Subcontracts and Subcontracting Plans

A subcontract is a contract between a prime contractor and a subcontractor to furnish supplies or services for the performance of a prime contract, subcontract or contract modification.

Subcontracting is often the springboard small businesses need to get started in the federal procurement arena. The Department of Defense and Civilian Agencies offer information on their subcontracting opportunities and programs and many publish directories to assist all small businesses with their marketing efforts in obtaining suitable subcontracting opportunities and presenting their capabilities to their agencies' prime contractors. The subcontracting program creates many opportunities for such small firms.

Background. All contractors, other than small businesses, receiving federal awards in excess of $500,000 ($1,000,000 for construction) are required by public law 95-507 to submit acceptable subcontracting plans prior to contract award. These subcontracting plans must specify goals and demonstrate contractors' best efforts to subcontract to small, small disadvantaged, (8a), HUBZone, veteran-owned, service disabled veteran-owned small firms, and women-owned small businesses. When a contractor fails to make a good faith effort to comply with a subcontracting plan, these objectives are not achieved, and 15 U.S.C. 637(d)(4)(F) directs that liquidated damages shall be paid by the contractor. The amount of damages attributable to the contractor's failure to comply shall be an amount equal to the actual dollar amount by which the contractor failed to achieve each subcontracting goal.

So it is in the best interest of Large Companies that have subcontracting plans to be interested in having qualified small businesses perform under their prime contracts.

FOR SMALL BUSINESSES.... WORDS OF CAUTION...not all Subcontracts are the same and not every large company issues the correct document to its subcontractors. All too frequently we have seen proposed subcontracts totally out-of-keeping with the product or service that is being procured by the prime, not to mention containing the incorrect flow-down clauses. Give us a call before you sign one.

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