings a price down percent, even before any negotiations take place. Third, a contractor ust give sall businesses the axiu practicable opportunity 10 to copete when buying fro vendors/subcontractors in support of governent requireents price, quality, and delivery being equal. How well a copany identifies sall business vendors and akes awards to such vendors is an iportant aspect of any CPSR. In 1991, the world of purchasing was paperintensive. Because of that, I included several checklists and charts regarding source identification and price reasonableness. Today, any such checklists should esh with the autoated contractor purchasing syste whether SAP, Oracle, etc. so purchase order docuentation can be aintained efficiently. Depending on the purchasing database, an adequate purchase order checklist ay be totally autoated. Such an arrangeent saves the buyer tie when docuenting actions taken and helps guarantee that each purchase order is adequately docuented. The data in such a checklist can irror a current checklist I use in y practice, which includes all pertinent inforation expected by a governent auditor. This checklist, Purchase Order/Subcontract Source Selection and Price Reasonableness Checklist (see FIGURE 2 on pages 30 31) establishes, in a single docuent, a process Acquisition Resource Center (ARC) Your front door to the right blend of acquisition services Web Tools Strealine counications Design to your needs with flexible odular syste Manage contracts, RFI/RFP responses Staffing Tap into our real life experience Adinistrative Services Cost/pricing experts Classified event anageent Business Process Optiize your acquisition process Standardize procureent docuentation Secure your data Strategic planning Acquisition Manageent Acquisition Staffing Acquisition Software info@bvti.co Contract Manageent May

9 contractor purchasing syste reviews not so different fro 1991 FIGURE Contract Manageent May 2013

10 contractor purchasing syste reviews not so different fro 1991 FIGURE 2, continued Contract Manageent May

11 contractor purchasing syste reviews not so different fro 1991 Sidebar It is the policy of the XYZ Copany to provide the axiu practical opportunity possible for sall businesses to copete for business if support fro outside vendors is necessary in developing a winnable proposal in response to governent solicitations. Key process steps are: Identify prospective vendors who display the best technical expertise to fulfill identified outsourcing requireents. HUBZone, veteran, service-disabled veteran, Aerican Indian, or Alaska Native Corporation. The assigned supply chain buyer begins to docuent the purchase order file in the autoated syste or by paper eoranda, as necessary. Essentially, the file will include: Vendor quotes. Include sall businesses whenever possible. Sall business sources ay be identified fro: Engineering stateent of work (SOW) and/or part nuber (s) identification. Buyer engineer or contracting knowledge of the arket. Assistance fro the copany supplier diversity anager and/or sall business liaison officer (SBLO). Source Selection Rationale Price negotiation eorandu if award is ade copetitively, the file will siply include quotes fro all copeting offerors with a siple notation that award was ade based on copetition. Assistance fro the Sall Business Dynaic Search tool on the SBA website. 1 Assistance fro Procureent Technical Assistance Centers 2. The source selection rationale should very siply identify how the source or sources were identified. The following chart can be used to identify the vendor business sizes solicited and the reasons sall businesses either weren t solicited or weren t selected for award. After possible sources are identified for a specific requireent, technical discussion ay ensue to validate initial selection. Requests for quotations should then be sent to qualified sources Proposals received are then analyzed by cognizant engineers and forwarded to the Buyer or Contracts Adinistrator for negotiation and/or issuance of a Purchase Order in the copany electronic purchasing syste. Purchase orders or subcontracts supporting governent solicitation or contracts usually including a PO Addendu that identifies specific details of the resulting PO/Subcontract, including any governent DPAS rating and any required clauses fro the governent solicitation/contract. The supply chain buyer, with assistance fro the contracts departent, as necessary, ensures the vendor receiving any subcontract is properly identified in the supply chain vendor database, including the vendor s business size; e.g., large or sall business. If sall business, whether the vendor also qualifies for any breakout of sall business such as disadvantaged, woen, Vendor Business Sizes Solicited q Large q Sall Business q Sall Disadvantaged Business (SDB) q Woen-Owned SB (WOSB) q HUBZone q Veteran-Owned SB (SDVOSB) Reason Codes for Non- Selection of Sall Business q Sole Source q Single Source q Source Controlled Drawing q Custoer Directed q No Known SB Source q SB Solicited, Not Selected q Service-Disabled Veteran q Price Owned SB (SDVOSB) q Supplier Quality Audit (Buyer s Evaluation) q Liited Capabilities Research Conducted Trying to Find Sall Businesses Explanation: 32 Contract Manageent May 2013

