Many companies want to be the prime contractor on big government contracts, but is that the most advantageous position for your company? Possibly not.

The harsh reality is being a prime contractor can be costly, especially for a small business. Prime contractors can have onerous regulations placed upon them by the government, from salary limitations to extensive reporting requirements which the prime must absorb into their overhead costs.

While the federal contracting agencies try to do a better job of vetting prime contractors now, some small businesses have actually fallen victim to unexpected and unknown costs of doing business as a prime, thereafter being forced to downsize or shut down the company entirely.

Of course, when done correctly, being a prime contractor can be the thing that catapults your company to success. It’s a gamble with the potential for hefty gains or losses.

Minimum Requirements of Being the Prime

Your first order of business before considering submitting a proposal should be to determine if you meet the minimum requirements of the solicitation. These often include a certain number of years your company must have been in business, as well as project references to prove you can do the required work. Worse even is that a certain number of these prior projects must often be government projects.

For startup businesses, this often means your proposal will get thrown out without ever being read or scored. Sorry, but you’ve just wasted tens of thousands of dollars on a process that probably cost you business and time that you could have been profitably focusing on elsewhere.

The exception to this is if the solicitation is a set-aside to help small businesses. Sometimes the requirements of those are less strict and will allow you to use the past performance and experience of your staff, rather than those of your business itself.

Be sure to have a contracting professional, such as Allied PCM, review solicitation requirements thoroughly to determine if your company meets minimum requirements.

Subcontracting to gain Competencies

Are you not positioned to be prime just yet?  Or are you not a gambler?  There’s a conservative approach to gain the competencies and experience necessary to become a successful prime contractor. Subcontracting for a prime on large government projects has been the key to success for many businesses.

In fact, starting as a second- or third-tier subcontractor often reduces or completely removes many of the restrictions and reporting requirements that are so costly, while moving into a first-tier subcontractor position often adds enough requirements into the mix to allow the company to slowly ramp up and prepare for that first successful bid as a prime.

There are also other considerations your company needs to take into account before bidding as a prime on government projects. It’s a costly process that requires a great deal of time and input from your project employees that could be better spent elsewhere if your chances of winning are quite slim.

Subcontract your way up the chain

How, then, can your company gain the experience required to propose on government contracts? Contact the prime contractor on an already-awarded government contract to see if they have need of your services. Find out from them who their subcontractors are, contact them, and move down the chain.  We have taken this responsibility for some of our clients over the years and they have been very successful from this approach.  Even if you don’t need us to help, use this hint.

Eventually, hopefully, someone will take a chance on your company, but that’s not where it ends. Now your company needs to shine and make itself visible enough in the process that project managers up the chain of command will take notice and want to do business with you.

In fact, subcontractors often come into contact with government clients and make a better impression than the prime, earning themselves a great reputation with the client that will be remembered when it’s time to propose as a prime for the first time.

Remember, it’s not how fast you make it to the top, but the reputation and experience you gain along the way. Do it right, and your company will succeed where so many others have failed.