So You Want to Subcontract?
When CMS published its rules for competitive bidding, the possibility that one supplier could subcontract its services to another supplier in order to provide a collective bid became an unexpectedly attractive opportunity. CMS' subcontracting rules appear to be relatively flexible. They impose only a few barriers, and even fewer hurdles to the subcontracting process.
This flexibility is in marked contrast to the final rules concerning networks, which eliminated most of networks' advantages while maintaining some significant risks. Because subcontracts remain an attractive option for competitive bidding activities, it is important to understand how you can establish safe and profitable subcontracting relationships.
Let's start with the basics. A subcontract is an agreement between two suppliers that establishes an ongoing relationship. Under this relationship, one party (the subcontractor) agrees to help the other party (the contractor) with certain products or services tied to ongoing activities, in order to support the contractor in achieving its goals or fulfilling its obligations.
In the context of competitive bidding, a subcontract is for use by suppliers who wish to get involved in the competitive bidding process but who will need assistance in order to service fully the entire competitive bidding area.
Some of these suppliers may not qualify to form a network because they do not fall under the definition of small supplier (“a company which earns $3.5 million in gross revenues or less”). Other suppliers may prefer a subcontract relationship, regardless, because they wish to maintain more control over their operations than a network would permit; suppliers who become contractors in subcontracting arrangements will have control over their subcontractors.
Follow the Rules
Under the competitive bidding rules, any supplier currently enrolled in the Medicare program is eligible to serve as a subcontractor to a supplier who wins a bid. The competitive bidding rules require that a subcontractor must have “never been excluded from the Medicare program, any state health program or any other government executive branch procurement or non-procurement activity.” A contractor is required in its bid to list all of its subcontractors. Also, the contractor must disclose if any of its subcontractors have been subject to any prior legal actions, sanctions or revocations.