Subcontractor Data Rights Challenges: A Need For Clarity

• Published date: 06 December 2021
• Subject Matter: Government, Public Sector, Government Contracts, Procurement & PPP
• Law Firm: Morrison & Foerster LLP
• Author: Mr W. Jay DeVecchio and Locke Bell

Life as a Department of Defense prime contractor is difficult, even on a good day. For DOD subcontractors it is often worse, but at least subs do not have to deal with a prime's headstrong contracting officer. Or so they think, until there is a data rights challenge. Then, to all subcontractors' dismay, they, not the primes, get the challenge directly from the CO. They, not the primes, have to slog through the iterative challenge process. They, not the primes, have to submit a certified claim, disguised as a sub's final response to the CO's challenge. And they, not the primes, get the adverse final decision directly from the CO, all as described in Defense Federal Acquisition Regulation Supplement 252.227-7037 "Validation of Restrictive Markings on Technical Data" and the similar validation provision for computer software, 252.227-7019.

Wait, what happened to privity of contract, which we learned from day one does not exist between the Government and a subcontractor?

A good question, as privity seems to have been dispensed with. Everything in -7037 is directed separately to the subcontractor as well as the prime, e.g., the CO "may request the Contractor or subcontractor to furnish a written explanation for any restriction asserted ...." (7037(d)(1)); "The Contractor or subcontractor shall submit such written data as requested ...." (id.); "the Contracting Officer shall send a written challenge notice to the Contractor or subcontractor ...." (7037(e)(1); "the Contracting Officer will issue a final decision to the Contractor or subcontractor ...." (7037(f)). (emphasis added).

In turn, this suggests that a subcontractor, not a prime, could appeal the CO's adverse final decision directly to a Board or to the Court of Federal Claims. This makes a great deal of sense, given all the other arduous direct dealings between the sub and the CO. More persuasively, the technical data validation clause indicates that if the subcontractor does not appeal, it is out of luck:

If the Contractor or subcontractor fails to appeal, file suit, or provide a notice of intent to file suit to the Contracting Officer within the ninety (90)-day period, the Government may cancel or ignore the restrictive markings, and the failure of the Contractor or subcontractor to take the required action constitutes agreement with such Government action.

252.227-7037(g)(2)(ii). (emphasis added).

Yet, common sense and these words notwithstanding, the most prudent course is for the subcontractor no...