12 contractor purchasing syste reviews not so different fro 1991 Sidebar, continued The basis for deterining the prices fair and reasonable ust be identified and ade part of the purchase order file (electrically or paper copy identified to the specific purchase order in question). Price reasonableness deterinations ay be the result of copetitive proposals. If so, copetition will norally be the basis for deterining the price fair and reasonable. However, if copetition isn t possible, the supply chain buyer should first use price analysis techniques to deterine the price proposed fair and reasonable. Price analysis is the deterination of a price as being fair and reasonable by looking at the selling price rather than analyzing the various cost eleents that ake up the price. If price analysis techniques are used, such analysis ay take one of several fors. For exaple: Other; e.g., value analysis (enter explanation in electronic purchasing odule or on paper price negotiation eorandu If price reasonableness can t be deterined by price analysis, other techniques, including cost analysis, should be eployed. Cost analysis is the review of a vendor proposal by exaining the various cost eleents, including profit, that ake up the selling price. For Exaple, a cost eleent buildup ay include: Engineering labor hours Engineering OH Materials Previous Prices Paid Copare the proposed price to a previous purchase or copare it with known prices for siilar ites. Based on this analysis, coents should be ade in the price negotiation eorandu (PNM) explaining why you think any difference in the proposed price and previous price paid is reasonable. For exaple, if a price has increased 3 percent over 24 onths, inflation or change in consuer price index or other indices ay justify the difference. Maybe the quantity has changed and siply the effect on the bill of aterial or anufacturing learning justifies the difference. Siilar Ite Coparison Paraetric Analysis analysis of proposed prices using a atheatical forula. For exaple, if tires or brakes are being purchased, it ight be possible to ake a paraetric cost versus size graph showing the relationship of brake prices to ri diaeter. Catalog or Market Published Price List Corporate Contract 3 In-House Estiate Pricing inforation fro the vendor/subcontractor Material OH Manufacturing labor hours Manufacturing OH G&A Profit When perforing cost analysis, ask the vendor how engineering hours or anufacturing hours are deterined. Verify if the vendor overhead rates have been reviewed and approved by the governent. Usually, the Defense Contract Audit Agency (DCAA) perfors such reviews. If the DCAA has approved the rates, you can rely on the approved rates as being reasonable. If the procureent was sole source with only a single vendor copeting, the supply chain buyer ust docuent the purchase order file to explain how he or she deterined the price fair and reasonable. If any of the choices identified above is applicable, the buyer should identify the reason and then explain in the PNM how the final negotiated price was deterined. If the negotiated price is less than the proposed price, the PNM should explain the rationale supporting the reduced price (negotiated savings) and docuent the cost savings in dollars and/or percent fro the original quote. Contract Manageent May

13 contractor purchasing syste reviews not so different fro 1991 Sidebar, continued The forat for a PNM will vary depending on the purchase. However, the following exaple can be used. Price Negotiation Meorandu (PNM) 4 For: (Identify the PR) Prie Contract Nuber: PO/Subcontract Nuber: Subcontractor/Vendor: The work to be perfored by XXXX for XYZ Copany involves engineering services in support of Research and Developent (R&D) efforts to better stabilize shock absorber systes on Ary HUMVEES. The price reasonableness of this as with all subcontractor proposals to XYZ Copany, are deterined following the pricing guidelines in the Federal Acquisition Regulation (FAR) at This basic guidance was suppleented by relying on copetition, where possible; past history, where available; knowledge of the arket; and, using recognized baroeters of price reasonableness. Inforation culled fro these various sources was evaluated following the standard processes identified in XYZ Copany Supply Chain Guidelines. Details of the Negotiation and Deterination of Price Reasonableness are explained below: Negotiation with all vendors/subcontractors should occur. Attepted negotiations should be explained in the PNM and any negotiated savings should be docuented in the PNM. Purchase orders/subcontracts issued in support of governent contracts oftenties require certain certifications to be received fro vendors; and, in the case of purchase orders/subcontracts over $650,000 with large business vendors/subcontractors, the receipt of a Sall Business Plan fro the vendor/subcontractor. Before issuing a request for quotation (RFQ) or request for proposal (RFP) to a prospective vendor/subcontractor review the requireent thoroughly to ake sure you fully understand if a DPAS Rating applies, what andatory clauses ust be flowed to the prospective vendors/subcontractors, and what certifications should be requested. Additionally, if the RFQ/RFP is expected to result in prices that exceed $650,000, levee a sall business plan requireent on all large business vendors/subcontractors as appropriate. Endnotes Prices should be deterined fair and reasonable if a corporate contract is issued. 4. Refer to FAR Contract Manageent May 2013

