FAR 12.001—Definition.
Plain-English Summary
FAR 12.001 provides a special definition of the term "subcontract" for use in FAR part 12, which governs the acquisition of commercial products and commercial services. The section makes clear that, in this part, a subcontract is not limited to a traditional purchase from one company to another; it also includes transfers of commercial products or commercial services between divisions, subsidiaries, or affiliates of a contractor or subcontractor. Its purpose is to prevent parties from avoiding commercial-item subcontracting requirements simply because the work or product moves within a corporate family rather than between unrelated entities. In practice, this definition matters when determining whether part 12 policies, flowdown expectations, and related commercial-item rules apply to internal corporate transfers that function like subcontracting arrangements. It helps contracting officers and contractors identify the full scope of relationships that may be treated as subcontracts under commercial-item acquisitions.
Key Rules
Broad subcontract meaning
For purposes of FAR part 12, "subcontract" is interpreted broadly. It is not confined to a conventional outside supplier relationship and can include internal or affiliated transfers that support performance of the prime contract.
Internal transfers can qualify
A transfer of commercial products or commercial services between divisions, subsidiaries, or affiliates of a contractor or subcontractor is included within the term. The corporate relationship does not prevent the transfer from being treated as a subcontract under this part.
Part 12-specific definition
This definition applies "as used in this part," meaning it is tailored to FAR part 12 and should be read in the context of commercial acquisitions. Users should not assume the same meaning automatically applies in every other FAR part without checking the relevant definitions.
Responsibilities
Contracting Officer
Apply the part 12 definition when evaluating whether a transfer or relationship should be treated as a subcontract in a commercial acquisition. Use the broader definition to avoid overlooking internal corporate transfers that may affect compliance, pricing, or flowdown analysis.
Contractor
Recognize that transfers among divisions, subsidiaries, or affiliates may be treated as subcontracts under FAR part 12. Structure compliance, recordkeeping, and subcontract management accordingly, rather than assuming corporate affiliation removes the transaction from subcontract treatment.
Subcontractor
Treat qualifying transfers within its own corporate family as potentially covered subcontract activity when performing under a commercial-item contract. Ensure internal arrangements are evaluated against part 12 requirements where relevant.
Agency
Support consistent application of the commercial-item framework by using the part 12 definition when developing acquisition strategy, reviewing subcontract-related issues, and assessing contractor compliance.
Practical Implications
Contractors cannot rely on corporate structure alone to avoid subcontract-related obligations under FAR part 12.
Internal transfers between affiliates may need to be tracked and managed like other subcontracts for compliance purposes.
Contracting officers should look beyond the legal entity label and examine the actual flow of commercial products or services.
A common pitfall is assuming that only third-party purchases count as subcontracts; this section expressly rejects that narrow view.
Because the definition is limited to part 12, users should verify whether another FAR part uses a different or more specific subcontract definition before applying this rule elsewhere.
Official Regulatory Text
Subcontract , as used in this part, includes, but is not limited to, a transfer of commercial products or commercial services between divisions, subsidiaries, or affiliates of a contractor or subcontractor.