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Federal Subcontracting Overview

Why subcontract?. Prime contractor cannot bid on a contract alone.A firm wants to pursue new business opportunities but needs to work with a prime contractor.The federal government often requires prime contractors to subcontract part of the contract work.. Rochester Federal Subcontracting Initiati

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Federal Subcontracting Overview

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    1. Federal Subcontracting Overview Why and How Should A Company Subcontract? David A. Gottfried Javelin Associates, Inc.

    2. Why subcontract? Prime contractor cannot bid on a contract alone. A firm wants to pursue new business opportunities but needs to work with a prime contractor. The federal government often requires prime contractors to subcontract part of the contract work.

    3. Federal Set-Asides Encourage certain types of companies to participate in competitive bidding situations. *Small Business *Small Disadvantaged Business *Businesses located in HubZones *Other specific situations

    4. Subcontractor considerations Capability Analysis Cost-Effective Solution Contract risk/reward Competitive position Customer preference Quantity discounts Final analysis

    5. Considerations by Primes Does a subcontractor add anything to a primes competitive position? Is the subcontractor willing to take on some (or all) of the risks the prime contractor faces?

    6. Subcontracting Benefits Subcontractors learn many of the details of federal contracting and learn new ways to conduct business. By entering non-exclusive relationships, contractors have the opportunity to bid with multiple primes. By subcontracting successfully, subcontractors improve chances of winning re-competed business.

    7. How Primes Find Subs Register with Pro-Net - a self certifying database managed by the Small Business Administration. Primes can search by firm type (HubZone, 8(a), SDB), region, key words, etc. Also, all government contractors must have a DUNs number, and register with CCR.

    8. How do Subcontractors Find Primes? Review contract announcements in publications like the Washington Post or Wall Street Journal. Market directly to the customer - some govt buyers may require primes to subcontract to a particular sub. Market yourself to prime contractors - programs like RFSI good networking opportunities.

    9. Subcontractor Tasks Establish firm as a reputable contractor on existing contracts. Understand own capabilities and be able to articulate them to potential primes. Understand the federal marketplace. Become familiar with the requirements of federal acquisition regulations (FAR).

    10. Subcontracting Risks Often, small companies take on huge risk and exposure of complying with all the federal contractual obligations, and assume part of the risks placed on the prime. Subcontractors need to prove that they meet requirements in federal acquisition regulations (FAR). Flow-down clause - Be aware that primes may take all their clauses and flow them down to their subs. A savvy sub will evaluate those requirements and determine which do not apply.

    11. Caveats: The subcontractor needs to decide if it is willing to provide the level of support needed by the prime. (For example, a sub could be audited at a moments notice.) Conduct a return-on-investment and opportunity cost analysis. Keep track of past performance - govt buyers may request citations from both the primes and subcontractors. Dun and Bradstreet credit rating is very important for first time subcontractors.

    12. Caveats continued: As a basic rule of thumb and due to the competitive nature of government business, prices for the same products tend to be lower on government contracts than for commercial contracts. Do not assume that prices can be modified after contract award. Also

    13. Discounts If you offer the government discounts, they will always seek the same discount - across agencies. The subcontractor must understand how much it actually costs to produce a product or provide a service before determining a price it can live with over the duration of a contract. (This means more than just production, but also includes the costs of record keeping, conducting an audit, etc.)

    14. Caveats continued: Prime contractors are often competing on price. They will seek to negotiate the lowest possible price with subcontractors in order to improve their scores when responding to federal contracts.

    15. Conclusion? Subcontracting opens the door to government contracting opportunities that small firms might not be able to compete for on their own. Subcontracting is a very complex system that small companies must be able to manage exactly like a prime contractor would. Provides for new cash flow opportunities that are otherwise inaccessible.

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