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Subcontractor

What Is A Subcontractor And How To Become One?

When companies face a complex project that seems too impossible to achieve with their capabilities, who would they call? Subcontractors!

Ever since the COVID-19 pandemic first devastated the world back in 2019, the U.S. government has mobilized more contractors to execute government projects to help the nation recover faster. And with several government projects up for grabs, the demand for subcontractors has also risen along with it.

As one of the world’s biggest spenders, the U.S. government is one of the prime clients anyone can have. So how can you make your way into the federal marketplace as a subcontractor? Read through to know more!Primary contractors in the construction industry are one of those who frequently hires a sub contractor to help complete projects.

What is the role of a subcontractor?

Subcontracting is a common practice in the government contracting industry where a general contractor outsources independent contractors for a larger government project. This type of work arrangement is prevalent in industries that require a higher mastery in executing complex projects such as healthcaredefenseconstruction, and IT.

To put it simply, a government subcontractor offers their specialized services to a general contractor for projects that require diverse skillsets.The subcontractor, namely an individual or a small team of experts,  take on contract work under properly licensed primary contractors.

Prime Contractor vs. General Contractor vs. Subcontractor: What’s the difference?

There are too many jargons to keep track of in the government contracting industry that it sometimes gets confusing. What is a subcontractor? How is it different from the first two types of contractors? These are just some of the questions that may pop into your mind.

Prime Contractor or General Contractor works directly with the client, which, in this case, is the government. As the primary contractor, they will be in charge of ensuring the government project goes smoothly.

On the other hand, a subcontractor is an independent contractor who works under a primary contractor for a larger project. A subcontractor’s prime responsibility varies, but they usually offer their specialized skill in one specific area of the project.

Another difference between these two types of contractors is their company size. Usually, primary contractors are huge companies who are considered industry giants. They are distinguished government contractors who have a hefty federal contracting portfolio. On the contrary, small business owners make up the majority of the subcontracting population since subcontracting offers excellent opportunities for small businesses.A sub contractor receives a number of benefits from their work arrangement such as flexibility,  more access to opportunities to hone their skills, and more.

Why should I become a government subcontractor?

Subcontracting is an excellent first step for government contractors

There is no better time than now to enter the government contracting field, especially now that the current administration dedicates its efforts to ensure that small company owners have more opportunities to work with the federal government. And fortunately, subcontracting offers every aspiring contractor the perfect chance to test the waters.

Since becoming a full-fledged government contractor requires you to undergo a stringent application process, you can try taking subcontracting projects first to know if the industry aligns with your business interests and goals. With subcontracting, you can offer your specialized services with more flexibility and less liability.

Additionally, there are certain government contracts that require a primary contractor to hire independent contractors. And that is why opportunities for subcontracting work continue to rise.

You can build a specialized portfolio for your expertise

As more and more subcontracting opportunities become available to independent contractors, building your portfolio has never been easier.

Having a solid reputation founded on a spotless track record is essential in securing more contracts in the government contracting industry. And by dealing with subcontracting work, you are allowing yourself to hone your specialized skill set, network with the business owner and several subcontractors, and above all, establish a reputation among the community.

How can I be a successful government subcontractor?

According to an industry forecast by Deltek’s Senior Vice President Kevin Plexico, the government contracting industry will continue to grow exponentially as new policies come into play. And above all, small government contractors will be given more opportunities to work with the government.

So to make sure that you position yourself favorably in the industry as an independent contractor, here are the ways how you can become a successful subcontractor.You should evaluate the strengths and weaknesses of your company, as well as your skills that gives you an edge over competition.

1. Identify your business expertise

Primary contractors seek out the assistance of subcontractors when they need a particular skillset to execute a government project. And that is why identifying your strengths can make or break your career as a subcontractor.

So as early as possible, try to define which field in the government contracting field you want to belong in and what type of services you want to offer. By being clear on who you are and what you do, you put your business in an advantageous position in the federal marketplace.From deciding on your company name to filing tax for your business expenses, you should fulfill every administrative and legal requirement to legitimize your  company.

