When companies face a complex project that seems impossible to achieve, who do they call? Subcontractors!
Despite more mergers and acquisitions happening now more than ever, big contractors still need a lot of specialized assistance in getting their contracts done. With several government projects up for grabs, the demand for subcontractors has also risen.
As one of the world’s biggest spenders, the U.S. government is a prime client. So how can you make your way into the federal marketplace as a subcontractor? Read more to learn how!
The Potomac Officers Club’s upcoming summits for 2025 are great chances to learn more about federal contracting. Get exclusive insights from top agency leaders and network with other government contractors to discover subcontracting opportunities. Sign up today!
What Is the Role of a Subcontractor?
Subcontracting is a common practice in the government contracting industry where a prime 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 healthcare, defense, construction, and IT.
To put it simply: a government subcontractor offers their specialized services to a prime contractor for projects that require diverse skillsets.
Prime Contractor vs. Subcontractor: What’s the Difference?
There is so much jargon in the government contracting industry that it sometimes gets confusing. What is a subcontractor? How is it different from other types of contractors? These are some questions that may pop into your mind.
A prime contractor works directly with the client, which, in this case, is the government. The prime contractor is in charge of ensuring the government project goes smoothly.
On the other hand, a subcontractor is an independent entity that works under a primary contractor for a larger project. A subcontractor’s prime responsibility varies, but it usually offers its 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 that are considered industry giants. They are distinguished government contractors who often have a hefty federal contracting portfolio. On the contrary, small business owners make up the majority of subcontractors since subcontracting offers excellent opportunities for small businesses.
Why Should I Become a Government Subcontractor?
Subcontracting is an excellent first step for government contractors.
There is no better time to enter the government contracting field. Fortunately, subcontracting offers every aspiring contractor the perfect chance to try federal contracting.
Since becoming a full-fledged government contractor requires you to undergo a stringent application process, try taking subcontracting projects to discover if government contracting 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. This is why subcontracting opportunities continue to grow.
Build a Specialized Portfolio
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 to securing additional contracts in the government contracting industry. By performing subcontracting work, you are honing your specialized skill set, networking with the business owner and several subcontractors, and, above all, you are establishing a reputation in the government contracting community.
How Can I Be a Successful Government Subcontractor?
According to an industry forecast by six-time Wash100 Award winner and Deltek Senior Vice President for Information Solutions Kevin Plexico, the government contracting industry will continue to grow exponentially as new policies come into play. Small government contractors, above all, will be given more opportunities to work with the government.
To ensure that you position yourself favorably in the industry as an independent contractor, here are ways you can become a successful subcontractor.
1. Identify Your Business Expertise
Primary contractors seek the assistance of subcontractors when they need a particular skillset for a government project. This is why identifying your strengths can make or break your subcontracting career.
Try to define as early as possible which government contracting field you want to compete in and which 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.
2. Legally Register Your Business
Whether you are an individual or a small team of professionals, you have to legally register your business and fulfill all the necessary administrative requirements, such as paying taxes.
According to the Internal Revenue Service, subcontractors are considered self-employed entities. This means if you choose to be a subcontractor, you have to file taxes. If you, instead, manage a team, check out the IRS website here.
3. Familiarize Yourself With Subcontractor Rights
The prime contractor-subcontractor relationship works differently than an employer-employee arrangement. The former operates on a contractual basis, while the latter is regulated by federal and state labor laws.
As an independent contractor, a subcontractor is considered an entity that does business for itself by offering services to others. Since you are not technically employed in a traditional employer-employee relationship, you are not protected by labor laws.
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 in a timely manner according to your contract. Familiarize yourself with federal and state subcontracting laws and policies to be well prepared for every possible outcome.
Additionally, if your subcontracting firm qualifies as a small business, you should also read up on small business subcontracting policies. You can learn more about them in the Code of Federal Regulations, the Federal Acquisition Regulation and publications of different federal agencies.
4. Regularly Scout Subcontracting Websites
Once you have nailed down all your administrative and legal requirements to open your business, you should now actively pursue subcontracting work on these channels.
- Small Business Administration’s Subcontracting Network (SubNet)
- SBA’s Directory of federal government prime contractors with subcontracting plans
- General Services Administration’s Subcontracting Directory for Small Businesses
- Department of Defense’s SAM.gov federal contracting repository
5. Attend Networking Events
In addition to scouring subcontracting opportunities on different digital platforms, you should attend networking events to market your services directly to potential clients.
Whether virtual or in-person, networking events are great ways to advertise yourself to federal clients. Not only that—networking events also give you opportunities to forge connections with relevant industry companies and connect with subcontractors that you can team up with.
If you feel intimidated in striking up a conversation with another industry executive, or even a CEO, read this networking playbook for government contracting professionals like you!
The Potomac Officers Club’s 2025 summits are your chance to network with other GovCon professionals and put together a subcontracting team. Hear from government leaders about how you can best fill their contracting needs. Don’t miss out!
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.
With a document as important as a contract, you should seek the help of an experienced attorney, 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 payment, 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 a contract that binds a subcontractor to the original contract’s terms between the primary contractor and the federal client. You will have no idea what you agree to here, unless your primary contractor shows you the contents of its initial contract.
Indemnification
This is your contractual obligation to pay for any damages or losses incurred during the project. You should ensure that this clause won’t require you to also pay for the damages made by other parties.
7. Get Insured
Last, but certainly not least—get your business insured for the project. One of the most suitable insurance policies is the Commercial General Liability, or CGL. This is general insurance that protects your business from bodily injury and property damages for which you may be legally responsible. When you are hired for a complex government project, it is best to ensure you protect your business. There are different types and coverages of CGL, so don’t forget to discuss this with your insurance provider
Next Steps
Subcontracting for the federal government is a fantastic way to further grow your business. It lets your company work with federal agencies without the challenges that come with primary contracting. However, that freedom and flexibility also comes with a huge responsibility. So to make it big in the government contracting industry as a subcontractor, you should be dedicated to honing your specialized skillsets, proactive in seeking opportunities and vigilant in protecting your rights.
The Potomac Officers Club’s 2025 Cyber Summit is a great chance to learn more about federal contracting. Get exclusive insights from top agency leaders and network with other government contractors to discover subcontracting opportunities. Sign up today!
