Why should Small Businesses work with Prime Contractors?

Posted by TurboGSA on May 2, 2023 4:00:00 PM

Some of our most effective small business clients succeeded in federal contracting by adopting a multifaceted approach that combines working with prime contractors and having their own contracts, such as GSA multiple award schedules (MAS). This strategy allows small businesses to diversify their revenue streams and increase their chances of winning federal contracts.

By collaborating with prime contractors, small businesses can tap into their larger networks and gain access to more significant and complex projects. Additionally, partnering with prime contractors provides small businesses with the opportunity to build relationships with key decision-makers in the federal contracting arena, which can lead to future contract opportunities.business partners, partnership concept with two businessman handshake

On the other hand, having their own GSA MAS contract and direct bidding on simplified acquisitions allows small businesses to pursue contracts independently. This type of contract can provide small businesses with a competitive advantage and allow them to secure long-term contracts with federal agencies.

By using a combination of these approaches, small businesses can position themselves to succeed in federal contracting. By diversifying their revenue streams, small businesses can better weather economic downturns and build a sustainable business in the federal contracting space.

Benefits of Working with Prime Contractors

Working with prime contractors can be beneficial for small businesses in the federal contracting space for a variety of reasons:

Access to larger contracts: As a subcontractor to a prime contractor, a small business can gain access to larger contracts that they might not have been able to compete for on their own.

Established relationships: Prime contractors typically have established relationships with government agencies and a strong reputation in the industry. By working with a prime contractor, a small business can benefit from these relationships and reputation.

Reduced risk: As a subcontractor, a small business shares some of the risks and responsibilities with the prime contractor. This can reduce the financial risk and liability of the small business.

Technical expertise: Prime contractors often have more technical expertise and experience than small businesses. By working with a prime contractor, a small business can gain access to this expertise, which can be valuable in developing their own capabilities.

Networking opportunities: Working with a prime contractor can provide small businesses with networking opportunities that can lead to new business relationships and future contracts.

Overall, working with a prime contractor can provide small businesses with access to larger contracts, established relationships, reduced risk, technical expertise, and networking opportunities that can help them grow and succeed in the federal contracting space.

What are prime contractors looking for?

Prime contractors are typically looking for small businesses that can provide high-quality products or services and can deliver them on time and within budget. The top five things that prime contractors look for in a small business:

Experience and Expertise: Prime contractors want to work with small businesses that have experience in their industry and possess expertise in their specific area of work.

Ability to Meet Requirements: Prime contractors need to be confident that the small business they are partnering with can meet all of the requirements set forth in the contract.

Strong Financial Stability: Prime contractors need to feel confident that the small business they are partnering with is financially stable and able to manage their own business finances.

Good Reputation: Prime contractors need to work with small businesses that have a strong reputation for delivering quality work and meeting their commitments.

Competitive Pricing: Small businesses that offer competitive pricing can be attractive to prime contractors, as they can help the prime contractor win more business and increase their profit margins.

Socio-Economic Status:  Prime contractors are looking for small businesses of all types, such as women-owned (WOSB), veteran-owned (VOSB), services disabled, HUBZone, 8(a), among others.

Prepare before you approach a Prime contractor

Before approaching a prime contractor, small businesses should first research the prime contractor's areas of focus and past contracts to ensure that their products or services align with the prime contractor's needs. Reaching out to any and all primes is a waste of time. Better to focus on primes that are a close fit for your firm’s complementary capabilities.

Before contacting the prime contractor, make sure you have a strong online presence, such as a website and professional social media accounts (e.g., LinkedIn), to showcase your expertise and experience.

Businesses should think through what they can offer prime contractors that others can’t. Develop your unique value proposition (UVP) so that it sets you apart and adds value to your team. How? The clue is in the acronym UVP.

