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American Subcontractors Association News

New SBA Rule Bans Contract Clause

Prohibiting Sub Contact with Contracting Officer

Effective immediately, prime contractors on federal construction may not prohibit their subcontractors from asking the federal contracting officer about the status of payment. The prohibition was included in a new rule governing small business contracting, which was issued by the U.S. Small Business Administration on July 15. This ASA-supported rule complements laws that ASA successfully had enacted in the 1990s that explicitly permit a subcontractor to contact a contracting officer to obtain information on payment and to obtain a copy of the general contractor’s payment bond. In response, some general contractors added a clause to their subcontracts prohibiting such subcontractor contact. “Generally, communications between the subcontractor and the project’s owner should go through the GC,” said ASA Chief Advocacy Officer E. Colette Nelson. “But when subcontractor payment is dependent on the actions of the owner, even a public owner, then the subcontractor should be able to get payment information directly from the owner or the owner’s agent.” The new SBA rule, which took effect on Aug. 15, states: “…A prime contractor selected for award of a contract or contract modification that exceeds … $1,500,000 in the case of construction of a public facility, is responsible for the following: The Contractor may not prohibit a subcontractor from discussing any material matter pertaining to payment or utilization with the contracting officer …” ASA will work with SBA and the contracting agencies to incorporate this new prohibition into the Federal Acquisition Regulation (FAR).