Contractual Flow-Down Clauses: Deterrence to Non-Traditional Defense Contractors From Doing Business With DoD

Abstract

Section 887 of the National Defense Authorization Act (NDAA) for Fiscal Year 2017 directed the Secretary of Defense to conduct a study of contractual flow-down clauses related to major defense acquisition programs (MDAPs) and subcontractors. The MDAP data sample indicates no clear misapplication of flow-down clauses from prime contractors to subcontractors; however, the significant number of flow-down clauses reflects the voluminous nature of the Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS). The existing and growing burden of regulatory compliance will reduce private sector participation in MDAPs, and the possibility exists that in the future, the Department of Defense may not have ready access to advanced technologies and capabilities for MDAPs that reside in the private sector due in part to this regulatory burden.