You Have to Shop Around Too: Competing Your Subcontracts and the Purchasing System Rule

Published 2026 | TIKC NewsWire

When you win a government contract and then buy materials, services, or subcontract work to deliver it, you might think how you spend that money is your own business. On government work, it is not entirely. The government expects you to buy the way it does, by getting fair and reasonable prices through real competition. There is even a formal review of how you do this, called a Contractor Purchasing System Review. Handing a subcontract to a friend without shopping it, or rubber-stamping a vendor’s price, can fail that review and, in the worst cases, raise fraud questions about what you billed.

Why your buying is the government’s business

When the government pays for your work, it is often paying for what you pay your subs and vendors. If you overpay a buddy’s company for a subcontract, that cost can flow up into what the government is charged. So the rules expect you to run a real purchasing process, get competition or justify why you did not, and document that your prices are fair. Under FAR Part 44, larger contractors face a formal Contractor Purchasing System Review, but the underlying expectation, buy responsibly with the government’s money, applies broadly.

The favor that becomes a problem

The danger zone is the cozy subcontract. You give the work to a friend, a relative, or a company you are close to, without competing it or checking the price, because it is easy. Even with no bad intent, you have overpaid with government money and cannot show the price was fair. Push it further, steering work to a company you secretly benefit from, and you are into self-dealing territory. Either way, a weak purchasing process points at a weak business system, which brings withholds and scrutiny.

Build a simple, real process

You do not need a giant procurement department to do this right. You need a repeatable habit: seek competition when you can, keep quotes, document why you chose a vendor, and show how you decided the price was fair. When you flow work down to subs, your responsibility for honest pricing flows with it, which ties into your flow-down obligations. A clean paper trail on a handful of subcontracts is usually all it takes to turn a vulnerability into a strength.

What to do now

• Compete your buys. Seek more than one quote for subcontracts and significant purchases when you can.
• Document price reasonableness. Keep a short record of why each price was fair and why you chose that vendor.
• Watch cozy deals. Be careful handing work to friends, relatives, or firms you benefit from without competition.
• Keep the paper trail. Save quotes, justifications, and approvals so your purchasing can survive a review.
• Flow honesty down. Expect your subs to price fairly too, and document that they did.

Spending the government’s money well is just an extension of the integrity you already run your business with. Shop your subcontracts, write down why your prices are fair, and keep the cozy favors out of it, and your purchasing becomes one more place your company clearly plays it straight. Brick by brick.

FAQ

What is a Contractor Purchasing System Review?

A formal government review, under FAR Part 44, of how a contractor buys from subs and vendors, including whether it gets competition and fair prices with government money.

Why does the government care how I buy?

Because what you pay subs and vendors often flows into what the government is charged. Overpaying an uncompeted vendor can inflate the cost to taxpayers.

Is handing work to a friend a problem?

It can be. Without competition or a documented fair price you cannot show the cost was reasonable, and secretly benefiting from the vendor crosses into self-dealing.

How do I build a compliant process?

Seek competition, keep quotes, document why each vendor and price was chosen, maintain approvals, and expect your subcontractors to price fairly too.

Sources

Federal Acquisition Regulation. (2026). Part 44, Subcontracting Policies and Procedures, and Contractor Purchasing System Reviews.

Defense Contract Management Agency. (2026). Contractor Purchasing System Review guidebook.

This article is general information, not legal advice.