The decision to become a subcontractor is perhaps an easy one to
make--but as any seasoned entrepreneur will tell you, securing that
coveted contract is an entirely different story. That's because
the subcontracting process itself--from the initial invitation or
query to contract award--often involves a tangle of complexities,
any one of which can deter even the most ambitious amateur. From
increasing global competition to Fortune 100 vendor consolidation,
challenges run rampant. But the good news is, small businesses can
learn to compete--and win.
According to the most recent figures from the National
Association of Purchasing Management (NAPM), an organization for
purchasing and supply management professionals, 54 percent of its
members spent between $1 million and $10 million on purchasing in
1996, and 10.4 percent of its members surpassed the $50 million
mark. That means subcontracting is and will most likely continue to
be big business for entrepreneurs, despite the challenges involved.
The advantages of a successful subcontracting relationship are more
than worth the effort: You'll gain invaluable experience,
expand your business, and open the doors to more big business and
government contract relationships.
So what's the best way to get started? That depends not only
on your product or service, but also on the type of company
offering the contract. Many specifically seek small-business
participation to meet threshold requirements, often because
they're working on projects for the federal government. When
bidding on a contract, says Gary Engebretson, president of the
Contract Services Association of America, your first three steps
should be:
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*providing the procurement representatives with detailed
information about your qualifications
*calling back and keeping the pressure on, but in a gentle way,
and requesting a personal visit
*and being patient; the contractor may be seeking future, not
current, prospects. Sell yourself to that corporation before a job
even becomes available.
Another thing to bear in mind--especially if you've been
down the subcontracting path before and have been unsuccessful--is
that important changes have occurred in the government sector over
the past few years. Consider recently passed legislation on federal
contract bundling that Engebretson says is favorable to small
business. (For more on the legislation, see "Pulse,"
March.) While smaller contracts are often bundled into one large
contract--making it difficult for all but Fortune 1000 companies to
get their teeth around the bid--the law now requires that 23
percent of all federal contracts be handled by small,
entrepreneurial firms. Businesses that are awarded contracts that
are part of a bundle carry responsibility for only a portion of the
project, rather than the entire thing.
Businesses should also keep in mind the recent trend of
businesses relying on subcontractors' past performance when
awarding contracts. Unfortunately, that has a negative impact on
small businesses that have yet to get their subcontracting feet
wet. On the flip side, if subcontractors do quality work, they can
acquire a good reputation, which may lead to more and larger
contracts. "One of the best things a small company can do is
to do quality work," says Engebretson.
And of course, the Internet will play a large role in the future
of subcontracting. As purchasing managers and government agencies
move toward the use of e-commerce and data interchange, potential
subcontractors will eventually be able to submit proposals and be
evaluated electronically. So if you don't have a Web site yet,
it's time to get one.
One final note: Some experts speculate that California's
recent abolition of affirmative action in state contracts will have
negative implications nationwide, making an already difficult
process even worse. But for now, it serves as another reminder for
small businesses to keep networking, stay aware of available bids
and always strive for quality.
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