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What are steps a small business owner should take to become a subcontractor to a prime government contractor?

Are you a small business looking to become a subcontractor to a prime government contractor? Or have you already signed on to be a subcontractor and are looking to streamline your operational processes? Here are some tips on subcontract management in government contracting:

Step 1. Get your official paperwork in order

  • Company Formation and applicable Tax Registrations. Speak to an attorney and CPA familiar with your industry about making sure your entity is structured in a way to ensure that your personal assets are protected from liability.

  • DUNS registration. Simply put, this is your company’s credit score.

  • System of Award Management ( registration (including NAICS codes). This is completely free, so do not pay anyone to be registered in SAM. It is essential for being paid by the government and by government contractors

Step 2: Research agencies and directories for subcontracting opportunities with DoD prime contractors

Search to see if the agency you are interested in doing contracted work with has a Subcontracting Opportunity Directory. For example, The Department of Defense’s (DoD) Subcontracting Opportunity Directory is intended for small business concerns seeking opportunities with DoD prime contractors.

Step 3: Seek out subcontracting opportunities through outreach events

Contractors often hold outreach events, publish notice of sources sought or solicitation for subcontracting work. In preparation, create a Capability Statement to share with government contracting officers and prime government contractors. Here are a few government contracting events that take place across the country

Step 4: Prepare for the administrative and accounting requirements of being a subcontractor to a prime government contractor

  • Become familiar with the Government Regulations and requirements for subcontractors. For example, FAR Subpart 19.7 The Small Business Subcontracting Program and DFARS Subpart 219.7 The Small Business Subcontracting Program, as well as FAR Part 44 Subcontracting Policies and Procedures.

  • Seek out training opportunities available through either the DoD or SBA, such as CLC 001, Defense Subcontract Management or CLC 054, Electronic Subcontracting Reporting System

  • Ensure that your Company has internal financial controls that are in accordance with Generally Acceptable Accounting Practices (GAAP).

  • Research financing options available to your entity should a contract be awarded.

Your Business Ownership Status matters as a Government Subcontractor

What percentage of the company do you own? This is relevant because with government subcontracting, a 51% ownership stake is required on the part of one or more of the business owners to be certified as eligible for one or more of the set-asides. This can be advantageous as a subcontractor because some government agencies define goals in their contracts for specific types of set-asides for certain kinds of certifications. These certifications include, but are not limited to Veteran-Owned Small Business, Service Disabled Veteran-Owned Small Business, and Women-Owned Small Business. You should note that there are different requirements for certifications for each type.

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