Small businesses can take advantage of federal subcontracting as prime contractors awarded over $750,000 must subcontract with small businesses. However, government contracting can be confusing for small business owners.
The first step is getting certified as a veteran-owned, service-disabled veteran-owned, HUBZone, small disadvantaged, and women-owned small business. Still, you can’t sit back and expect contracts to come.
After finishing this article, you will become more familiar with the federal procurement and contracting journey.
What is a federal subcontractor?
Federal subcontracting is when a business provides services to a prime contractor or another subcontractor. Subcontractors don’t directly deal with the government but work under another contractor to complete the job. This includes providing goods or services to a prime contractor with a direct contract with the federal government.
Subcontracting is commonly practiced across various industries, for example:
- Construction industry: General contractors like Kiewit hire subcontractors to handle site preparation, concrete work, roofing, plumbing, traffic engineering, and HVAC.
- IT industry: IT contractors like SAIC hire subcontractors to implement certain tasks and obligations outside its scope. This includes project management, administrative tasks, and technical writing.
- Healthcare industry: Subcontractors in healthcare include medical billing companies, medical equipment suppliers, telehealth service providers, and medical waste disposal services.
How to become a federal subcontractor?
Becoming a federal subcontractor includes navigating processes, registering, and preparing the necessary paperwork. Here are some steps to becoming a federal subcontractor.
Become a certified small business
Small businesses need to get certified according to the Small Business Administration (SBA) size standards. The SBA offers several certifications for small businesses seeking to partner with the federal government. These certifications offer eligible entrepreneurs special access to federal contracts and other resources.
Below are certifications small businesses can apply for at the SBA’s website, which typically takes weeks or months to complete:
- 8(a) Business Development Program: This program is for small businesses owned and controlled by at least 51% of disadvantaged individuals. It offers access to sole-source and competitive set-aside contracts, support for business development, and opportunities to start a joint venture.
- Woman-Owned Small Business (WOSB): This certification is for small businesses at least 51% owned and controlled by U.S. women. It expands contracting opportunities for WOSBS because the government awards them at least 5% of federal contract spending yearly.
- Veteran-Owned Small Business (VOSB): This certification is for businesses at least 51% owned and managed by veterans. It provides access to certain government contracts set aside specifically for veteran-owned companies.
- Service-Disabled Veteran-Owned Small Business (SDVOSB): Similar to the VOSB, this certification is for small businesses owned by service-disabled veterans. These businesses can be managed by the spouse due to the veteran’s severe disability.
- HUBZone Program: This program benefits small businesses in underutilized business zones by giving them preferential access to federal procurement opportunities.
- Small Disadvantaged Business (SDB): This certification is for small businesses that are 51% owned and controlled by disadvantaged individuals. These include Black Americans, Hispanic Americans, and Asian Pacific Americans.
Understand the FAR
Federal subcontractors must know several key aspects of the Federal Acquisition Regulation (FAR). This ensures compliance, understanding of the bidding process, and familiarity with the types of contracts used in federal procurement.
The FAR has categorized contract types into two broad categories: fixed-price contracts and cost-reimbursement contracts. It prohibits using cost-plus-a-percentage-of-cost contracts and requires prime contracts to prohibit such subcontracts.
The selection of a contract type is a matter for negotiation and should reflect the risks involved. Factors such as the extent and nature of proposed subcontracting and acquisition history should be considered.
Some of the most used subcontracting program regulations stated by the SBA include the following:
- 13 CFR 121.404: Determination of a business concern’s size status
- 13 CFR 121.410: Size standards for the SBA’s Section 8(d) Subcontracting Program
- 13 CFR 121.411: Size procedures for the SBA’s Section 8(d) Subcontracting Program
- 13 CFR 125.3: Types of subcontracting assistance for small businesses
- FAR 19.7: The Small Business Subcontracting Program
- FAR 52.219-9: Small Business Subcontracting Plan
Identify potential prime contractors
Now that you’re all set, use resources from federal agencies’ websites to identify potential prime contractors and their subcontracting needs.
- The Small Business Administration
- The Department of Homeland Security
- The Department of Transportation
- The General Services Administration
Once identified, reach out to them directly to market your business.
How to maximize your success as a federal subcontractor
Subcontracting is a great avenue for businesses to collaborate and pursue larger government contracts. Here’s how to maximize your success as a federal subcontractor.
Understand the federal market
Understand the competition, processes, and strategies involved in government contracting. Keep an eye on trends such as the increasing need for cutting-edge technology and sustainability initiatives. Specifically, look into the shift toward cloud-based solutions, cybersecurity, artificial intelligence, and space innovation.
Investigate the competition within government contracting by using resources like USAspending.gov and the Federal Procurement Data System. These contain valuable information about past contracts, including dates, NAICS codes, and contacts.
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Federal agencies are actively seeking solutions to update outdated IT systems. These include prioritizing modernization, specifically security, based on Executive Orders 14028 and 14058.
The modernization efforts include cloud integration, software-defined networking, mobile and remote workers support, and robotic process automation. Subcontractors specializing in IT infrastructure modernization, including cloud services, agile acquisitions, and open-source software, can benefit from these initiatives.
Moreover, government contracting tools, such as Cobblestone Software and UNANET, can help identify opportunities, manage contracts, and ensure federal compliance. These tools enable informed decision-making in contracting with features for market intelligence, budgeting and spending data, and agency profiles.
Collaboration builds relationships with government contracting officials (COs) and other contractors. Communicating clearly and honestly can address any issues as they arise. Always keep your communication simple and succinct, especially when emailing a contracting officer.
Additionally, the DoD, GSA, and NASA have enforced regulations to promote communication between the government and industries. This provides additional opportunities for effective communication, which can be found under FAR 1.102-2.
It states that the government should engage with the industry early in the acquisition process to understand available capabilities. Government acquisition personnel can also openly discuss with the industry because it doesn’t favor specific companies unfairly.
Finally, good communication helps subcontractors avoid problems like delays, misunderstandings, and inefficiencies, making projects run smoother and on time.