Advantages of Subcontracting with a Prime on a Government Project

March 2007

 

There are many benefits associated with doing business with the government (yes, even beyond the billion-dollar government budget allocated toward acquiring goods). In particular, there is a strong list of subcontracting benefits.

Subcontracting Advantage - No Contractual Relationship with the Government

Because you are delivering goods and services to a prime contractor who is trying to complete a government contract, the prime works as another entity between you and the government. The benefits of subcontracting through a prime instead of working directly with the government are that the work is more straightforward and there are fewer technicalities.

Subcontracting Advantage - Protective Benefits from the Government

One nice advantage of subcontracting with a prime working for the government is that you aren’t bound to working for private companies that you have come to depend on for income. Oftentimes, a company you are working with may decrease your profit margin little by little, “requesting” you to do so. This could leave you feeling like you’re in a bad business relationship, rather than feeling like you’re building a strong business partnership while making a great profit.

The advantage of subcontracting on a government project is that you won’t feel this way, since the government is required by law to pay their contractors within 30 days once a proper invoice was received. This means that your prime is required by contract to pay you in a timely fashion. The government can even affect contract requirements through a “flow down”, where they can require certain aspects of prime contract requirements to flow down to the subcontracts of subcontractors. The flow down clause is more common in construction and government subcontracts.

Subcontracting Advantage - Minimal Administrative Burdens

Another advantage of subcontracting is that there are less administrative burdens for subcontractors since the government places most of those burdens on the prime. In addition, the monetary value of a subcontract is usually below the dollar amount when the paperwork kicks in.

To an extent, even resolving concerns can be less tedious when working with a prime on a government contract. If you have any issues you need to resolve with the prime, you can talk to them directly without having to contact the contracting official. However, if there is a problem with the prime, it is encouraged that you resolve the issue, whether with a phone call, by meeting in person, etc. When issues arise with a prime, the government doesn’t have an exact structure for you to follow in order to resolve matters.

Secure More Subcontracting Work

Instead of spending hours digging up information on companies who work with subcontractors, finding primes who’ve won government contracts is much easier for a subcontractor. Simply sign up with a government business intelligence company to receive email notifications with award data and plan holder’s lists. These pieces of government business intelligence will help you build a target contact list. By reviewing this data, you will know the names of companies who have won contracts and can begin contacting them to see if they’re going to need a subcontractor. Even if they already have a subcontractor in mind for the awarded contract, they may still need help down the line with future contracts. Plan holders lists are helpful to figure out which companies are interested in pursuing government contract work.

More Information from Government Contracting 101

To learn more about long-term contract rules, read Subcontractors: What you Need to Know about Long-Term Contracts at http://government.onvia.com/?p=135. For more on finding a prime contractor, read Find Government Prime Contractors for Government Subcontracting at http://government.onvia.com/?p=62