What is a Subcontractor? A Beginner’s Guide

13 mins read
subcontractor

Being a subcontractor makes you versatile. You can be an independent contractor or a freelance employee, a subcontractor who works for a general contractor in the construction industry, and even a federal subcontractor who enters into a contract with a prime contractor!

The United States government offers some of the most lucrative contracts any company will dream of having—and each fiscal year, the budget for federal contracts increases. This high-risk, high-reward industry is still projected to grow even further this year, and it is forecasted that small businesses and subcontractors will benefit from this greatly.

The primary contractor hires a sub contractor to assist them in completing a larger project. The sub contractor offers their expertise on a contractual basis.

What is the role of a government subcontractor?

Government subcontractors are known for their specialties, which are valuable in fulfilling complex federal contracts. And that is why primary contractors outsource the specialized talents of the subcontractors when they are faced with a complicated government contract.

For example, if the federal government tasks the prime contractor to construct a new building, they have to hire teams—or in other words, government subcontractors—who will be in charge of accomplishing different areas of the contract. Depending on the niche or industry of the subcontractor, they can be assigned to layout the electricals of the building, install the roofing, plan the interior design, and more.

What is a subcontractor, really? The key differences between a prime contractor and subcontractor lies in the kind of work performed by each. Prime contarctors are more concerned with project management while subcontractors are more focused in fulfilling one area of the project.ile

What is the difference between a contractor and a subcontractor?

Prime contractors and subcontractors team up with each other to complete federal projects. However, even if both desire to achieve a common goal, they have different responsibilities that they have to fulfill.

The prime contractor is a for-profit or non-profit organization directly engaged in a contract with the federal government. Their prime responsibility is to monitor the project’s progress and ensure it operates within the set business expenses and deadlines. And on top of that, they are also the ones who hire subcontractors for their projects.

 

On the other hand, the subcontractor is a firm, usually a small business, that lends its expertise to prime contractors. Instead of working under a federal agency, they report directly to their hiring prime contractor.

Many subcontractors enjoy the benefits of doing contract work for a federal prime contractor, such as being more exposed to contracting opportunities and getting connected with key industry movers.

Why should you become a government subcontractor?

Government subcontracting is less restrictive than prime contracting

It is undeniable how the bureaucracy and complexity of the requirements needed to become a full-fledged government contractor have deterred several businesses from trying out their hand in this industry.

Fortunately, the requirements to become a federal subcontractor are easier to acquire. Learn more about it by reading below.

Government subcontracting allows you to build your portfolio

If you desire to become a prime contractor in the long run, subcontracting gives you the perfect opportunity to gain experience and establish your presence in your chosen industry. Building your credibility as soon as possible can help you secure more government contracts in the future.

Government subcontracting allows you to network with key industry movers

Connecting with experts, industry veterans, and key decision-makers are essential to making it big in the field.

Government subcontracting gives you the opportunity to test the waters

Entering the government contracting industry will require you to spend considerable time and resources—from learning the ropes to spearheading training and initiatives to prove that you are competent enough for a government contract. So to ensure that you are not wasting your efforts on fruitless endeavors, you can test the waters first with subcontracting.

 

The federal subcontracting industry is less restrictive than prime contracting. This is also one of the reasons why several small businesses take their shot in subcontracting.

Government subcontracting levels the playing field for small business owners

The government provides special assistance to federal subcontractors who want to do business with them. In some prime federal contracts, the federal contractor may require the prime contractors to outsource the talents of small business subcontractors.

Just like independent contractors, federal subcontractors also need to do the necessary preparations and fulfill a set of requirements—which vary depending on the prime contractor—before becoming one.

How can you become a government subcontractor?

  1. Plan your entry into the government subcontracting industry

  • Decide on your expertise

Federal subcontractors are known to be specialists. They are the ones the prime contractors hire to complete a specific area of the project they are currently engaged in. So to be a successful subcontractor, you have to decide which niche you want to focus on.

 

Once you have honed in on your target industry, your efforts for improvement will be more precise and efficient.

