Subcontractor Agreement: A Vital Part of Government Subcontracting

When subcontractors are pursuing a subcontract, they may be required to prepare a proposal explaining what their company offers. Prime contractors may have specific rules about how subcontractors should present and write their proposals. These requirements should be explained to subcontractors in a document such as an RFQ or an RFP. If any confusion arises, contact the prime contractor. As the first step, the subcontractor agreement is very important to the subcontracting process.

Subcontractors’ Qualifications

The prime contractor may want to confirm basic details about their company and its eligible subcontractors. This information might include your company’s name, address, ownership information, parent company, length of time in business, DUNS number, tax identification number and the name of a principal contact.

The prime contractor may also want details about whether the subcontractor’s company is a minority- or woman-owned business or has been certified as a disadvantaged business. It may also ask for information about the subcontractor’s licenses and industry certification.

Subcontractors: Statement of Work

The subcontractors’ statement of work describes what the prime contractor can expect from subcontractors. What job will subcontractors perform? Where will it be done? Who will do it? Subcontractors’ statements may be as short as a letter or as long as a detailed report. In any instance, it should accurately and adequately describe the work that the prime contractor needs performed.

Products and services: You must describe the products or services you will provide, along with specific deadlines for the beginning and completion of work. Subcontractors should include specifics about design review, testing, training or any other elements necessary for the job.

Subcontractor’s track record: You should offer details about your company’s experiences and successes with similar jobs. Try giving examples of how your company has met similar demands. Talk about your company’s history, management strategy, and other characteristics that set it apart from other subcontractors.

Accountability: Who is the key person from the subcontractor’s company that is in charge of the project? Will inspections or facility tours be available? Can the prime contractor expect to have the job done on time? How will the project be audited or checked?

Subcontractors: The Budget

In the budget, subcontractors explain how much the contract will cost the prime and why this is a fair and competitive price.

Direct and indirect costs: For the subcontractor’s standpoint, explain all the job’s components and direct costs, such as salaries, supplies, materials, insurance, travel and legal fees. Indirect costs are the costs of your overhead and infrastructure, such as rent, human resources, equipment, management, etc.

Budget justification: Subcontractors may need to explain why certain elements of the job cost what they do. For example, the prime contractor may ask you to break the travel budget down into the number of business trips necessary. Or you may need to explain special purchases required to finish the contract, such equipment, retooling, training or consulting.

A few additional tips: Find out everything the prime contractor wants and provide it, offering more information upon request. Subcontractors should make sure everything is accurate and stress why your company is the best subcontractor for the job. Be sure to have knowledgeable people (and possibly consultants or lawyers) read over the document to make sure everything is right.

More Information from the Resource Center
Find out how a Statement of Work, Delivery Schedule and Invoicing Schedule come into play once you’ve won a government subcontract.