By: Joe Romagnoli, Managing Partner
CST-JoeRomagnoli49-EditIf you’re like most government contractors, you might rely on subcontractors to perform and complete contracts as agreed. They deliver goods and services that you otherwise couldn’t, or provide subject matter expertise that your organization needs to serve the client. But as the prime contractor, you are responsible for negligence that may occur. In other words, a subcontractor’s mistake can become your problem.
Because you are ultimately responsible for the actions of the subcontractor, it’s essential that you conduct thorough due diligence when selecting an organization to partner with, even when it is not necessarily required by the client.
Ask the following questions when conducting subcontractor due diligence:
In the last five years, has the subcontractor been involved in any violation of federal, state, or local law? Have they been involved in lawsuits or government enforcement actions? If so, what was the outcome and how were the disputes resolved?
How does the subcontractor protect their organization from fraud? Do they have a system to prevent fraud perpetrated by employees? Do they have an employee code of conduct that all employees must agree to?
Has the subcontractor recently received negative press coverage? If so, how did their management respond?
Have any of the subcontractor’s executive leaders been involved in any lawsuits or legal investigations? Have they received any negative press individually? If so, how did the company respond?
Does your subcontractor carry the appropriate insurance coverage?
While this list is certainly not exhaustive, these questions will help you uncover any glaring issues. The extent of due diligence necessary will vary according to the size, type and complexity of the government contract being pursued.
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