We all know that one of the biggest spenders when it comes to services and goods is the U.S. government. The pandemic, made the government spend even more, as it has been racing to help our economy recover by creating and authorizing a lot of government projects.
Government contracting is very tedious, has numerous rules and regulations that change a lot, and does accounting differently. But, it is quite lucrative and would help any private business grow. A great way to get your feet wet is to first try out sub-contracting.
What is a Subcontractor?
Prime or General Contractors sometimes need help in completing huge or overly complex projects. They may be short in manpower or even lacking in skill. This is when they seek the help of subcontractors.
Projects such as IT, defense, healthcare, and construction, which require specialized and diverse skills, all look to subcontractors for help.
The Prime contractor works with the federal government directly on the project and ensures that everything is done great. They are usually huge companies that have quite a portfolio of government contracts.
The subcontractor https://www.merriam-webster.com/dictionary/subcontractor is then asked to perform some part of the contract. There are even times when a subcontractor looks for another subcontractor.
Government ➜ Prime Contractors ➜ Subcontractors.
There is no interaction between the subcontractor and the government, all that is done by the prime contractor.
Here’s How to Start Your Subcontractor Journey.
If you are an individual, a freelancer, a group of people, or a team of pros, you still need to register and do one of life’s 2 certainties– pay taxes. You can go to the IRS website https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee for some great tips.
- Recognize and Be an Expert in Your Field
General Contractors know what they are looking for. This means you have to be clear with what you offer. Find your niche, and your strength, and be specific about it. Don’t forget to learn and grow your focus.
- Know Your Rights as a Subcontractor
As a subcontractor, you are considered an entity offering your services to others. That makes you technically not an employee. Know your duties and rights. Here are good sites to start doing just that:
✔️ The Code of Federal Regulations
✔️ The U.S. Small Business Administration (if you are a qualified small business)
- Attend Events and Know Where to Look
There are a great number of websites, along with virtual and in-person events that you can attend.
If you have the opportunity to go to in-person events, do so. You can encounter regular subcontractors and big general contractors, and you may even make lasting connections as well.
Try these sites too:
The Department of Defense, Office of Small Business Programs
- Review Your Contract
Your contract holds the responsibilities and duties towards each other, of both General Contractor and subcontractor. Reviewing it is of the utmost importance.
Check for flow-through, indemnification, and compensation policies, especially on delays. It’s always a great idea to have an experienced lawyer look the contract over.
- Get CGL or other relevant insurance.
The Commercial General Liability protects you and your people in your daily work.
Make sure to evaluate the different levels of coverage that you can get from the CGL and plan accordingly.
There, you’ve taken your first step as a subcontractor. Take in all the knowledge, prepare your team, and learn about government contracting as much as possible with the experience. It may take some time, and a few more subcontracts, but you will eventually get inside the world of federal contracting. If you need more confidence and help, especially in government contract accounting, let Peter Witts CPA PC give you a quick run-down of what to expect, where you are, and how to start government contracting.