2. Legally register your business

Whether you are an individual or a small team of professionals, you still have to legally register your business and fulfill all the necessary administrative requirements such as taxes.

According to the Internal Revenue Service (IRS), subcontractors are considered self-employed entities. This means if you choose to be a subcontractor, you have to file your taxes, even your Medicare, properly. If you manage a team instead of working independently, check out the IRS website here.

3. Familiarize yourself with the subcontractor rights

The contractor-subcontractor relationship works differently than the employer-employee dynamics. The former operates on a contractual basis, while the latter is bounded indefinitely to one employer only but is protected by the federal and state labor laws.

As an independent contractor, you are considered an entity that does business for itself by offering services to others. And since you are not technically employed, the protection of labor laws does not extend to you.

However, as a subcontractor, you are still entitled to rights that give you the freedom to manage your business however you want, enter contracts with multiple clients simultaneously, and be compensated fairly and timely according to your agreed contract. So to ensure that you have covered all the legal bases, familiarize yourself with the federal and state subcontracting laws and policies.

Additionally, if your subcontracting firm qualifies as a small business, you should also read up about the small business subcontracting policies. You can learn more about it in the Code of Federal Regulations, the Federal Acquisition Regulations, and publications of different federal agencies.Put your company in a more favorable market position by actively seeking  subcontracting opportunities.

4. Regularly scout subcontracting websites

Once you have nailed down all your administrative and legal requirements to put up shop, it is now time to look for subcontracting work on these relevant channels actively.

5. Attend networking events

In addition to your efforts in scouting subcontracting opportunities on different digital platforms, you should also remember to market your services directly to your potential clients by attending networking events.

Whether virtual or in-person, networking events are the perfect avenues to advertise yourself to your target federal clients. And not only that—networking events also give you the opportunities to forge connections with relevant industry movers and link up with several subcontractors that you can team up with in the future.

If you feel intimidated in striking up a conversation with another industry expert, or even a CEO, read up this networking playbook for government contracting professionals like you!Before signing a subcontracting deal, talk with your attorney or legal advisor to go over the contract.

6. Carefully review your subcontracting contract

Your contract is an important document that holds both you and your primary contractor liable for fulfilling the requirements of a specific project. The goal of this contract is to protect the interests of both parties.

So with a document as important as this, you should seek the help of an experienced attorney in reviewing your contract, especially in these critical areas:

Compensation 

In addition to knowing your primary contractor’s payment scheme, you should also note what will happen if your primary contractor’s federal client delays or refuses to pay for the project. In some cases, direct contractors won’t pay their subcontractors if their clients don’t pay them as well.

Flow-through 

The flow-through is a commonly overlooked clause in the contract that binds you to the original contract’s terms between the primary contractor and the federal client. Unless your primary contractor shows you the contents of their initial contract, you will have no idea what you agree to.

Indemnification

This is your contractual obligation to compensate for any damages or losses incurred during the project. But you should ensure that this clause wouldn’t require you also to shoulder the responsibility for the damages made by other parties.With insurance, you can protect your company from any unforeseen  injuries and damages incurred that you are legally responsible for during your contract period.

7. Get insured

And last but not least—get your business insured for the project. One of the most suitable insurance policies is the Commercial General Liability (CGL). CGL is general insurance that protects your business from any bodily injury and property damages you may be legally responsible for. When you are hired for a complex government project, it is best to cover all the bases to protect your business interest. There are different types and coverages of CGL, so don’t forget to talk with your insurance provider regarding this matter.

Subcontracting for the federal government is a viable option to make your business grow further. It lets your business experience working with federal agencies without going through all the hurdles. However, the freedom and flexibility every subcontractor enjoy also come with a huge responsibility. So to make it big in the industry as a government subcontractor, you should be dedicated to honing your specialized skillsets, proactive in seeking opportunities, and vigilant in protecting your rights.

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