Starting Out in Government Contracting? Subcontract First!

When the Government awards a contract to a large business prime contractor, an opportunity for small businesses usually exists under the large prime’s Subcontracting Plan.  A Subcontracting Plan is the prime’s roadmap for how they will utilize small businesses as they perform the project.  The percentages and dollar amounts of the prime’s workload vary and can be substantial.  Large federal contractors subcontract millions of dollars annually to local small businesses in California.

What are the benefits of subcontracting to a prime?

• Experience.  If you are new to government contracting, you can learn from the prime contractor.  Many prime contractors offer classes, bonding, etc. to help their partners succeed.
• Exposure to the reporting demands and other requirements of federal contracts.  This experience will let you see if your company can handle the paperwork.
• Additional income stream – many small businesses work both as prime contractors and subcontractors.

The following key points can provide a good foundation for working as a subcontractor:

• Research the companies that you are considering approaching and begin to work on establishing a relationship with them.  Large primes frequently host outreach events for small businesses which provide an opportunity to talk one-on-one and learn about teaming opportunities.  The NorCal PTAC will notify you of these opportunities in our newsletters.
• Read Requests for Proposals (RFP) and contracts carefully.  Consult with an attorney on the structure of the relationship with the prime and ask questions.
• Subcontract with a prime on a private industry project prior to proposing on a large government project, it will give you the chance to see how well you work together.  This experience will be beneficial to both you and the prime on future applications as it demonstrates an established working relationship. 
• Have a discussion with the prime contractor about what will happen if something goes wrong on the project.  In the Federal Contracting world only the prime contractor has direct access to the Federal Government.  How will the prime help you, represent you, what are their policies, procedures when the unexpected happens?

Prime contractors are always looking for good subcontractors.  They are required to meet specific small business goals including goals for all the socio-economic sectors including HUBZone, woman owned, and service disabled veteran owned businesses.  Hiring locally also makes good business sense.  Establish a good relationship from the beginning by being honest about your capabilities.  You will enhance your position by knowing that core capabilities are more important than your small business status and your past performance demonstrates your expertise.  Know your limitations and share them with the prime.  Read the contract and your proposal.  Ask questions, get clarifications and take advantage of opportunities to learn. 

Written by Mary Jo Juarez, Norcal PTAC Procurement Specialist.

Jul 2020: Do’s and Don’ts for Teaming Agreements & Subcontracting
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Jul 2020: Subcontracting Opportunities Q&A
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