Subcontractors on federal projects routinely assume that if the Government causes delay, disruption, or scope growth, their damages can simply be “passed through” the prime contractor and recovered later. In theory, pass-through claims are well established. In practice, they fail with surprising regularity—and almost never because the subcontractor was wrong on the facts.
They fail because the subcontract eliminated the claim before it ever existed.
In federal procurement, pass-through claims live or die on contract language, not equitable arguments. By the time a dispute reaches the boards of contract appeals or the Court of Federal Claims, the outcome is often already determined by a clause the parties treated as boilerplate.
The Privity Problem—and the Only Way Around It
Subcontractors lack privity of contract with the United States and therefore cannot bring claims directly under the Contract Disputes Act. See Erickson Air Crane Co. of Wash., Inc. v. United States, 731 F.2d 810, 813–14 (Fed. Cir. 1984). The only viable path is for the prime contractor to assert the claim on the subcontractor’s behalf. This mechanism is commonly referred to as a “pass-through” claim. It is permitted, but only if the prime contractor remains liable to the subcontractor for the damages being claimed. That condition is not academic. It is dispositive.
The Severin Doctrine Still Matters
Under the Severin doctrine, a prime contractor cannot recover subcontractor damages from the Government if the prime has been released from liability to the subcontractor. Severin v. United States, 99 Ct. Cl. 435 (1943). While courts and boards describe the doctrine as “narrow,” it remains a frequent and effective defense when subcontract language extinguishes liability.
The Federal Circuit has made clear that the key question is whether the prime contractor has “completely immunized itself” from liability to the subcontractor. E.R. Mitchell Constr. Co. v. Danzig, 175 F.3d 1369, 1371–72 (Fed. Cir. 1999). If it has, the Government cannot be liable either. Many subcontracts answer that question unintentionally.
How Subcontracts Commonly Eliminate Recovery
The most common failure point is not an express waiver of pass-through claims, but a collection of clauses that operate together to extinguish liability. No-damage-for-delay provisions, broad release language tied to payment applications or change orders, “sole remedy” clauses, and flow-down provisions that incorporate prime contract releases without qualification all routinely appear in federal subcontracts. Courts and boards do not rewrite these provisions to save claims. If the subcontract bars recovery, the pass-through claim fails regardless of how compelling the underlying Government conduct may have been. See Blake Constr. Co. v. United States, 987 F.2d 743, 746–47 (Fed. Cir. 1993).
Conditional Liability Is Not Optional
To preserve a viable pass-through claim, the subcontract must establish conditional liability—often through a liquidating agreement or sponsorship clause. The purpose of such a clause is not to guarantee payment, but to ensure that the prime contractor remains legally liable to the subcontractor to the same extent the Government is liable to the prime. Boards routinely uphold pass-through claims where this structure is clear. Absent conditional liability, there is nothing to pass through.
Flow-Down Clauses Are a Frequent Trap
Subcontractors often assume that incorporating the prime contract by reference strengthens their position. In reality, broad flow-down language frequently imports notice requirements, release provisions, and claim limitations the subcontractor never tracked or intended to assume. Boards routinely enforce these provisions as written. If the subcontract binds the subcontractor “to the same extent” as the prime, missed prime-level notice deadlines and release language can bar subcontractor recovery just as effectively as if the subcontractor were the prime. See M. Maropakis Carpentry, Inc. v. United States, 609 F.3d 1323, 1331–32 (Fed. Cir. 2010).
Procedure Matters as Much as Language
Even where the subcontract preserves liability, pass-through claims fail on procedural grounds with alarming frequency. Untimely notice to the prime, failure to segregate costs, reliance on generalized impact theories, or waiting until closeout to quantify damages all create vulnerabilities that are fatal once the claim reaches litigation. Because the prime contractor is the claimant of record, procedural defects are imputed to the subcontractor. The Government need only defeat the prime’s claim to defeat the subcontractor’s recovery.
Conflicts Between Prime and Sub Are Not Hypothetical
Pass-through claims inherently place the prime contractor in a conflicted role. The prime controls certification, submission, settlement, and appeal. The subcontractor bears the economic risk but lacks control. Without express contractual protections, subcontractors frequently discover that their claims were settled globally, compromised for relationship reasons, or never meaningfully pursued. Courts will not police these internal dynamics absent contractual obligations requiring sponsorship and good-faith prosecution.
The Practical Takeaway
Most pass-through claims are not lost on the merits. They are lost because the subcontract eliminated liability, waived damages, or failed to preserve procedural rights long before a dispute arose. For subcontractors, the lesson is straightforward: if the subcontract does not preserve conditional liability and a clear sponsorship mechanism, the claim likely does not exist. For prime contractors, clarity at the subcontract level avoids internal disputes and preserves recoverable value. In federal contracting, recovery is determined early—often before performance begins. The subcontract is not background paperwork. It is the case.
