Library - The Pros and Cons of Subcontracting with Prime Defense Contractors

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The Pros and Cons of Subcontracting with Prime Defense Contractors

Each year, there are thousands of subcontracting opportunities with prime DoD contractors. For some small businesses, subcontracting to a prime defense contractor is a great way to "get a foot in the door" of government contracting.  These opportunities exist nationwide and overseas in support of our military forces and DoD operations.

Benefits to Partnering with Prime Contractors
There are several important benefits to partnering with prime contractors. These benefits include:

  • Prime contractors are frequently required to partner with small businesses when bidding on or performing contracts for federal, state, or local agencies. 
  • Thousands of small business opportunities with prime contractor exist each year.
  • Vendors to prime contractors forego the administrative overhead costs and resources necessary to manage execution of large contracts.
  • Small businesses can gain valuable experience within a new industry as an apprentice to a prime contractor.
  • Subcontracting to a prime can be a springboard to future direct contract awards within an industry.

Limitations as a Subcontractor
There are several key limitations (or offsets) associated with partnering with prime contractors. These disadvantages should be weighed against the benefits to determine whether a specific partnership makes sense.
Prime contractors will take a slice of your profit margin… sometimes a large slice!

  • Prime contractors often impose “non-compete” clauses to prevent your company from bidding on similar contracts. 
  • Prime contractors have proprietary rights to the work your company performs while under contract with them on a specific project.
  • On a day to day basis, your employees (working on a specific project) will be following direction from the prime’s project leadership. Often this creates a sense of divided loyalties. 
  • Sometimes subcontractors absorb a disproportionate amount of responsibility for projects encountering difficulties.
  • The low guy on totem pole (subcontractor) can become a convenient scapegoat when things go wrong.
  • Communication with the Prime Contractor’s Staff may not always 
  • be “Full and Open.”  Prime contractors frequently do not include subcontractors in all meetings with the Government because this is not always practical or possible. As such, often subcontractors may not receive all the facts, guidance, and feedback it needs on a project.
  • Competition to Partner with Big Prime Contractors Can Be Keen.  Prime contractors are very specific in their requirements for partners. Prime contractors want partners who give them a competitive edge over other prime contractors.  

Video 1 - Six Ways to Do Business with Military (2 May 2017)

"Six Ways to Do Business with Military Bases"

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