The federal government is assisting small businesses to get subcontract opportunities from prime contracts offer by the government.
What is subcontracting?
Subcontracting is a business practice where one corporate body or government agency/organization outsource or assign part of its contractual obligation to another business called a subcontractor.
What Is The Relationship Between Subcontracting And Prime Contracting?
A subcontractor is different from a prime contractor. The latter have a direct working relationship with the government. Prime contractors get the contracts from the government and deals directly with other customers to ensure the work is done properly according to the terms of the contract.
On the other hand, contractors involved in subcontracting do not have a direct dealing with the government. They only take part in the project under contract by working for prime contractors.
That is, if you are operating as a subcontractor, you have no direct relationship with the government, and owe it no obligation whatever. Rather, your obligation and contractual relationship rest with the prime contractor.
How do government subcontracting plans benefits small businesses?
One of the many benefits vendors get in registering with the government SBA programs is the opportunity to attract subcontracting.
Typically, businesses that are just starting out find it difficult to secure government contracts due to a lack of previous work history they can site as reference.
Thankfully, many government prime contracts come with a subcontracting clause. These clauses mandates the prime contractor to outsource parts of the contract to subcontractors. Those registered businesses in the SBA small business program are usually the favorite to land such deals.
For instance, in the goods and service sector, a subcontracting plan becomes necessary if the value of the goods or services under the prime contract exceed the value of $700,000. In that case, the prime contractor must outsource parts of the contract to small businesses.
If the prime contract is related to the construction industry, and value of the contract exceed $1.5 million, it automatically triggers a subcontracting plan that the prime contractor must comply with. These are great opportunities for small businesses to shine and make good returns on business.
How to become a subcontractor and deal with a prime government contractor
- Get certification
Any business that is sending a proposal to a larger prime contractor must certify itself as a small business in accordance with the NAIC Code Solicitation standards. It means you must comply with all relevant official guidelines and paperwork, which includes:
- Registering in the System for Award Management (SAM) by visiting SAM.gov. (Otherwise, you won’t get paid by the government and its contractors).
- Structure and organize your business in the correct order to protect you and your personal assets I the event of liabilities.
- Getting business credit score by registering with DUNS.
- Search for subcontracting openings
Once you have the right paperwork, you are set to start searching for opportunities by researching prime contractors directories.
Majority of the federal agencies have directories for subcontracting opportunities. You can review them and find a contract relating to your niche.
For instance, there is a subcontracting directory at Department of Defense (DoD) that keep track of subcontracts opportunities for small businesses researching large prime contractors.
A similar subcontracting directory is available at the General Service Administration site. There small businesses will find a list of prime contractors required to create subtracting plans.
The subcontracting database also contains many outreach events notices seeking sources, and solicitations for subcontracting projects put forward by larger corporations to find small business subcontractors. So do not forget to search that also.
Another good place to land subcontracting deals is to visit the websites of prime contractors. Many prime contractors know they cannot get contract from the government if they don’t have a number subcontractors they can use as reference. So, many of them have their websites crawling with lots of information on subcontractors.
Limits on Subcontracting
There are limitations to the level at which prime contractors can outsource under some types of set-aside contracts. Some small prime contracting businesses cannot perform certain types of activities; therefore they relay to subcontracting the same way larger prime contractors can.
The limitations and rules for subcontracting are clearly stated in 13 CFR 125.6.
This blog was written by Linda Rawson, who is the founder of DynaGrace Enterprises (dynagrace.com) and the inventor of WeatherEgg (weatheregg.com). She, along with her daughter, Jennifer Remund make up the mother-daughter duo of 2BizChicks (2Bizchicks.com). For further information, please connect with Linda on LinkedIn, or contact her at (800) 676-0058 ext 101.
Please reach out to us at GovCon-Biz should you have any questions.
