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Washington D.C. Subcontracting Law | Scope, Agreements, and Legal Penalties
Understanding the Washington D.C. Subcontracting Law is essential for general contractors, subcontractors, and developers alike. This guide explains who is covered, how to write compliant contracts, and what happens when violations occur.
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1. Washington D.C. Subcontracting Law: Legal Definition and Covered Transactions
The D.C. Subcontracting Law regulates how businesses delegate parts of projects to smaller firms, ensuring fair competition and legal accountability.
Washington D.C. Subcontracting Law: Types of Subcontracting Transactions
Subcontracting in Washington D.C. includes four main types of transactions:
- Manufacturing Subcontracting: Assigning the manufacturing of specified goods to another party.
- Repair Subcontracting: Outsourcing equipment or property repair work to another service provider.
- Construction Subcontracting: Entrusting part or all of a construction project to another contractor.
- Service Subcontracting: Delegating service-based work, including information analysis or professional labor.
2. Washington D.C. Subcontracting Law: Who It Applies To
The law generally applies to the “prime contractor,” which refers to businesses that assign work to others.
Washington D.C. Subcontracting Law: Applicable Prime Contractors
The following entities may be considered prime contractors under D.C. law:
- Large enterprises (non-SMEs)
- SMEs with greater annual revenues than the subcontractor
- Conglomerate-affiliated firms engaging in tiered outsourcing
- Firms exceeding $2 billion in revenue
- Businesses within a restricted cross-shareholding group
Washington D.C. Subcontracting Law: Sample Covered Transactions
Examples of transactions subject to D.C. subcontracting law include:
- Ordering a third party to manufacture custom parts or complete final goods.
- Assigning complex repairs (vehicles, ships) to other vendors.
- Subcontracting parts of design, development, or labor services under written direction.
3. Washington D.C. Subcontracting Law: How to Draft a Valid Agreement
A subcontracting agreement must be in writing and finalized before work begins. Any amendments must be captured in a written supplement.
Washington D.C. Subcontracting Law: Mandatory Contract Elements
To comply with D.C. subcontracting regulations, a valid agreement must include:
| Required Clause | Description |
|---|---|
| Compensation Terms | Include base price, milestones, and adjustment clauses |
| Scope of Work | Detailed description of deliverables and specifications |
| Delivery Deadlines | Exact due dates and locations |
| Inspection Protocols | Methods and timelines for checking finished goods |
| Payment Terms | When and how payments will be made |
Washington D.C. Subcontracting Law: Document Retention and Delivery
Both parties must keep a signed copy of the subcontract for a minimum of three years. The prime contractor must not impose unfair conditions that limit the subcontractor’s rights.
4. Washington D.C. Subcontracting Law: Common Violations and Penalties
Violations typically arise from power imbalance and improper business practices.
Washington D.C. Subcontracting Law: Examples of Violations
- Unilateral reduction of agreed payments
- Forced purchases from designated suppliers
- Late or partial payments without cause
- Cancellation without valid business justification
- Retaliatory return of delivered goods
- Unauthorized demand for technical data
Washington D.C. Subcontracting Law: Legal Consequences
When violations are identified:
- Up to 4 months suspension of business license
- Civil fines and treble damages
- Up to 3 years imprisonment or $25,000 in penalties
- Double payment of withheld compensation
- Public listing of violators by the enforcement agency
The information provided in this article is for general informational purposes only and does not constitute legal advice. Reading or relying on the contents of this article does not create an attorney-client relationship with our firm. For advice regarding your specific situation, please consult a qualified attorney licensed in your jurisdiction.
