Subcontracting in procurement means that a contact is split and provided by two different companies or businesses. A large procurement contract can be delivered by two different companies with proper coordination.
Subcontracting is often done by small business companies while the larger part of the contract is fulfilled by a larger company. Subcontracting government contracts is ideal for small businesses that like to have an extra income generated from the government and trying to get experience and presence in the sourcing and procurement industry. Businesses that are new to small business subcontracting can be helped by the Small Business Administration(SBA) and their website on how to subcontract and work the procurement processes.
So why consider subcontracting if you are a small business owner? There are a lot of perks and here is just a short list:
1. Get experience and action
For many small businesses, procurement is a whole new and different ballgame. In government or public procurement, any business can register and participate. But getting an opportunity is different from actual participation. For those new businesses, they might have second thoughts in doing procurement even if they have enough resources and knowledge. To participate effectively, small businesses can try to be a subcontractor to get the ‘feel’ of the process and gauge how others are managing this activity.
2. Getting profit from the experience
The main idea of procurement is to get profit from services or products rendered. Participating in procurement even as a subcontractor entails extra income for the small business. Any additional income is appreciated by owners and workers, especially in uncertain financial situations.
3. Networking in the procurement world
Putting the business’ foot in the procurement world is one thing, actually partnering or networking with fellow businesses is another. In procurement, not everybody wins a contract and not everybody gets the chance. Partnering with a larger company can increase that chance and contacts or any form of relationship.
4. No contractual relationship…
Usually, the prime contractor (the larger company) assumes the contractual obligation to the entity who sells the procurement. Small businesses that are subcontracting contracts have no contractual obligations, which is good if there is a negative result from the process or activity.
5. … but still getting paid
If your business has successfully won a procurement contract along with your prime contractor, the government will pay the subcontractor (your business) first.
6. Bulk orders and other stuff from Uncle Sam
The US government is the biggest buyer of services and commodities. Getting federal contracts will be a big boost of income to the business as well as forming a relationship with the government. The business can also make it in the government contactor list as it learns the ropes and prepare to take a contract for itself. The government, in turn, gets the things it needs. The effect of transaction can contribute in stimulating the national economy. Money flows within the country and keeps it from being spent for activities like outsourcing.
I am a small business owner and these all perks are very helpful for me in my business. Thanks for sharing these six fantastic perks. Nice article!