Saturday, June 30, 2007

Q. What is subcontracting under competitive bidding and how does it work?

A. Under competitive bidding, a contract supplier may delegate some of the services he has agreed to provide through subcontracting. Subcontractors are entities that enter into agreements with contract suppliers to supply services to the supplier or to the beneficiary on behalf of the supplier. For example, a contract supplier may subcontract with another supplier to make deliveries to parts of the competitive bidding area to which he does not normally deliver. Losing bidders may be subcontractors to contract suppliers. Contract suppliers may also be subcontractors to other contract suppliers.
When a supplier places a bid, he must identify anticipated subcontractors and describe the types of services they will supply. Just as bidders must disclose information about current or past legal actions, sanctions, revocations, and convictions, they must also disclose the same information for the subcontractors they intend to use. Bidders also need to include signed letters of intent to enter into an agreement for each anticipated subcontractor with their bid.
Contract suppliers may not subcontract out all services they have promised to furnish, but there is no explicit limit on the percentage or range of services that may be subcontracted.
Subcontracting is a useful tool to smaller suppliers in several ways. First, bids on services previously out of the range of a smaller supplier's capability are now attainable because the supplier can subcontract some of the services.
Conversely, a supplier that is not awarded a competitive bidding contract may still provide services by becoming a subcontractor. Subcontractors also do not need to submit bids or go through the process of competitive bidding. Finally, subcontractors do not need to be accredited.
Phuong Nguyen is a healthcare attorney with Brown & Fortunato in Amarillo, Texas. Reach him at 806-345-6308 or