Subcontracting can be tricky, for Primes and subs. It’s a big commitment; one that may last for years. As a Prime, you bear responsibility for the subcontractor on your contract. And as a subcontractor, you run the risk of not getting the work the Prime has promised you. But, subcontracting is a billion-dollar game, and you don’t want to miss out on opportunities. The solution for both Primes and subs – do your homework on your potential partners.
USASpending.gov is a fantastic resource for market research. For small businesses, you can find out which Primes do a lot of subcontracting. For example, since October 1, 2018, several large businesses have awarded multiple subcontracts for millions of dollars, just on CMS contracts:
- Accenture – 44 subcontracts totaling $14.6M
- National Government Services – 19 subcontracts totaling $4.5M
- MITRE – 18 subcontracts totaling $8.3M
That’s almost $30 million dollars in subcontracts in FY2018 so far. Imagine if I added up the number for an entire fiscal year ($3.7 BILLION in subcontracts reported for FY2017 on Prime contracts in CMS). In addition to the dollar amounts for subcontracts, the NAICS code and a description of services is available, so you can see if Prime contractors are buying what you are selling, and if so, who they are! Also, you can check up on the Primes you are considering partnering with. If they don’t have any subcontracts in USASpending.gov, they either don’t subcontract or are not compliant with FAR requirements. Either way, it’s definitely something to consider, and really, it’s just business due diligence. Would you go on a blind date without googling someone? NO! So, check your Prime contractor’s dating record.
Prime contractors can use USASpending.gov too. If you have a potential subcontractor that has subcontracted with multiple organizations, it’s a reasonable assumption that they play well with others. Several small businesses work with multiple Primes, resulting in millions of dollars of subcontracts. For example, on CMS Prime contracts in FY2017:
- Actuarial Research Corporation has over $5M across three Primes
- Visual Connections has approximately $2M for two Primes
- HCD International has $4.6M across four Primes
Subcontracting isn’t only for small businesses; large businesses owe large amounts of their revenue to subcontracting. I pulled the FY2017 active subcontracts in CMS (btw, you can filter by any department or agency, I just have a penchant for CMS) from USASpending.gov and the top three subcontractors in terms of subcontracting dollars were:
- Texas Hospital Association Foundation – $3,140,478,861.00
- Terremark Federal Group, LLC – $134,938,718.27
- Grant Thornton, LLC – $122,776,793.09
Granted, this information I have given you is only as good as the data it came from. And you may be wondering, where does this data come from? Per Federal Acquisitions Regulations (FAR) 52.204-10 Reporting Executive Compensation and First-Tier Subcontract Awards (I know I said the F-word, but stay with me here), by the end of the month of a subcontract award of $30,000 or more, the Prime must report the following items at https://www.fsrs.gov/:
- Unique entity identifier for the subcontractor receiving the award
- Name of the subcontractor
- Date of the subcontract award
- Description of the products or services being provided under the subcontract
- Subcontract number
- Subcontractor’s physical address
- Subcontractor’s primary performance location
- The Prime contract number
- Awarding agency name and code
- Funding agency name and code
- Government contracting office code
- Treasury account symbol (TAS) as reported in FPDS
- Applicable NAICS code
Don’t worry if you have no idea what some of these codes are. The Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS) is prepopulated with some of this data from the Federal Procurement Data System Next Generation (FPDS) and the System for Award Management (SAM).
As always, there are exceptions. If the Prime contractor in the previous tax year had a gross income of less than $300,000 from all sources, they do not have to report subcontracts. Additionally, if the subcontractor in the previous year had a gross income of less than $300,000 from all sources, the Prime contractor does not have to report subcontracts for that contractor.
This process was phased in from 2009 through 2015. However, as a self-proclaimed contracting data nerd, I know several of you have subcontracts, and I can’t seem to find them anywhere on USASpending,gov. So, the data on USASpending.gov is not complete, however, the data it does contain can be very valuable. Let’s say you want to pursue a contract at CMS that has an incumbent. Using USASpending.gov, if the incumbent has reported subcontractors, you can see who they are, how much they were awarded, what NAICS code the work falls under, and a description of the services provided by the subcontractor. Some Primes put a ton of information in the description, and some put only the bare minimum, but they all have to put in something. After you figure out who the subcontractors are, the next step is figuring out whether 1) they will be competition, 2) could be open to joining your team, or 3) are happy where they are. How to make those determinations is a book unto itself, so we won’t go there today.
This article is actually about more than just subcontracting and the data available at USASpending.gov, it’s about working together. In my opinion, at least in the CMS contracting community, I have seen a shift in the last few years which is very encouraging. Contractors are sharing information much more freely, and truly building relationships with each other. The mentality is shifting from “me versus them” to “us”. I guess this could only be true with me and my crew (shout out, you know who you are!), however I think it’s larger than that. Hopefully the days of side eying each other or being afraid of slipping up and giving the competition valuable information will soon be gone. I remember a time in the not too distant past when contractors were afraid to tell each other who their Primes or CORs were. Seems like such a needless investment in fear in hindsight. When we cooperate and develop solutions together, our value is multiplied for our customers, and ourselves and each other as taxpayers. These contracts are our money, and don’t we all want the best value for our dollar?