Posted on 8/17/2011 3:10 PM

Model Subcontract Disputes Clause

The standard FAR Disputes, Changes and Termination clauses are not mandatory subcontract flow down clauses.  In fact, it is improper to flow down the standard FAR Disputes clause.  Here is a model subcontract Disputes clause:

 DISPUTES
1)  If a dispute arises in the performance of this subcontract, the parties will first attempt to negotiate a settlement.  If negotiation is unsuccessful, they agree to submit the dispute to mediation.  If mediation does not resolve the dispute, either party may seek redress in any court of competent jurisdiction.  Pending resolution of any dispute, the parties shall proceed diligently with the performance of the work.
 
2)  However, if any dispute gives the subcontractor recourse against the U.S. Government through the prime contractor's prime contract, the parties may agree to pass the subcontractor's dispute through the prime contract to the U.S. Government.  The subcontractor must submit the disputed claim within 5 years after it accrues; the prime must cooperate fully with the subcontractor in prosecuting the claim; the parties agree to be bound by the outcome; the subcontractor must certify its claim in a form approved by the prime contractor; each party will bear its own costs in prosecuting the claim; and any other dispute or portion of the dispute not resolved in paragraph 1) above may be decided by a court of competent jurisdiction.  Pending resolution of the dispute, the parties shall proceed with performance.
 
3)  This subcontract shall be government by the laws of the State of ______________.  However, any FAR, DFARS or other federal agency clause or any clause substantially based on such federal agency clause shall be construed and interpreted according to the federal common law of government contracts as applied by federal agency judicial tribunals.
 
Subcontract terms and conditions under federal government prime contracts can be tricky.  There is nothing in FAR, DFARS or any other federal regulation which provides a single source guide to mandatory flow down clauses.  Moreover, many flow down clauses need to be rewritten or modified for subcontracts.  The disputes clause is probably the best example of a clause which has to be totally rewritten for subcontracts.

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