14 contractor purchasing syste reviews not so different fro 1991 for buyers to follow to ake sure sall business is allowed the axiu practicable opportunity to copete, that negotiations occur or are attepted with prospective vendors, and that prices are deterined fair and reasonable. If only a sole- or singlesource is solicited, the for provides a place for the buyer to identify the actions taken and why. The for also requires the buyer to identify the business size of each prospective vendor. If sall business is not solicited or doesn t receive the award, the reasons can be easily identified on the checklist. When deterining prices fair and reasonable, docuentation differs significantly depending on whether the ite or service bought eets the definition of a coercial ite 11 or a non-coercial ite. For exaple, if the ite or service eets the definition of a coercial ite, certified cost or pricing data will not be required of the vendor. For this reason, the for requires the buyer to initially identify whether he or she is buying a coercial ite or a non-coercial ite. Buyers ust often be reinded, however, that buying coercial ites still requires a deterination that price is fair and reasonable. While this checklist can be used to docuent such actions of the buyers, the purchasing anual should go into ore detail explaining this iportant part of the process the buyers follow. For exaple, a purchasing anual ight explain source selection and price reasonableness deterinations, as shown in the sidebar on pages Socioeconoic Progra The final topic discussed in y 1991 article involved socioeconoic considerations. It included a checklist for conducting an in-house review of the copany s 12 sall business progra. While the review of a sall business progra is not a specific focal point of a CPSR audit, it is identified as topic 54 in the list of topics that should be discussed in a contractor s purchasing anual, and having a FAR-copliant sall business progra helps ensure that: Sall businesses are provided the axiu practicable opportunity to copete for your copany s business; and That sall business related flow down clauses such as FAR are actually flowed to subcontractors as necessary. A current trend in sall business progra audits is for the Sall Business Adinistration to perfor an increasing nuber of audits, often in lieu of the DCMA sall business specialist. The Sall Business Adinistration auditor often reviews purchase orders/ subcontracts over $150,000 to see if a sall business was solicited, and, if not, why. Conclusion In 1991, I suggested a supply chain that supports governent contracts could perfor its duties better and be ore profitable siply by aking sure it is ready for a governent CPSR. That axio hasn t changed. CM About the Author PHILIP G. BAIL JR., CPCM, NCMA Fellow, is the owner of Phil Bail & Associates, a veteran-owned sall business that perfors pre-audits for contract purchasing syste reviews, ipleents or anages large contractor sall business progras, and prepares equitable adjustents and clais for both large and sall businesses. A retired U.S. Air Force contracting officer, Bail has worked in both the aerospace and hazardous waste disposal industries as a purchasing anager, director of governent contract adinistration, and sall business liaison officer. Send coents about this article to c@ncahq.org. Endnotes See Philip G. Bail, Being Audited by the Governent Can Increase Contractor Profitability, Contract Manageent Magazine (August 1991). 3. See FAR , Utilization of Sall Business Concerns. 4. See FAR (a). 5. See FAR (a). 6. See FAR The ters vendor and subcontractor are used interchangeably in this article. However, the ters ay actually refer to different groupings of businesses when discussing clause flow down. 8. Available at 9. Available at FAR (a). 11. See FAR Sall business progra requireents in FAR 19.7 apply to large businesses. Contract Manageent May