Working as a subcontractor
Subcontracting is a popular collaborating option that is available to most businesses. It is also a good way to enter government supply chains.
Government buyers seek value for money from their procurement activities. They often tender to larger businesses and expect smaller businesses to play a part in delivering these contracts, usually as a subcontractor. It may be that the main contractor is looking for specialist skills or experience that you are able to provide.
Remember, subcontracting can have implications for your business. You will need to carefully weigh up the pros and cons before making a decision to subcontract.
What are the advantages of subcontracting?
- You do not have to invest significant resources into preparing a tender response.
- For many smaller businesses, subcontracting can be the first step in gaining tendering experience. Many opportunities require previous tendering experience and subcontracting helps solve this 'catch 22' (i.e. even though you may lack experience or skills in tendering, you can still gain access to the contract).
- Private sector contractors may be keen to partner with you to to help increase the level of potential social impact within the tender response.
- You can negotiate intellectual property (IP) rights with the lead contractor and buyer.
What are the disadvantages of subcontracting?
- Depending on your position in the supply chain, there could be problems managing your cash flow, particularly if the main contractor is experiencing delays in payment.
- Often the main contractor will introduce clauses into the subcontracting agreement, which may ban you from carrying out any direct business with the end customer.
- Often the main contractor will include clauses that prohibit you from entering into similar subcontract relationships with one of their competitors for a specified period of time.
- You may have to cut your margins to deliver better returns for private companies.
- You may not gain any practical experience in developing a tender.
- As you are not the 'lead partner' or main contractor, there may be no brand recognition for your business.
- You may have different business values and ethics from the main contractor, which could cause friction.
- There may be a breach of contract by the main contractor that will impact on your business.
- If you fail to deliver on your subcontract, the main contractor can sue you.
- You may not be in a position to become involved in negotiations or management discussions about the tender, but your business will be impacted by these decisions.
Where can I find subcontracting opportunities?
There is no single way of finding out about subcontracting opportunities.
Government agencies may give you information about their main contractors or you might identify and contact a supplier who has won a major contract. 'Meet the supplier' events can also provide opportunities for finding out about subcontracting opportunities.
Industry Capability Network Queensland's ICN Gateway helps match relevant suppliers to project proponents who have been awarded major contracts. This is a great source for subcontracting opportunities.
The Black Business Finder is a website designed to help Aboriginal, Torres Strait Islander and multicultural-owned businesses break into major project supply chains. Registering on the website helps you to become visible to a main contractor/project proponent who is seeking Aboriginal, Torres Strait Islander or multicultural business skills and expertise.
- Find out where to search for tender opportunities.
- Learn more about analysing a tender request.
- Find out how to write a competitive bid.
- Supply Nation supports both Aboriginal businesses and Torres Strait Islander businesses that are looking to enter the supply chains of Australian companies and government agencies.