Uncle Sam is the world’s largest single purchaser of goods and services, spending just over $535 billion on contracts last year. Of that, 23% — approximately $123 billion — is designated for small businesses. Landing contracts, however, takes planning and ingenuity. For some business owners, the road to success comes in the form of teaming or subcontracting.
A new survey of 740 active small contractors looks at how small firms are pursuing government contracts by teaming with other small firms and subcontracting with larger contractors. Findings show that nearly half (48%) have contributed products and services as a subcontractor, deriving an average of 25% of their procurement revenue from subcontracts. The findings are from the third of four summaries to be published as part of the second annual government contracting survey from American Express OPEN.
Notable findings from the study include:
- While subcontracting is big, teaming is lagging: Teaming — banding together with fellow small business owners to pursue larger prime contracts — is pursued less frequently than subcontracting opportunities. 27% of active small contractors have had some procurement revenue from teaming, averaging 9% of their procurement revenue.
- Getting left out is an increasing concern: Nearly one-third (29%) of active small business contractors have experienced the oft-discussed phenomenon of being shut out by large prime contractors. While they participated in a winning bid as a subcontractor, they subsequently did not participate in the fulfillment of that contract.
- Minorities lead the way for teaming: Women and minorities are equally active in subcontracting as the average small firm contractor, but minorities are more likely than average to be engaging in teaming.
- When subcontracting, good performance bears fruit down the road: Nearly one-quarter (22%) of active small firm contractors say that they have accessed additional subcontracting opportunities after being recommended to a large prime contractor by a prime that they had performed successfully for in the past.