Table of Contents
- Order of Precedence in Government Contracts
- Understanding the Order of Precedence
- Common Issues and Considerations
- Recent Developments and Examples
- Best Practices and Recommendations
- About BOOST LLC
- Key Takeaways
- About the Author, Kathy Wright
In contract documents, Order of Precedence is a term that establishes a hierarchy among contractual documents. That “pecking order” is defined to resolve conflicts that could occur in the various terms contained in those documents. For example, if your contract terms and conditions offer NET 30 payment terms, but you are issued a purchase order under that contract that has NET 45 payment terms, which document controls the final outcome? It depends on the Order of Precedence in your contract documents.
The Order of Precedence in a federal contract is consistent because it is defined by FAR 52.215-8.
“Any inconsistency in this solicitation or contract shall be resolved by giving precedence in the following order:
(a) The Schedule (excluding the specifications).
(b) Representations and other instructions.
(c) Contract clauses.
(d) Other documents, exhibits, and attachments.
(e) The specifications.”
However, the Order of Precedence in subcontracts under government prime contracts can vary. More often than not, the face of the purchase order/task order/technical instruction (“order”) is first on the list. This means that an order can add new terms, or previously agreed-upon terms in a subcontract can be altered, removed, or even reversed by the customer if an unsuspecting subcontractor acknowledges an order before carefully reading and analyzing it.
The more experienced prime contractors understand this concept. The face of the order is used as a vehicle for everything from adding new or highlighting important federal flowdowns or representations and certifications to explicitly disclaiming a subcontractors’ terms of sale.
- When the government added the “certain telecommunications and video surveillance services or equipment” in November 2021, many prime contractors used the face of their orders to have their subcontractors complete this representation/certification to close the gap between the issuance of the requirement and the next, regular annual recertification.
- After a subcontract is negotiated, any order issued under that subcontract should specifically reference those NEGOTIATED terms and conditions. If the order refers to the customer’s “standard terms and conditions”, signing the order commits the parties to the original terms rather than the negotiated document.
- In the opening paragraph’s payment terms example, payment terms would become NET 45 once the purchase order is signed; irrespective of what was negotiated in the subcontract itself, and even if that purchase order referenced the negotiated terms and conditions.
In government subcontracts, Order of Precedence is one of those shorter paragraphs that is often glossed over, especially when the reader is focused on ensuring fairness in the terms that directly impact performance and cashflow. When terms are negotiated and agreed, the actual order is seen as the finish line and is sometimes signed in a rush to begin execution, without reviewing more than the dollar amounts.
Take the time to understand the Order of Precedence in your government subcontracts, and if they are not what you expect, work with your customer to negotiate something balanced and fair. If the order is at the top of the precedence list, read your orders carefully before signing them (or performing under them, because in numerous contracts, performance signifies acceptance of an order) and insist on corrections whenever the order terms deviate from what was agreed in the subcontract.
BOOST LLC has experienced government contracts consultants that can help interpret and negotiate contract/subcontract terms and conditions and can review your orders to make sure they are aligned with agreed terms before you accept them.
Contact BOOST today to leverage our contracts knowledge and make sure you’re getting a fair deal with every document you sign.
- Order of Precedence establishes a hierarchy among contractual documents in government contracts and subcontracts.
- In federal contracts, FAR 52.215-8 defines the Order of Precedence, prioritizing the Schedule, representations, contract clauses, other documents, and specifications.
- Order of Precedence in government subcontracts can vary, often giving precedence to the face of the purchase order/task order/technical instruction.
- Subcontractors should carefully review orders to avoid unexpected changes to negotiated terms.
- The face of the order can add new terms, highlight federal flowdowns, and override subcontractors’ terms of sale.
- Payment terms specified in an order may override negotiated terms in the subcontract.
- Understanding the Order of Precedence is essential for fairness and alignment in government contracts and subcontracts.
About the Author, Kathy Wright
Kathy Wright is a contracts and procurement professional with more than 30 years of experience working with government and commercial contracts. She has worked for both small and large businesses and has developed a contracts management style that blends agility with process improvement.