Contractual flowdown requirements have major implications for the Department of Defense (DoD) supply chain and industrial base participation. While often well-intentioned, the proliferation of government-unique requirements has a detrimental impact on the government and prime contractors’ ability to access commercial suppliers, limits firms to suppliers that are willing to comply with government-unique requirements, and drives up supply chain costs. DoD has emphasized utilizing commercial technologies as a main component of its efforts to maintain technological superiority, yet, the Department continues to add commercial item flowdown requirements.
In 1994, Congress passed the Federal Acquisition Streamlining Act (FASA) to remove government-unique requirements and foster purchases of commercial goods and services. However, executive implementation lags, as of early 2015, 15 Federal Acquisition Regulation (FAR) clauses must be flown down for commercial products or services, and 19 more Defense Federal Acquisition Regulation Supplement (DFARS) clauses must be flown down if included in a prime contract. Additionally, since 2015, several high-cost flowdowns have been finalized or are pending finalization and numerous more flowdowns are recommended to be added for legal protection.
Moving forward, DoD is best served to align its flowdown requirements with its stated policies and initiatives, such as Defense Innovation Unit Experimental (DIUx) and existing statute that seek to streamline the acquisition of commercial items. This would require the Department to prohibit any new contractual requirement from being flown down to the commercial supply chain, or at least make public its determination that a new contractual requirement should apply to commercial items. Further, DoD should review all existing commercial flowdown requirements and sunset those that do not align with commercial best practices.