Subcontracting occurs in almost all larger dollar contracts. The prime contractor usually has the discretion to determine which subcontractors they will use. Can the government issue a solicitation that requires a particular subcontractor to be used?
In Simplex Aerospace, B-414566.2 (Aug. 8, 2017), the Air Force was seeking firefighting modifications for seven demilitarized HC-130H transport aircraft formerly operated by the United States Coast Guard. The modifications included increasing the frame support within the aircraft and installing gravity fed drop tanks for fire retardant dispersal. All modifications would be overseen by the United States Air Force. Once modifications were complete, the Air Force was to transfer the HC-130Hs to the Forest Service.
Within the technical specifications there was a requirement that offerors had to retain the Original Equipment Manufacturer as a subcontractor. Simplex had tried to work with the OEM during the proposal preparation, but the OEM “refused [Simplex’s] requests to participate in the pre-award phase.” According to Simplex, “the lack of participation has hindered Simplex’s ability to properly evaluate schedule risk and/or limit the firm’s liability.”
Since they could not get any cooperation from the OEM, Simplex protested the terms of the Solicitation, including the OEM component. Simplex argued that the requirement to use the OEM was “overly prescriptive and unduly restrictive.”
According to the GAO, Simplex’s protest was about risk allocation. As GAO explained, “the mere presence of risk in a solicitation does not make the solicitation inappropriate or improper. . . . Risk is inherent in most types of contracts, especially fixed-price contracts, and firms must use their professional expertise and business judgment in anticipating a variety of influences affecting performance costs.”
The GAO wasn’t convinced by the argument that the OEM might not team with the eventual awardee. “The protester’s concern here is speculative,” the GAO wrote, adding “further, should such a situation arise, it would be a matter of contract administration” outside the GAO’s jurisdiction.
The GAO found nothing unreasonable about the Air Force’s decision to require contractors to retain the OEM as a subcontractor rather than independently solicit the services.
So while the prime will normally decide who they want to subcontract to, there could be times when the requirement states who the subcontractor will be. In those cases, the prime needs to assess the risk of this situation and how to mitigate it.