The federal government spends more than $500 billion a year on contracts. More than 50 percent of that total works its way down to subcontractors. Thus, disputes between prime contractors and their subcontractors on federal contracts are relatively common, but may nevertheless contain some issues unfamiliar even to the experienced government contractor or government contract lawyer.
Certainly, the subcontract itself can identify the applicable body of law that will be used to interpret it. If the prime contractor and the subcontractor are both California corporations and the contract is formed and performed in California, it would be logical for the parties to agree that California law will apply. Frequently, however, the parties will designate “federal procurement law” as the body of law used to interpret the subcontract.
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