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Subcontracting

Prime Contracting

Prime contractors are usually other-than-small businesses who work directly with the government. They manage the contracts and then hire subcontractors who are responsible for completing the work as defined in the contract.

These contractors are usually well versed in the ways of Government contracting. Subcontractors utilize primes to get experience without taking on contracts on their own. They use the opportunity to learn how to navigate the system and how to execute a contract from start to finish. It’s usually a mentorship opportunity for startup contractors.

Some contractors use Prime contractors to tap into Government spending without the headache of complex procurement procedures. No matter the reason behind working with Prime contractors, partnerships with Primes can be a lucrative business plan.

 

Subcontracting

Unlike prime contractors, subcontractors do not work directly with the government, but instead work for other contractors. This allows contractors that are not prepared to work directly with a federal agency to still participate in Federal procurements.

Businesses who are just starting out in Government contracting can truly benefit from utilizing prime contractors. Not only can they gain valuable experience and performance history to add to their capabilities statement, but it also allows the business the opportunity to mentor and learn about the procurement process.

 

Awards with small business subcontracting plans

Federal contracts awarded to “other than small” businesses over a certain dollar threshold must contain a small business subcontracting plan. In this plan, the prime contractor sets goals for what it plans to subcontract to small businesses, disadvantaged businesses, women-owned small businesses, HUBZone small businesses, veteran-owned small businesses, and service-disabled veteran-owned small businesses.

Some federal agencies maintain subcontracting websites that include directories of large prime contractors so that small businesses know what contractors may have subcontracting opportunities:

  • General Services Administration’s Subcontracting Directory for Small Businesses
  • Department of Defense Subcontracting Opportunity Directory
  • DOT Subcontracting Directory | US Department of Transportation
  • Subcontracting and Other Partnerships | GSA

In an effort to locate small business subcontractors, any large business can post a notice of a subcontracting opportunity, including the solicitation, to SBA’s subcontracting database, SUBNet. Prime contractors wanting to publish opportunities in SUBNet must sign in through SBA Connect. Small businesses can search and view these posted subcontracting opportunities at SUBNet. (Small businesses do not need to register at SBA Connect to view SUBNet postings.)

Prime contractors also use the Dynamic Small Business Search to find small businesses. Ensure that your profile in DSBS is complete including socioeconomic representations and certifications, a capabilities narrative, keywords, NAICS codes, and performance history.

Contact an local small business liaison for additional assistance in finding opportunities. Visit the SBA’s local assistance search tool to locate your local OSDBU representative. (https://www.sba.gov/local- assistance)

 

Limitations & Compliance

Under certain kinds of set-aside contracts, small business prime contractors are required to perform minimum levels of work. Subcontracting limitations are part of the governing rules and responsibilities that all contractors should be familiar with.

The limitations on subcontracting are fully defined in 13 CFR 125.6.

Any prime contractor with a subcontracting plan can be selected for a subcontracting compliance review. The review confirms the prime is following relevant regulations, processes, procedures, and the subcontracting plan. The review will rate the prime contractor’s level of conformity and identify any deficiencies that need to be addressed.

If the review identifies any deficiencies, the prime contractor must submit a corrective action plan to their CMR. The CMR will follow up with the contractor several months later to see if the corrective action plan was followed. Failing to address any deficiencies could result in negative past performance ratings, which can affect your future ability to receive federal contracts.

 

Subcontractor compliance

Large business contractors must ensure lower-tier subcontractors adhere to the requirements of subcontracting-related contract clauses. This includes monitoring and enforcing compliance with flow- down clauses, subcontracting plans, subcontract reporting, and subcontracting goals.

To track compliance with subcontracting requirements, large businesses are required to submit regular subcontract reports using the Electronic Subcontract Reporting System (eSRS). You’ll need to submit reports even if you don’t have any active subcontracts for the reporting period.

 

Subcontracting rules and regulations