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Subcontracting:
Reasons Prime Contractors choose Subcontractors
Prime contractors choose subcontractors for a variety of reasons.
- It is required by the government.
If a prime contractor selected by the government fails to negotiate an acceptable subcontracting plan, it will not be awarded the contract. This subcontracting plan must detail how it will subcontract with small business, small disadvantaged business, women-owned small business Historically Underutilized Business Zone (HUBZone) small business, and service-disabled Veteran owned small businesses (SDVOB).
- It allows prime contractors to bid on large projects with areas outside their expertise.
Many prime contracts are so large that the prime contractor is unable to accomplish all work in-house. A project may be attractive to a prime contractor, even though they realize they are only able to perform a percentage of the project. Prime contractors utilize subcontractors to fill in the additional areas of work.
- It provides prime contractors with specialized skill-sets.
A prime contractor may benefit from the specialized knowledge of subcontractors, leading to an improvement in design or manufacturing process. Lockheed Martin subcontracts many of the parts for a jet engine, and while possessing an extraordinary design staff, may benefit from design or manufacturing recommendations made by subcontractors on specific parts.
- Bundling Increases Sub-Opportunities.
Federal agencies have recently begun combining small contracts for different activities into larger contracts, with the implication that combining these small projects is more efficient and cost effective than bidding multiple smaller projects. Bundled contracts are often too diverse for prime contractors to handle alone, leading to an increase in subcontracting opportunities.
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