A Practical Guide to Determining Who Is a ‘Subcontractor’ Under the FAR

00:00

24:53

Quick Hits

• The determination as to who qualifies as a “subcontractor” is not always straightforward and carries real compliance risk if done incorrectly.
• The FAR and relevant case law reinforce a functional definition of “subcontractor” focused less on how a relationship is labeled and more on whether a vendor provides goods or services for the performance of the prime contract and whether the work is essential to contract performance.
• Contractors can apply a practical, nexus-based framework to assess whether a vendor’s role ties directly to statement-of-work requirements.

Under-inclusion of vendors and suppliers for the purposes of compliance with the FAR and executive orders can create a risk of noncompliance with the prime contract, whereas over-inclusion may create friction with vendors, particularly commercial suppliers that resist the inclusion of government-unique terms in their agreements. While the definition of “subcontractor” is broad, there is a practical, workable way to determine which vendors qualify as subcontractors for the purposes of these compliance obligations.

Background

Executive Order (EO) 14398, “Addressing DEI Discrimination by Federal Contractors,” issued March 26, 2026, and its implementing FAR clause, 52.222-90, introduced new compliance requirements aimed at addressing employment-related matters in federal contracting. EO 14398 and FAR 52.222-90 require contractors to flow down new compliance obligations to subcontractors and monitor certain subcontractor conduct. Among other things, prime contractors are required to “report any subcontractor’s known or reasonably knowable conduct that may violate th[e] clause,” to “inform the Contracting Officer if a subcontractor sues the Contractor and the suit puts at issue, in any way, the validity of th[e] clause,” and to flow down the clause into “subcontracts at any tier, including those for commercial products and commercial services.”

‘Subcontractor’ Defined

Procurement regulations and statutes, and related case law, provide a broad but functional definition of “subcontractor” that offers an analytical framework for understanding whether a vendor/supplier/consultant providing a contractor with goods or services is a “subcontractor” under the FAR.

The FAR defines “subcontract” as “any contract … entered into by a subcontractor to furnish supplies or services for performance of a prime contract or a subcontract.” The Anti-Kick Back Act defines “subcontractor” to mean “a person, other than the prime contractor, that offers to furnish or furnishes supplies, materials, equipment, or services of any kind under a prime contract or a subcontract entered into in connection with the prime contract.”

The language of these definitions is expansive yet focuses not on how an agreement is labeled, but on whether its purpose is to deliver goods or services to support the prime contractor’s performance of the prime contract. Although sparse, the case law addressing who is a subcontractor puts a finer point on these definitions by connecting the importance of the vendor’s goods or services to the prime contractor’s performance of the government contract.

In General Injectables & Vaccines, Inc., ASBCA No. 54930, 06-2 B.C.A. (CCH) ¶ 33401 (Aug. 31, 2006), a contractor that promised to deliver flu vaccines to the Defense Logistics Agency argued that its failure to deliver the vaccines should be excused because the manufacturer of the vaccine had its license suspended—a condition the contractor argued it was not responsible for. The board disagreed, reasoning that the manufacturer’s “performance was essential to the enterprise and its failures were [the contractor’s] failures, and its role as the supplier of the vaccine to [the contractor] made it [the contractor’s] subcontractor by any rational definition of that term.”

The takeaway is that, labels aside, where a vendor furnishes goods or services essential to the performance of the prime contract, the vendor is more likely to be a subcontractor for FAR compliance purposes.

There remain cases that a strict causation analysis may not neatly resolve, such as vendors whose goods or services can connect to the prime contractor’s performance obligations at some downstream point in the supply chain, or that support the prime’s enterprise operations generally with only ancillary benefits to its government work. Determining whether these vendors are “subcontractors” under the FAR may be a judgment call.

Identifying Subcontractors

The regulatory definition of “subcontractor” and the way courts have applied that definition show that identifying subcontractors calls for an inquiry into the proximate role a vendor plays in the contractor’s performance of a government contract. Accordingly, contractors can examine the following factors:

• Are the vendor’s goods or services used in the performance of the contract in any way?
• If yes, are those goods or services being used to carry out the contract’s statement-of-work requirements, as opposed to supporting the company’s general business operations?
• Is there a meaningful nexus between the vendor’s work and the contract’s deliverables such that the vendor’s contribution is integral, or “essential to the enterprise,” in meeting the prime contract’s requirements? Where that connection exists, the vendor is likely to fall within the FAR’s definition of a “subcontractor,” regardless of how the relationship is labeled.

Examples

The following examples illustrate how this analytical framework may apply in practice across common vendor relationships.

• Vendors performing statement-of-work requirements. If a vendor is performing a portion of the prime contract’s statement of work, it is likely a subcontractor.
• Product and equipment suppliers. Suppliers providing items that are incorporated into the contract’s deliverables are typically subcontractors. Even commercial item suppliers can fall into this category if their products are used to meet contract requirements.
• Professional services supporting contract performance. Consultants, engineers, or subject-matter experts engaged specifically to support contract deliverables will usually be subcontractors. The key is whether their work ties directly to the contract.
• Enterprise support vendors. Vendors providing services such as HR support, IT infrastructure, accounting, or general staffing across the company are not automatically subcontractors. In such situations, the question is whether the vendor’s work is tied to the government contract or to the company’s general operations. If a staffing firm provides personnel assigned specifically to perform contract work, that firm is more likely to be considered a subcontractor. If the same firm provides general workforce support across the enterprise, it may not be.
• Mixed-use vendors. Some vendors support both contract performance and general operations. In those cases, contractors may need to assess whether the portion of work tied to the government contract is identifiable and significant. If so, treating the vendor as a subcontractor may be the safer approach. A useful question is whether the vendor’s services would still be needed or required by the contractor in the absence of the government contract.

Key Takeaways

Contractors do not need a perfect legal test; they need a workable screening process. A practical approach is to ask one basic question during vendor onboarding or contract review: could we perform this government contract, or perform it as required, without this vendor’s goods or services? If the answer is no, the vendor likely falls within the FAR concept of a subcontractor, and flow-down of FAR 52.222-90 should be strongly considered.

Ogletree Deakins’ Diversity, Equity, and Inclusion Compliance Practice Group, Government Contracting and Compliance Practice Group, and Workforce Analytics and Compliance Practice Group will continue to monitor developments and provide updates on the Diversity, Equity, and Inclusion Compliance, Government Contracting and Compliance, and Workforce Analytics and Compliance blogs as additional information becomes available.

This article and more information on how the Trump administration’s actions impact employers can be found on Ogletree Deakins’ Administration Resource Hub.

Follow and Subscribe
LinkedIn | Instagram | Webinars | Podcasts