FAR 44.203—Consent limitations.
Plain-English Summary
FAR 44.203 explains the limits on a contracting officer’s consent to subcontracting and approval of a contractor’s purchasing system. Its main purpose is to make clear that consent or system approval is not, by itself, a government finding that the subcontract’s terms, price, or costs are acceptable, unless the contracting officer expressly says otherwise. The section also identifies several types of subcontract provisions the contracting officer must not approve, including certain cost-reimbursement arrangements, cost-plus-a-percentage-of-cost pricing, direct-dealing obligations with the subcontractor, clauses that bind the Government to private dispute outcomes, and repetitive or overly extended use of cost-reimbursement, time-and-materials, or labor-hour subcontracts. Finally, it addresses indirect appeal clauses, explaining when they should not be rejected and what limits must remain in place. In practice, this section protects the Government from unintended liability or pricing commitments while preserving reasonable subcontract dispute mechanisms between prime contractors and subcontractors.
Key Rules
Consent is not approval of terms
A contracting officer’s consent to a subcontract, or approval of a contractor’s purchasing system, does not automatically mean the subcontract terms, subcontract price, or underlying costs are acceptable. That effect exists only if the contracting officer specifically states otherwise.
No excessive cost-reimbursement fees
The contracting officer may not consent to a cost-reimbursement subcontract if the fee exceeds the limitations in FAR 15.404-4(c)(4)(i). This prevents subcontract pricing from exceeding the allowable fee structure applicable to that type of arrangement.
No cost-plus-percentage pricing
The contracting officer must not consent to a subcontract that pays the subcontractor on a cost-plus-a-percentage-of-cost basis. That pricing method is prohibited because it creates an incentive to increase costs.
No direct obligation to subcontractor
The contracting officer may not consent to a subcontract that requires the Government to deal directly with the subcontractor. The Government’s contractual relationship remains with the prime contractor unless a separate arrangement exists.
No binding private dispute outcomes
The contracting officer may not consent to a subcontract that makes arbitration, court decisions, or voluntary settlements between the prime and subcontractor binding on the Government. Private dispute resolutions cannot control the Government’s rights or obligations unless the Government is properly a party and the clause is otherwise authorized.
Limit repetitive cost-type subcontracting
The contracting officer should not consent to repetitive or unduly protracted use of cost-reimbursement, time-and-materials, or labor-hour subcontracts. The contracting officer should apply the principles in FAR 16.103(c) when evaluating whether the arrangement is appropriate.
Indirect appeal clauses are usually allowed
The contracting officer should not refuse consent merely because the subcontract gives the subcontractor an indirect appeal right if the subcontractor is affected by a dispute between the Government and the prime contractor. The clause may allow the subcontractor to use the prime’s appeal rights or have the prime prosecute the appeal on the subcontractor’s behalf.
Indirect appeal clauses have limits
An indirect appeal clause may not require the contracting officer or the board of contract appeals to decide issues that arise only between the prime and subcontractor, or issues not covered by the Disputes clause at FAR 52.233-1. The clause can preserve subcontractor access to the prime’s appeal process, but it cannot expand Government dispute jurisdiction.
Responsibilities
Contracting Officer
Review subcontract consent requests and purchasing system approvals with the limits in this section in mind. Do not treat consent or approval as a blanket endorsement of subcontract price, terms, or costs unless expressly stated, and refuse consent for prohibited subcontract provisions or inappropriate repeated use of cost-type subcontracting.
Prime Contractor
Structure subcontract terms so they do not impose prohibited obligations on the Government, do not use prohibited pricing methods, and do not rely on consent as proof that the Government has accepted subcontract pricing or cost allowability. If using indirect appeal language, ensure it stays within the permitted limits.
Subcontractor
Understand that subcontract dispute rights may be limited to indirect appeal mechanisms and that such clauses do not make the Government a party to the subcontract. The subcontractor should not assume Government liability or direct recourse against the contracting officer unless a separate legal basis exists.
Agency
Ensure contracting officers apply the consent limitations consistently and in line with FAR pricing and disputes policy. Agencies should also support training and oversight so purchasing system approvals and subcontract consents do not inadvertently create unauthorized commitments.
Practical Implications
Consent is a control point, not a full legal or price approval. Contractors should not assume that getting consent means the Government has accepted every subcontract term or cost element.
Watch for prohibited pricing structures early. Cost-plus-percentage-of-cost subcontracts are not allowed, and cost-reimbursement fees must stay within the applicable FAR limits.
Be careful with dispute clauses. Indirect appeal language can be acceptable, but clauses that try to bind the Government to private settlements or force direct Government-subcontractor dealings are problematic.
Repeated use of cost-type subcontracting can trigger scrutiny. Even if each subcontract is individually defensible, a pattern of using cost-reimbursement, T&M, or labor-hour subcontracts may lead the contracting officer to withhold consent.
Drafting matters. A subcontract clause that is intended to preserve subcontractor appeal rights must be carefully written so it does not expand the board’s or contracting officer’s authority beyond disputes between the Government and the prime contractor.
Official Regulatory Text
(a) The contracting officer’s consent to a subcontract or approval of the contractor’s purchasing system does not constitute a determination of the acceptability of the subcontract terms or price, or of the allowability of costs, unless the consent or approval specifies otherwise. (b) Contracting officers shall not consent to- (1) Cost-reimbursement subcontracts if the fee exceeds the fee limitations of 15.404-4 (c)(4)(i); (2) Subcontracts providing for payment on a cost-plus-a-percentage-of-cost basis; (3) Subcontracts obligating the contracting officer to deal directly with the subcontractor; (4) Subcontracts that make the results of arbitration, judicial determination, or voluntary settlement between the prime contractor and subcontractor binding on the Government; or (5) Repetitive or unduly protracted use of cost-reimbursement, time-and-materials, or labor-hour subcontracts (contracting officers should follow the principles of 16.103 (c)). (c) Contracting officers should not refuse consent to a subcontract merely because it contains a clause giving the subcontractor the right of indirect appeal to an agency board of contract appeals if the subcontractor is affected by a dispute between the Government and the prime contractor. Indirect appeal means assertion by the subcontractor of the prime contractor’s right to appeal or the prosecution of an appeal by the prime contractor on the subcontractor’s behalf. The clause may also provide that the prime contractor and subcontractor shall be equally bound by the contracting officer’s or board’s decision. The clause may not attempt to obligate the contracting officer or the appeals board to decide questions that do not arise between the Government and the prime contractor or that are not cognizable under the clause at 52.233-1 , Disputes.