The prime’s flow-down terms run to sixty pages and we agreed to them because we wanted the work.
Defence supply chains push obligations downwards: flow-down clauses, security requirements, export control obligations and audit rights that a smaller supplier accepts in order to win a place. We own the contract layer, and we are explicit about the parts that require specialist counsel because the consequences of getting them wrong are criminal rather than commercial. The businesses we act for are usually good at the engineering and under-resourced on the paper. They win a place on a programme, accept the prime’s terms because the alternative is losing the work, and then live with those terms for a decade. The purpose of the function is to make that a decision rather than a reflex.
Dinmore Bell acts as the outsourced General Counsel for defence suppliers: subcontracts and flow-down terms, MOD contract conditions, IP and background rights, supplier agreements, and coordination of the specialists who handle export control and security matters. It is a retained function on a fixed monthly fee.
How we own it
Flow-down terms, read and negotiated
What the prime passes down is drafted for the prime. Much of it is non-negotiable and some of it is not, and knowing which is which is worth real money, particularly on liability, IP and audit. The genuinely non-negotiable parts are the obligations the prime itself owes upstream and must pass on: security classifications, export control undertakings, specific contract conditions mandated by the customer. Arguing about those wastes goodwill. The negotiable parts are the ones the prime added for its own protection: uncapped liability, unlimited indemnities, set-off across unrelated contracts, termination for convenience with no compensation for work in progress, and payment terms that bear no relation to the prime’s own. The distinction is visible in the drafting once you know what to look for, and most suppliers have never had anybody look. We read the whole schedule, mark what is mandated and what is discretionary, and negotiate only the second category. That is a shorter and far more successful conversation than a general objection to the terms.
Background IP that stays yours
Defence contracting is where suppliers most often give away the technology they arrived with. We separate background from foreground rights clearly, in the contract, before the first deliverable. The mechanism is rarely dramatic. A definition of foreground IP wide enough to capture improvements to your existing product. A licence back to the customer that is irrevocable, worldwide, sub-licensable and royalty-free, granted over everything "necessary to operate and maintain" the deliverable. A requirement to deposit design data that in practice hands a competitor the ability to second-source you. The defence is specificity. A written schedule of background IP, agreed at the outset and updated at each contract, so that ownership is a matter of record rather than of argument three years later. Foreground defined by reference to what is actually created under the contract. Licences scoped to the programme rather than to the customer at large. None of this is contentious if it is raised at the start; all of it is contentious afterwards.
Obligations you can actually meet
Security, quality, reporting and audit obligations checked against what your business can genuinely do. An obligation accepted and not met is worse than one negotiated down at the outset. This is the commonest failure we see. A supplier of forty people signs up to cyber and quality standards, reporting cadences and audit rights written for a business of four hundred, on the reasonable assumption that nobody will check. Then there is an incident, or a change of programme manager, and every unmet obligation becomes a breach available to be used. We read the obligations against the business as it actually is, flag the ones that cannot be met without investment, and either negotiate them to something achievable or price the investment into the bid. Where a standard genuinely must be met, the answer is a plan and a timetable written into the contract, not silence.
The supply chain beneath you
A supplier in a defence programme is also a customer, and the obligations accepted from the prime have to reach the businesses underneath. Where they do not, the gap sits with you. The practical test is simple and frequently fails: take each obligation in the prime contract and ask whether the corresponding subcontract carries it. Security requirements, export control undertakings, audit and access rights, quality standards, delivery and delay liability, IP ownership. A mismatch means you have promised something you have not secured. We build a single flow-down template from the prime terms and apply it across the supply base, rather than negotiating each subcontract from a different starting point. We also look at concentration: where one small supplier is the single source for a critical component, the contractual protection matters far less than a second source, and saying so is part of the job.
Delay, variation and the claims that follow
Defence programmes change. Requirements move, schedules slip, and the cost of that movement is allocated by clauses nobody reads until it has happened. The clauses that decide it are change control, extensions of time, liquidated damages and the definition of what counts as a customer-caused delay. Most disputes we see are not about whether a supplier was late. They are about whether the lateness was caused by a variation that was instructed informally, by email or in a meeting, and never processed as a change. The discipline is contemporaneous and unglamorous: notify in the form and within the period the contract requires, record what was instructed and by whom, and price variations before performing them. We run that process rather than advise on it, because the value is in it being done every time, and we take over the correspondence when a claim is coming.
Where a specialist is needed
Export control, security clearance and classified handling are not contract questions and we do not treat them as such. Breaches are criminal, the regimes are jurisdictional, and they require specialist advice that Dinmore Bell instructs and coordinates rather than provides. The same applies to competition law questions on teaming and bidding arrangements, to certain aspects of MOD-specific pricing regulation, and to anything involving an investigation. Our role there is to know where the line is, to bring in the right specialist early, and to manage the instruction so the business gets a usable answer rather than a memorandum. What Dinmore Bell owns is the commercial layer around all of it: the contracts, the flow-downs, the IP position, the supply chain paper, and the register that says what has been promised to whom and when it falls due.
Where specialists come in
The boundaries in this sector carry criminal rather than commercial consequences, so they are stated plainly. We do not advise on strategic export controls or licensing under the Export Control Act 2002 and the Export Control Order 2008 — those matters are referred to specialist export control counsel and, where required, to the Export Control Joint Unit. We do not advise on the US International Traffic in Arms Regulations or the Export Administration Regulations, which are matters for qualified US counsel. We do not hold, handle or advise on material classified above OFFICIAL unless separately cleared and agreed in writing, and we do not advise on the Official Secrets Acts or the National Security and Investment Act 2021, which are referred to specialist counsel. Contentious matters and any proceedings are conducted by regulated lawyers. We instruct, brief and coordinate each of these specialists, hold the budget, and remain accountable for the commercial outcome.
Services we run here
- Can flow-down terms from a prime contractor be negotiated?
- Some can. Obligations the prime owes its own customer and must pass on are usually fixed. Terms the prime added for its own protection, such as uncapped liability, set-off and payment timing, are frequently negotiable and rarely challenged.
- How do we stop a customer acquiring rights in technology we already owned?
- By scheduling background IP in writing at the outset, defining foreground narrowly by reference to what is created under the contract, and scoping any licence back to the programme rather than to the customer generally.
- Do you advise on export control?
- No. Export control is specialist and the consequences of error are criminal. Dinmore Bell identifies where it is engaged, instructs and coordinates the right specialist, and makes sure the contractual obligations match the advice.
- What happens if we accepted obligations we cannot meet?
- They are dealt with before they are tested. That usually means a negotiated variation to something achievable, or an agreed plan and timetable written into the contract. Silence is the one option that reliably fails.
- Do our subcontracts need the same terms as the prime contract?
- They need to carry every obligation you have accepted upstream. Where a subcontract does not flow an obligation down, the gap sits with you, and that gap is the commonest structural problem in a supplier’s contract estate.
- The customer changed the requirement verbally. Are we protected?
- Only if the change was processed as the contract requires. Informally instructed variations are the single largest cause of delay disputes, which is why the notification and change control discipline matters more than the drafting.
- Is Dinmore Bell a law firm?
- Dinmore Bell is a retained General Counsel function for businesses without one. Where reserved legal activity or specialist advice is required, it instructs and controls the right firm and stays responsible for the outcome.
- How is this priced?
- A fixed monthly retainer, scoped on a Scope Analysis call. That matters in defence contracting because the cost of asking a question early is the thing that stops a bad clause being accepted for a decade.