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Direct Supplier Relationship vs. Subcontracting (Tier 2)

Hello Fellow Members, I was recently asked a question regarding when it is appropriate for having an existing supplier subcontract to a non-supplier, and when it is appropriate to deal with each supplier separately and directly. I thought this would be a great forum to present this questions & my thoughts to this, looking to hear from others. I don’t think there is any industry standard for use of direct supplier versus subcontract via a prime; there is hardly a standard definition of those terms. There are legitimate reasons for subcontracting, its often part of a direct supplier’s offering/operations for items that they need special expertise or for activities or goods they are unable to deliver appropriately. However, there are certainly instances where subcontracting is used as a means of convenience & avoidance of supplier selection & on-boarding processes. Additionally, it could leave one open to conflicts of interest or other compliance issues, if proper vetting is not completed for companies that perform a lot of work for an organization in an indirect manner. I am curios of what others’ thoughts are on the subject, & if anyone uses some rule of thumb or governance of when it’s appropriate to permit subcontracting & when it’s best to directly contract with an organization. I think it’s appropriate for use of a sub-contractor when → - Sub is a secondary contractor selected & managed by the prime - Performs some part of prime’s obligation & not a majority - Prime contractor dictates when the use of a sub is necessary, not the customer Thank you all for your help.
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