Tips for Transitioning from a Subcontractor to a Prime

by Yolanda Goodloe | June 22, 2020

Many of my clients struggle when making the jump from a subcontractor to a prime government contractor. There are two main hurdles for them – resources and business infrastructure. Business infrastructure requires business owners to work on internal items, such as business, personnel, technology, facility and operational plans. All of these things require time and money from the business owner.

For those that can make the jump, there are many benefits and reasons for moving from a subcontractor to a prime contractor. Some of those include:

• Utilizing your military experience to provide practical solutions in which you have experience
• The ability to capitalize on market patterns and trends
• The ability to grow and expand into a large corporate structure
• The ability to give back and create teaming arrangements and subcontracting opportunities for smaller businesses in the industry

For those clients who want to tackle the prime contractor jump, I have created a roadmap with six areas of discussion that we use when trying to identify strategies to aid them in making a smooth transition.

Topic 1: Past Performance/History

The amount of history required will depend on the size of the government agency the business intends to work with, and the industry in which they provide services. For instance, I’ve had occasions where clients operated as a prime with no previous government contracting experience, but they had commercial experience. If it’s a smaller contract, a company may be able to fulfill that contract while gaining some valuable past performance to demonstrate their capabilities on future, larger contracts. This would also make them more attractive to prime contractors looking for subcontractors, thus increasing opportunities for experience.

It also depends on the industry. For example, someone selling products to the federal government can compete as a prime if they have a solid infrastructure, a strong supply chain, access to capital, and distribution channels. However, if the business is in the service industry such as IT or construction, it may take a few years to get a considerable amount of past performance under their belt as a subcontractor, before taking on a prime contract.

Tip: Take advantage of conference and industry days to learn as much as possible and consider identifying a mentor and building valuable business contacts for your government network.

Topic 2: Capabilities Statement

The Capabilities Statement is used to market your business to government buyers, prime contractors and vendors. This is an area that many government contractors need to pay closer attention. While you may already have a Capabilities Statement, businesses should really have more than one. Just like you tailor your resume to the job you want; business owners should have Capabilities Statements tailored to the contracts they want. I typically advise clients to have two to three Capabilities Statements. See the list below for the breakdown.

 

• One as a prime contractor that targets the agency they are marketing to
• One as a subcontractor that speaks to the prime contractor they are interested in subbing under
• One as a team member that focuses on supply chain, vendors and business-to-business

Topic 3: Cash Flow Projections

To stay competitive, business owners have to constantly monitor their cash positioning. Cash flow analysis includes a financial statement that records how many flows into and out of your business during a specific period of time. It can help you to better understand your financial position, where your money is going and how much actual cash you have in the business at any given time.

Topic 4: Organizational Development

Organizational development includes plans for supply chain, operations, personnel and more. Recently, I helped a client with a management plan that was required to bid on a Defense Logistics Agency (DLA) contract. The plan detailed the client’s plan of action for meeting DLA needs and specified goals. Much like writing a business plan, his management plan had to take into consideration short and long-term business strategies for solving DLA’s problems and meeting the needs of its customers that would be utilizing the contract. It’s extremely important to have items such as these before responding to the bids so that you can be prepared to demonstrate how you can successfully execute the contract.

Topic 5: Strategic Planning/Capture Management

While most know what strategic planning is, many have not heard the term capture management. Capture management is a disciplined approach to qualifying business opportunities and developing a winning strategy to improve your probability of winning a contract. While the primary missions of strategic planning, capture management and proposal management are all very different, they share the same end goal: winning proposals. They are typically practiced as a series of hand-offs.

A capture manager follows market patterns and trends, conducts market research, and researches government spending to identify contracts that should be pursued. They also attend conferences, industry days, tradeshows, and build relationships with contract administrators and buyers.

Topic 6: Business Relationships

As you can see from the topics above, much of government contracting is about creating long-lasting relationships with the right people. It’s not enough to just go to a tradeshow and sit in the crowd. Be sure to:

• Attend breakout sessions
• Utilize social media to connect/Encourage new connections to follow your company
• Identify the key players
• Sit with someone new each day during the general assembly and meet as many people as you can
• Hand out your business cards and make sure to have your Capabilities Statements on hand
• Get business cards from agency officials, speakers, attendees and follow-up in an email with your Capabilities Statement
• Post an article to your blog regarding something you learned/Post images of you with attendees and speakers and be sure to use hashtags and tag those people

In addition to building your business relationships, it’s essential to have someone in your corner who can guide you along the way as you are making the transition to prime contractor. That can be a mentor and/or your local business consultant. There are various city and county entities that provide this kind of support at no-cost.

Government contracting is like learning a foreign language. It’s filled with acronyms and industry jargon. Developing a plan for transitioning from subcontractor to prime contractor is not an overnight endeavor. It will take time, but the better you prepare, the better your chance of success.