  • Exhaust all learning resources available

The U.S. Small Business Administration grants special assistance to small businesses, particularly to companies considered to be socio-economically disadvantaged.

 

For starters, you can visit your local Procurement Technical Assistance Centers (PTACs) by the SBA. These learning centers are the best places to seek valuable learning materials regarding government contracting. And to make it even more amazing, PTACs are also one of the best avenues to meet industry experts who can offer your insights and guidance in navigating this complicated industry.

 

Additionally, PTACs can help you evaluate whether you are qualified for any small business assistance programs.

  • Learn about the government subcontracting rules and your rights as a subcontractor

The taxpayers’ money is the resource used to fund every government contract. And that is why the federal government has laid down extensive rules and policies regarding government contracting to ensure that every penny is worth it. Familiarize yourself with the federal policies regarding subcontractors by reading the Code of Federal Regulations, the Federal Acquisition Regulations, and publications of different federal agencies.

  • Attend networking events

One of the best ways to advertise your subcontracting firm is to attend networking events where you will get the chance to connect with key industry professionals. Get to know fellow contractors and subcontractors, innovative business leaders, and the critical decision-makers of the industry.

  1. Accomplish the requirements to become a government subcontractor

The requirements you have to fulfill as a subcontractor depend on the industry you are currently operating in and your prime contractor. To get you started, here are the general requirements for being a subcontractor:

  • Legally register your business

From deciding your business structure to acquiring your state and federal tax IDs from the Internal Revenue Service—you have to ensure that all of your legal paperwork is spotless. This will also assure your prime contractors that you are a legitimate subcontractor here for business.

  • Acquire your DUNS Number

Your DUNS Number is the unique 9-digit identifier code you can easily get at the Dun & Bradstreet website.

 

Visit the website, complete the short application form, and wait at least 1-3 business days before receiving your DUNS Number. This is a free service that can be conveniently done online, so be wary of people offering to request your DUNS Number for you in exchange for a payment.

The System for Award Management (SAM) is the one-stop portal for government contractors and subcontractors. On top of being the platform used by federal agencies to publish government contracting opportunities, SAM.gov also allows you to compete for set-aside contracts and be eligible for grants and financial assistance.

After registering your subcontracting firm at SAM.gov, you can complete your SBA profile afterward. Fill out the necessary information to help contracting officers and prime contractors know who your company is.

  • Craft a capability statement

This one-page marketing document contains your company profile, expertise, and relevant experience. Like how an employee’s resume works, your capability statement should be clear and compelling to convince prime contractors that you are the best subcontractor for the job.

  1. Keep tabs on the best websites to explore subcontracting opportunities

Never let a subcontracting opportunity escape your grasp by regularly monitoring the following online platforms where prime contractors look for federal subcontractors:

 

  1. Learn how to write a contract bid

If you want to increase your contract winning rate, you should consider learning how to write an effective contract bid.

The prime contractors use this important document to evaluate whether you are the best subcontractor for the job. It contains all the necessary information, such as:

 

  • Your business identity.
  • Relevant experience
  • An outline of how you plan to execute the task stated in the contract
  • Service rates

 

There are countless contract bid templates floating around the internet that you can use as a reference. However, it all boils down to how you can weave a clear and compelling bid that includes all of the previously mentioned key information.

 

Construct your contract bid around the specific requirements of your target prime contractor, then emphasize how you can harness your expertise in addressing the said requirements.

  1. Read the fine print of your subcontracting agreement

For the prime contractor-subcontractor relationship to work, a fair and just contract should bind them both. However, some clauses may put you at a disadvantage if they blindside you, so take time to carefully scrutinize every line of your contract, especially in these particular clauses:

  • Compensation – check whether your agreed rates and payment scheme are reflected in the contract. Also, try to see the course of action if the federal government is delayed compensating the prime contractor.
  • Flow-through – this contract clause automatically binds you to the terms stated in the original contract between the prime contractor and the federal agency. If possible, try to ask for a copy of the original contract for transparency.
  • Indemnification –if things go sideways, this clause will hold you liable for damages incurred during the contract period. Carefully review this clause to ensure that you will only be responsible for the damages directly related to your task.
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