Why Subcontracting Is a Smart Strategy
Subcontracting allows small businesses to participate in large federal contracts without having to win the prime contract themselves. Large businesses that win federal contracts worth over $750,000 are required by law to create subcontracting plans that include goals for small business participation. This creates a structural demand for small business subcontractors.
The benefits extend beyond revenue. Subcontracting builds federal past performance, teaches you how government contracts are managed, introduces you to agency personnel, and positions you for future prime contract opportunities. Many successful prime contractors started as subcontractors and gradually built the track record needed to win work on their own.
How to Find Prime Contractors
FPDS (Federal Procurement Data System) at usaspending.gov is the best source for identifying which companies hold prime contracts with the agencies you target. Search by agency, NAICS code, and contract value to find the major primes in your space.
SAM.gov’s Sub-Award Reporting system and agency small business offices are additional sources. Many large contractors also list subcontracting opportunities on their own websites. Industry associations and SBA matchmaking events provide networking opportunities to connect directly with prime contractor business development teams.
When approaching a prime, lead with your value proposition: what specific capability do you bring that they need for current or upcoming work? Have your capability statement ready, customized to their requirements. A generic pitch rarely works; a targeted approach demonstrating knowledge of their specific contracts is far more effective.
Negotiating Subcontract Agreements
Subcontract agreements should clearly define: scope of work, period of performance, pricing and payment terms, intellectual property rights, flow-down clauses from the prime contract, insurance requirements, and dispute resolution procedures.
Pay special attention to payment terms. Prime contractors sometimes delay paying subcontractors until they’ve been paid by the government. The FAR requires prompt payment to subcontractors (within 90 days for small businesses), but cash flow delays are still common. Negotiate the best payment terms possible.
Flow-down clauses from the prime contract may impose compliance requirements on your company that you wouldn’t face in a commercial engagement. Review these carefully, especially clauses related to cybersecurity (CMMC), labor standards, and reporting requirements.
Transitioning from Sub to Prime
Use your subcontracting experience strategically to build toward prime contracting. Document your past performance carefully — the specific work you performed, the outcomes achieved, and the client relationships you developed. This documentation becomes your competitive advantage when pursuing prime contracts.
Consider the SBA Mentor-Protégé program, which formalizes a relationship between a large prime (mentor) and a small business (protégé). Under this program, the two firms can form joint ventures that combine the mentor’s resources with the protégé’s small business status, creating a powerful competitive entity.
When you’re ready to pursue prime contracts, start with smaller set-aside opportunities where your subcontracting past performance is relevant. Winning a few small prime contracts builds the track record you need to compete for larger work.
Subcontracting as a Growth Engine
Subcontracting isn’t just a fallback for companies that can’t win prime contracts — it’s a strategic tool for building a sustainable federal practice. The past performance, agency relationships, and operational knowledge you gain as a subcontractor directly accelerate your path to prime contracting.
Approach subcontracting with the same seriousness you’d bring to prime contract performance. Deliver excellent work, build strong relationships, and document everything. The subcontracting experience you build today becomes the competitive advantage you leverage tomorrow.