FAR 44.201-2—Advance notification requirements.
Plain-English Summary
FAR 44.201-2 explains when a contractor on a cost-reimbursement contract must give the contracting officer advance notice before placing certain subcontracts. It covers two separate statutory regimes: one for DoD, the Coast Guard, and NASA under 10 U.S.C. 3322(c), and one for civilian agencies under 41 U.S.C. 3905. The section focuses on two subcontract types—cost-plus-fixed-fee subcontracts and large fixed-price subcontracts—and uses dollar thresholds tied to the simplified acquisition threshold and, in some cases, 5 percent of the total estimated cost of the prime contract. It also distinguishes between contractors with and without an approved purchasing system, which matters for DoD, Coast Guard, and NASA contracts but not for civilian agency contracts under this rule. In practice, this requirement gives the government visibility into significant subcontract commitments before they are awarded, so the contracting officer can review risk, pricing, and subcontracting decisions that may affect contract performance and cost control.
Key Rules
Advance notice is mandatory
On covered cost-reimbursement contracts, the contractor must notify the contracting officer before awarding certain subcontracts. The notice requirement applies only to the subcontract types and thresholds identified in the statute and FAR text.
DoD, Coast Guard, and NASA rule
For these agencies, advance notice is required before awarding any cost-plus-fixed-fee subcontract, or any fixed-price subcontract that exceeds the greater of the simplified acquisition threshold or 5 percent of the total estimated cost of the prime contract. This requirement does not apply if the contractor maintains an approved purchasing system.
Civilian agency rule
For civilian agencies other than the Coast Guard and NASA, advance notice is required before awarding any cost-plus-fixed-fee subcontract, or any fixed-price subcontract that exceeds either the simplified acquisition threshold or 5 percent of the total estimated cost of the contract. The text states this applies even when the contractor has an approved purchasing system.
Cost-plus-fixed-fee subcontracts are always covered
The section requires notice before award of any cost-plus-fixed-fee subcontract under the applicable statutory framework. There is no dollar threshold stated for this subcontract type in the text.
Fixed-price subcontracts depend on size
For fixed-price subcontracts, the notice requirement is triggered only when the subcontract exceeds the applicable threshold. The threshold is measured against the simplified acquisition threshold and, depending on the agency, may also be compared to 5 percent of the total estimated prime contract cost.
Agency and system status matter
Whether the contractor has an approved purchasing system changes the rule for DoD, Coast Guard, and NASA contracts, but not for civilian agency contracts under this section. Contractors must therefore identify both the agency and their purchasing system status before deciding whether notice is required.
Responsibilities
Contractor
Determine whether the prime contract is a cost-reimbursement contract covered by this section, identify the applicable agency regime, and provide advance notification to the contracting officer before awarding any subcontract that meets the rule. The contractor must also track subcontract type, value, total estimated prime contract cost, and whether it has an approved purchasing system.
Contracting Officer
Receive and evaluate advance notices of proposed subcontracts, and use that information to oversee subcontracting risk and contract administration. The contracting officer should verify whether the notice requirement applies based on the agency, contract type, subcontract type, and threshold.
Agency
Apply the correct statutory framework for its contracts and ensure contractors understand the applicable advance-notice requirements. The agency must distinguish between DoD/Coast Guard/NASA contracts and civilian agency contracts when administering cost-reimbursement contracts.
Practical Implications
Contractors need a pre-award subcontract review process, because the notice must be given before the subcontract is awarded, not after.
The biggest compliance risk is misapplying the threshold: for fixed-price subcontracts, the contractor must compare the subcontract value to the correct statutory trigger, including the 5 percent test where applicable.
Approved purchasing system status can eliminate the notice requirement for DoD, Coast Guard, and NASA contracts, but it does not remove the requirement for civilian agency contracts under this section.
Teams should coordinate procurement, contracts, and program staff early so proposed subcontracts are flagged before award decisions are finalized.
Failure to provide advance notice can create contract administration issues, delay subcontract approval or oversight, and expose the contractor to noncompliance findings under the prime contract.
Official Regulatory Text
Under cost-reimbursement contracts, the contractor is required by statute to notify the contracting officer as follows: (a) For the Department of Defense, the Coast Guard, and the National Aeronautics and Space Administration, unless the contractor maintains an approved purchasing system, 10 U.S.C. 3322(c) requires notification before the award of any cost-plus-fixed-fee subcontract, or any fixed-price subcontract that exceeds the greater of the simplified acquisition threshold or 5 percent of the total estimated cost of the contract. (b) For civilian agencies other than the Coast Guard and the National Aeronautics and Space Administration, even if the contractor has an approved purchasing system, 41 U.S.C. 3905 requires notification before the award of any cost-plus-fixed-fee subcontract, or any fixed-price subcontract that exceeds either the simplified acquisition threshold or 5 percent of the total estimated cost of the contract.