How do we break ties with our current prime contracting company?

It is difficult to answer your question based on the limited information provided. Do you have an existing contract that obligates you to accept new requirements imposed in the prime contract? Or is your existing contract expiring so that you are now determining whether to renew your own contract with your GC? Absent some contractual authority, your GC cannot unilaterally alter your scope of work or pricing structure, so the answer to your question may be more of a business decision (i.e. can you afford to walk away given the potential profits from the job and/or damage to your relationship with the GC?). If your existing subcontract agreement is being affected by a renegotiation of the prime contract in a way that materially alters your own performance obligations, you may have grounds to seek additional compensation or relief from the new requirements (either before or after doing the work) on a theory related to the changed circumstances.

If the owner is committed to your involvement, you should have some ability to insist on terms that you can meet. No one wants a sub getting in over its head and having to walk in the middle of the project.

It sounds like you need to consult with a knowledgeable construction lawyer about your rights vis-a-vis the terms of your subcontract agreement and any applicable procurement laws. I would be happy to recommend a good attorney in Virginia or in the D.C. area if it would be helpful.

The first thing I would do is to review your present contract and/or teaming agreement and see what restrictions and limitations you are under. Did you give your customer the right to exercise an option? What are the contract change provisions? Can they force a change on you (like the government can with the prime contractor)? I'm assuming there is nothing particularly restrictive, but you want to be sure. Even if there is, those restrictions may not apply to what they are trying to force you to take. When you say “contract renegotiations,” I assume you mean an extension or follow-on contract. If the terms are changing in a material way, even if your customer has you under an option agreement, you have a legal right to not be forced to accept new terms. If you are providing a commercial product, you should be familiar with the FAR provisions that significantly limit the FAR clauses that can be flowed down to you. See the clauses at FAR 52.212-5 and 52.244-6. The prime contract should have the clause at FAR 52.203-6, “Restrictions on Subcontractor Sales to the Government.” Check it out. It might offer some additional leverage. If you are strongly desired by the government customer, that customer should be aware that you are having difficulty with their prime contractor. I know that can be a very delicate matter, but perhaps you might want to see if the government would be willing to consider a direct contract with you.