Leveraging Subcontracting to Grow your Federal Business

Steve Bain

 

by Steve Bain

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In a previous article, we described the value of including a prime on your SBIR project. This will not only improve your SBIR hit rate and streamline your commercialization process, but will also help build relationships with primes that lead to new subcontracting opportunities. Including a prime as a subcontractor on your SBIR project is also a great way to establish a relationship which could lead to your inclusion on their larger projects.

Is subcontracting a key element of your Federal Strategy? Many small businesses and entry-level companies approaching the Federal / Government / Defense Contracting arena want to gain a foothold, or grow their business, by becoming a subcontractor to the prime contractors.

Is becoming a Federal subcontractor a good strategy? Yes. But here's some data you must consider as your company strategizes and operates in order to remain one. Take a look at this page from Federal Computer Week.

What to make of this data? The first graph shows typical bell curve grading – and only 10% of subcontractors are evaluated as "Excellent." So what?

  • If you're a subcontractor, there's a 90% chance your company isn't providing "excellent" support to your prime.
  • Those same 90% of subcontractors are potentially at risk for being replaced in follow-on competitions. Follow-on work is a critical element of long-term success.
  • Subcontractor past performance evaluations will impact your ability to gain traction with other prime contractors.

 

Over half of primes work with 5 or more subcontractors – that means they have options. That means they most likely view subcontractors as replaceable parts to their own strategy – based on performance and value. Nearly half of primes expect to use more subs in the future – that means their eyes are always to windward to evaluate potential new teaming partners.

Scores are slipping – subs are either giving less or primes are expecting more. Even the "best subcontractors" are trending lower in customer knowledge, technical expertise, teamwork and process. That's huge! If the subcontractor is perceived as bringing less value in those critical areas, then the prime will look elsewhere. Subcontractors must shore up the holes and re-evaluate how they're working in this contracting environment!

Is "LPTA" a factor in the lowered scores? Is competing in a "Red Ocean," as opposed to working "Blue Ocean Strategy" a factor? Probably both impact the scores.

The last section of data shown has advice from the primes on improving:

• "Accept changes"
• "Be more courteous"
• "Participate in the proposal process"
• "Don't oversell"
• "Understand completely that [you] are the subcontractor and not the prime."

As long as the government has subcontracting goals, primes will seek subcontractors. And the excellent primes want the "excellent" subcontractors – to improve the probability of winning their own follow-on competitions. The last line of advice may be saying some subcontractors have a goal to eventually supplant their prime contractor with the customer – and the prime knows it – so they want true team players over the long term.

New competitors enter the arena every day and many will see and act on this insightful information from the primes, so they can replace current subcontractors and gain a piece of the federal funding stream.

If subcontracting is critical to your government strategy, act upon the advice given by the primes – determine how you become one of the "excellent" subcontractors!