FAR 26.104—Contract clause.
Plain-English Summary
FAR 26.104 explains when a contracting officer in a civilian agency may include the clause at 52.226-1, Utilization of Indian Organizations and Indian-Owned Economic Enterprises, in solicitations and contracts. The section is narrow but important: it addresses discretionary use of the clause, the contracting officer’s judgment that subcontracting opportunities exist for Indian organizations or Indian-owned economic enterprises, and the need for available funds to cover any increased costs associated with the clause. In practice, this means the rule is not a blanket requirement to include the clause in every civilian agency procurement; instead, the contracting officer must make two threshold determinations before using it. The section exists to support participation by Indian organizations and Indian-owned economic enterprises in federal contracting while also ensuring the Government only commits to the clause when the procurement can support it financially. For contractors and contracting officers, the practical effect is that the clause may be added selectively, and its inclusion can affect subcontracting planning, pricing, and competition strategy.
Key Rules
Civilian agencies only
This section applies to contracting officers in civilian agencies. It does not create a general governmentwide mandate; rather, it authorizes use of the clause in the civilian-agency context when the stated conditions are met.
Discretionary clause use
The contracting officer may insert the clause at 52.226-1, but is not required to do so under this section. The decision is permissive and depends on the contracting officer’s judgment and funding availability.
Subcontracting opportunity must exist
Before inserting the clause, the contracting officer must believe that subcontracting possibilities exist for Indian organizations or Indian-owned economic enterprises. This is a practical market assessment, not a mechanical checklist item.
Funds must cover increased costs
The clause may be used only if funds are available for any increased costs described in paragraph (b)(2) of the clause at 52.226-1. The agency must be able to absorb the potential cost impact associated with the clause’s requirements.
Clause governs the details
FAR 26.104 does not itself spell out the substantive obligations; it points to the clause at 52.226-1 for the operative requirements. Users must read the clause text to understand the actual contractor and subcontracting obligations.
Responsibilities
Contracting Officer
Determine whether subcontracting possibilities exist for Indian organizations or Indian-owned economic enterprises, decide whether to use the clause, and ensure funds are available to cover any increased costs described in the clause before inserting it into the solicitation or contract.
Civilian Agency
Provide the funding and acquisition environment necessary to support use of the clause when the contracting officer determines it is appropriate. The agency must be able to absorb any increased costs associated with the clause.
Contractor
If the clause is included, comply with the requirements of 52.226-1 and account for its potential effects on subcontracting approach, pricing, and performance planning.
Indian Organizations and Indian-Owned Economic Enterprises
Potentially compete for subcontracting opportunities when the clause is used; their participation is the policy objective the section is intended to support.
Practical Implications
This is a permission-based rule, so contractors should not assume the clause will appear in every civilian agency solicitation; its inclusion depends on the contracting officer’s judgment and funding.
Contracting officers should document the basis for believing subcontracting opportunities exist and confirm funding before adding the clause, because both conditions are prerequisites.
The phrase "increased costs" matters in practice: agencies need to consider whether the clause could raise contract or subcontract costs and whether those costs are budgeted.
Offerors and prime contractors should review the solicitation carefully for 52.226-1 because it can affect subcontracting strategy and pricing assumptions.
A common pitfall is treating this section as a standalone requirement; the real operational obligations are in the clause itself, so both the regulation and the clause must be read together.
Official Regulatory Text
Contracting officers in civilian agencies may insert the clause at 52.226-1 , Utilization of Indian Organizations and Indian-Owned Economic Enterprises, in solicitations and contracts if- (a) In the opinion of the contracting officer, subcontracting possibilities exist for Indian organizations or Indian-owned economic enterprises; and (b) Funds are available for any increased costs as described in paragraph (b)(2) of the clause at 52.226-1 .