Subcontracting is a contract between the main contractor and the subcontractor, where the subcontractor is expected to complete a specific task or a specific portion of the project for the prime contractor. Unlike the prime contractors, the subcontractors do not work directly with the government but for and under the other contractors. Thus, subcontracts help contractors who are not directly involved with the Federal agency still participate in the Federal procurement process. Also, some government contracts will require other small and large businesses to subcontract with the other businesses to create more opportunities for small businesses and to involve themselves in the federal contracting process.
Who is a Subcontractor?
A subcontractor is a contractor who has been specifically hired to complete certain tasks offered by the prime contractor on the project. The subcontractors will be specialists in specific tasks such as electrical systems, window installation, software programming, etc. Since the subcontractors perform more specialized work, they render their service only when required and not consistently throughout the project window.
There are chances for a project to have only subcontractors and not prime contractors, especially when the owner of the property is managing the contracting work onsite. Sub-contracting and a subcontractor is never a permanent job title, as the professionals might become subcontractors if they get hired by another contractor in order to get the job completed.
Awards with the Small Business Sub-Contracting Plans
The federal contracts that are awarded for small businesses over a specific dollar threshold should include a small business subcontracting plan. In this plan, the prime contractor would set the goals for the work for which it plans to subcontract with small businesses, women-owned businesses, small disadvantaged businesses, etc. Some of the federal agencies maintain their subcontracting websites as well, which include the directories of the large prime contractors so that the small businesses would know their subcontracting opportunities.
Any large business is free to post the notice for a subcontracting opportunity, which includes the solicitation, to the SBA subcontracting database, SUBNet, in an effort to locate small business subcontractors. Prime contractors who wish to publish small business contracting opportunities can sign in through the SBA Connect portal. Small businesses can search and view all of their subcontracting opportunities through SUBNet.
The prime contractors can also use the Dynamic small business search option to locate the small businesses and ensure that their profile with the DSBS portal is complete with some socio-economic certifications and representations, capabilities narratives, NAICS codes, and performance history. Businesses can also take help from the procurement technical assistance center or the APEX accelerator to help small businesses find more sub-contracting opportunities.
Subcontractor Compliance and Limitations
For certain types of set-aside contracts, the small business prime contractors are required to subcontract only minimum levels of work. These limitations on subcontracting are part of the SBA rules and responsibilities that all contractors should be familiar with.
Also, the prime business contracts should ensure that their lower-tier subcontractors adhere to the subcontracting requirements and related contract clauses. This will also include monitoring and enforcing compliance with a due focus on the flow-down clauses, the subcontracting plans, the subcontracting goals, and the subcontract reporting options.
The prime contractors of the Federal contracting might be required to flow down some of the clauses of their contract to the subcontractors, and in the due case may be required to flow down the subcontracting plan from their commercial representative in the market. For the sake of tracking compliance with the subcontracting requirements, large businesses are required to submit their regular subcontracting reports with the help of the Electronic Subcontract Reporting System. They will be required to submit the reports, even if they do not have any active subcontracts for the specific reporting period.
Difference Between Prime Contracting and Sub-Contracting
A prime contractor, who is also referred to as a general contractor, is the primary party who is responsible for the management, coordination, and oversight of the entire project or the contract. A subcontractor however is a specialized entity who is hired by the prime contractor to perform specific tasks within the scope of the project or the contract. Here are some of the specific roles and responsibilities of the prime contractors and the subcontractors.
- Difference in Training
There is no practical difference in the training required to be a prime contractor and subcontractor since skilled professionals might fill both roles. The prime contractor will have experience and certification in both project management and industry-specific skills, whether they work in construction or technology.
The subcontractor typically possesses particular knowledge, certificates, or licensure in that industry because they carry out a specific activity on the work. For instance, a certified electrician may work as a subcontractor for the prime contractor on building projects like homes since they have the knowledge and credentials necessary to finish the job properly. Professionals in the advertising or marketing industry who operate as contractors may employ degree-holding graphic designers, animators, or interior designers.
- Job Duties
A prime contractor’s job responsibilities include organizing and coordinating others in order to manage the project’s overall status. This can entail regular and thorough communication with the project owners in addition to project management both on location and remotely. The subcontractor’s job obligations are outlined in their contract and consist of a set amount of tasks depending on their specialty. Prime contractors and subcontractors bear greater accountability for meeting deadlines and customer expectations because they are self-employed and not part of an organization.
- Hiring Process
On a project, prime contractors and subcontractors come on board at different points. An owner may appoint a prime contractor to oversee the project from start to finish. The prime contractor then selects which jobs to assign to subcontractors. Any subcontractors are sourced, investigated, and hired by the prime contractor, who also negotiates contracts and prices with each one separately.
- Transferable Skills
Both the contractors and the subcontractors have the required skills that overlap with the non-contract work. Therefore, it is possible to transition into or out of the contract at both levels. Some of the transferable skills for prime contractors include project management, scheduling, and enhancing coordination between labor, money, and other resources.
The subcontractors might transfer all of their working knowledge to a position similar to working for a large company, or they may also work as employees of a contractor. Working directly for a contractor means that they don’t have to negotiate the terms of each contract and usually enjoy employment benefits.
- Salary
The contractors might depend not only on their role within the project but also on the industry and its specific specialization. Each of the prime contractors will negotiate the terms and pay of their work before they begin their work and the terms that are included in the contract. The owner of the business will pay the prime contractor, and then the prime contractor will pay the subcontractors. Tools that are used in the process, such as the mechanic’s liens, the prompt payment rules, and the bond claims, might either prevent or resolve a payment dispute between the contractors.
Since the main contractor works for the entire project and the subcontractor only works on a part of it, the prime contractor generally makes more money per project. A subcontractor, however, may work on more projects over the same amount of time, so their annual pay heavily depends on both scheduling and demand. Both the prime contractors and the subcontractors generally earn overtime pay.
- Job Outlook
The job outlook for prime contractors and subcontractors depends heavily on the industry. Thus, predictions for a specialty may prove more useful than predictions for subcontractors and prime contractors in general.
- Regulations
Since they fall under the labor category of contractors, neither prime contractors nor subcontractors are entitled to benefits from the person or business that owns the project, such as insurance or healthcare. Federal, state, or municipal governments may have extra requirements for prime contractors and subcontractors in terms of work levels, reporting, and training. The scale of the project and business may also have an impact on these rules. Each contractor is in for of obtaining their own insurance, licenses, and permissions.
How can MySetAside help with Federal contracting goals?
Understanding the details of small business subcontracting and the differences between the prime contractors and subcontractors is very crucial in expanding the contracting opportunities of the company. Subcontractors offer specialized skills and expertise within their defined roles established by the contractor and have limited or no direct client communication.
At MySetAside, we are committed to guiding the business through the intricacies of the Federal marketplace, irrespective of whether they are pursuing prime contracting or subcontracting opportunities. Our MSA experts in federal government contracting will offer tailored services for businesses to capture contract opportunities and scale effectively. Our effective marketing services will help to boost the image of small businesses and maximize their presence in government contracting.