INQUIRY: What is the far clause for a lower tier subcontractor to deny audit access to the prime for competitive purposes?
RESPONSE: There is no FAR clause that provides for permitting a subcontractor's denial of a prime contractor audit access to the subcontractor's books and records. A subcontractor is required to demonstrate its compliance with CAS and/or FAR (as applicable) in accordance with the applicable flow-down contract clauses. If a subcontractor denies its prime contractor access to the subcontractor's books and records, the prime contractor will have to request assistance from the contracting officer to ensure the subcontractor's compliance with CAS and/or FAR.
FAR 15.404-3 states that the prime contractor shall conduct appropriate price or cost analyses to establish the reasonableness of proposed subcontract prices. DFARS PGI 215.404-3 provides that if a prime contractor is unable to complete its required price or cost analyses of a subcontractor's proposal because the prime contractor has been denied access to the subcontractor's records, then the prime contractor may request assistance from the contracting officer to analyze and evaluate the subcontractor's proposal.
FAR 52.230-2, When Applicable, Cost Accounting Standards, requires that contractors comply with all CAS. Paragraph (d) of this contract clause requires the prime contractor to include in all negotiated subcontracts the substance of the clause, including paragraph (c), which states that the contractor (subcontractor) shall permit any authorized representatives of the Government to examine and make copies of any documents, papers, or records relating to compliance with the requirements of this clause.
FAR 52.215-2, Audits and Records, provides the contracting officer access to the contractor's books and records to determine if the records support the costs claimed and to evaluate any cost or pricing data that has been submitted. Paragraph (g) of this FAR contract clause requires the prime contractor to insert the terms of this FAR clause in all flexibly-priced subcontracts that exceed the simplified acquisition threshold for which cost or pricing data are required. Accordingly, the contracting officer and his authorized representative have access to the subcontractor's book and records.
As shown above, if the subcontractor denies the prime contractor access to the subcontractor's books and records, the prime contractor will have to request assistance from the contracting officer. This applies if contractor is subject to FAR or CAS.
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