§4710 Limitations on tiering of subcontractors

Summary

Federal contracting rules (the Federal Acquisition Regulation) must make contractors avoid using extra layers of subcontractors that add little or no value. For agencies other than the Department of Defense, contractors and higher-tier subcontractors cannot collect indirect costs or profit on work done by a lower-tier subcontractor when the higher tier adds no or negligible value. They may still charge indirect costs and profit for the direct costs of managing lower-tier subcontracts. The rule applies to cost-reimbursement contracts or task or delivery orders above the simplified acquisition threshold (see section 134). executive agency — same meaning given in section 133. The Department of Defense may set stricter limits and stays subject to its guidance under section 852 of the John Warner NDAA for FY2007 (Public Law 109–364, 10 U.S.C. 2324 note).