The Perks of Subcontracting

Last year, I attended a seminar about diversity in contracting. While there, I spoke with an executive of a prime contractor of the U.S. EPA. He stressed for me to share with clients that the best way to start work with the federal government is through subcontracting. It is how they got started and within a few years, they became a prime. Going this route, you learn about the major players, make the right contacts, and show that you do good work.

Subcontracting usually occurs with government and construction contracts but could really be referred to with any project (think "outsourcing"). Subcontracting to Snag Stimulus Dollars, an article from The Wall Street Journal, provides an excellent summary for what this can really do for a business.



When considering this route, definitely consider its implications. Subcontractors should ensure they have the resources available to work the contract at least 60 days without expecting payment (and that's being conservative). Depending on the payment terms, a customer may not pay for 60 days, or even 90 days. That leaves the subcontractor on the hook for labor, material, and other costs directly associated with the contract for a significant amount of time. Fortunately, contract financing is a viable debt instrument which provides bridge financing for contractors to meet their obligations while awaiting payment. Ultimately, make sure an agreement is in place that addresses the needs of all parties. The article, Subcontractors - One More Reason for a Contract, presents a compelling argument to ensure you make this happen.

To go after these contracts, the best advice there is - network, network, network. This can put you in front of those that hold the information that will best position you to win. Bundling, the placement of multiple jobs under one contract, is a growing trend (check out this roundtable held by the U.S. Senate Small Business Committee) - it would be at your disadvantage to not know who could win those bundled contracts and pursue relationships with them. We'll talk about networking later!