Subcontractor

A subcontractor is an individual or organization hired by a prime contractor to perform part of a government contract. Public Services and Procurement Canada (PSPC) describes the prime contractor as the organization awarded the contract and the subcontractor as the organization hired to work on part of it. This definition appears in PSPC's subcontracting security requirements guidance.

The Government of Canada normally has a contract with the prime contractor, not directly with the subcontractor. The Contract Security Manual adds that a subcontractor is not an employee of the prime contractor. Related terms include prime contractor, contractor, subcontract, subcontracting, and subcontractor at any tier.

Subcontractor versus prime contractor

The prime contractor holds the contract with Canada and answers for all of the work. The subcontractor holds an agreement with the prime contractor only. PSPC's standard service-contract clauses define a subcontract broadly. It includes an agreement entered into by a subcontractor at any tier to perform any part of the work, as set out in the task solutions professional services supply arrangement. A firm several layers below the prime contractor is therefore still a subcontractor under these clauses.

Consent and flow-down rules in PSPC contracts

Several PSPC supply-arrangement clauses require the contractor to obtain the contracting authority's written consent before subcontracting any part of the work, unless the contract specifically authorizes it. The same requirement appears in the task-based informatics supply arrangement. For professional services, PSPC states that subcontracting may be permitted unless the contract prohibits it.

Where subcontracting is allowed, the prime contractor may have to make sure the subcontractor is bound by conditions compatible with, and no less favourable to Canada than, the conditions of the prime contract.

Consent does not shift responsibility. Canada's standard clauses state that consenting to a subcontract does not make Canada responsible to the subcontractor and does not remove the contractor's responsibility for the contract or for the subcontractor's work. The temporary help supply arrangement sets out this wording. In general, Canada is not responsible for paying the subcontractor.

Security screening and cybersecurity obligations

A subcontractor that needs access to protected or classified information, assets, or secure sites must hold the required security status or clearance before starting work. The Contract Security Manual directs the prime contractor to contact the Contract Security Program and obtain approval before awarding a subcontract with security requirements. Approval is required for each successive level of subcontracting.

• Sponsorship timing: A prime contractor can request clearance for a subcontractor only after the prime contract has been awarded, subcontracting is permitted, and the necessary documentation has been provided. The sponsorship process describes these steps.
• No work before clearance: A subcontractor may not begin work until the required clearance is confirmed.
• Cybersecurity: For defence-related contracts under the Canadian Program for Cyber Security Certification, the contractor must determine whether the subcontractor will access specified information. It must flow the applicable requirements into the subcontract and confirm the subcontractor has an appropriately scoped declaration or certification before access is granted, as the program's supporting information explains.

Subcontractors in contribution agreements

Government of Canada contribution agreements use a broader definition. In that context, a subcontractor can be an individual, firm, organization, institution, consultant, consortium, joint venture, or partnership that enters into a subcontract with the funding recipient to perform project work. Global Affairs Canada's contribution agreement terms state that this includes Canadian, international, and local consultants.

What it means for a supplier bidding on Canadian public contracts

If you plan to use subcontractors in a bid, check the solicitation and the resulting contract for the consent clause. Do not assume you can add a subcontractor after award without the contracting authority's written consent. As the prime contractor, you remain responsible for the work your subcontractors perform, and Canada is generally not responsible for paying them.

If you are the subcontractor, your relationship and your payment run through the prime contractor. Where the work involves protected or classified material, expect security screening before you start, and expect the prime contractor to pass contract conditions and any cybersecurity requirements down to you. Confirm your clearance or certification status early, because work cannot begin without it.