  • Unique - Focus on showing the prime what truly makes you unique. Asserting that you have experience is not really unique. Saying you are a leader in your field is not necessarily unique because every competitor says that (unless of course, you can prove you are).
  • Valuable – how valuable is your offering to them? Is it that you have a certain socio-economic status, or do you have proprietary methods or tools that make you truly stand out?
  • Provable – Avoid asserting characteristics that cannot be demonstrated or provable. This will increase your credibility.

Finally, small businesses should have a well-crafted capabilities statement and be prepared to provide additional detailed information about its UVP, capabilities, and track record, as well as any certifications or qualifications that may be relevant to the prime contractor's needs.

Approaching Prime Contractors

Here are some tips for small businesses to improve their chances of partnering with large primes.

Research Your Target Partner - Before reaching out to a large prime contractor, small businesses should research their target partner thoroughly. This includes understanding the company's areas of focus, past contracts, and priorities. Most large primes have small business liaison representatives to connect you with opportunities in their firms.

Make First Contact through Email - Email is generally the preferred method for making first contact with large primes. Small businesses should provide specific information about their capabilities and experience, including their NAICS codes, any contract vehicles they are on, and socio-economic tags. The email should be addressed to the correct person and should not be generic.

Utilize Networking Events and LinkedIn - Networking events are a great way for small businesses to meet representatives from small and large companies. Small businesses should also utilize LinkedIn to expand their reach and conduct research to discover who's who within any organization.

Differentiate Yourself through Socio-Economic Status - Socio-economic status, such as being HUBZone, Service Disabled Veterans or Women-Owned or Veteran Owned business can be a differentiator for small businesses when trying to land a contract with a large prime contractor. While socioeconomic status is not the sole justification for landing a contract, it might give small businesses an advantage.

Develop Relationships and Be Persistent - It typically takes six or more months to develop a relationship with a prime contractor as a subcontractor. Persistence is key, and small businesses should approach them with specific information so they understand exactly what the small business is looking for. This enables them to follow a specific path within their extensive network.

Potential Pitfalls

Working with large prime contractors can be a great way for small businesses to gain access to federal contracting opportunities. By understanding and researching potential partners, making first contact through email, utilizing networking events and LinkedIn, differentiating themselves, and developing relationships, small businesses can improve their chances of partnering with large primes.

But be careful. While working with prime contractors can be beneficial for small businesses, there are also risks and drawbacks to consider:

Dependence on the prime contractor: By exclusively working with prime contractors, a small business may become too dependent on them for their revenue and business opportunities. If the prime contractor loses a contract or changes their priorities, it can crush the small business.

Limited control: As a subcontractor, a small business may have limited control over the work they are doing and the direction of the project. The prime contractor is the one in charge of the project and makes the final decisions. Also, while regulations exist to ensure subcontractors are paid in a timely fashion, this is not always the case. And if there is a potential for intellectual property disputes, make sure you cover the protection of your IP before getting involved in a contract.

Limited visibility: As a subcontractor, a small business may have limited visibility into the overall project and how it fits into the larger picture. This can make it difficult for them to develop their own strategies and plans.

Reduced profits: As a subcontractor, a small business may have lower profit margins than if they were the prime contractor. The prime contractor typically takes a percentage of the revenue, which can impact the small business's profitability.

Limited branding and recognition: By exclusively working as a subcontractor, a small business may miss out on the opportunity to build its own brand and reputation in the industry. They may be seen as just another small part of a larger project rather than an independent entity.

 It's important for small businesses to weigh the benefits and risks of working exclusively with prime contractors and to consider diversifying their portfolio to mitigate risks and maximize opportunities for growth.

One of the best ways to mitigate these risks is to seek smaller prime contracts for themselves. Smaller jobs (<$250,000) issued under the Simplified Acquisition Procedure in SAM.gov should be considered. GSA’s Multiple Award Schedule program is also great for small businesses to expand their own portfolio of prime contracts and experience.

Topics: 3. Federal Marketing

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