Well, the easy answer is of course! How else can you effectively take advantage of MWBE subcontracting goals on government contracts? So many of us are reluctant to subcontract because of either a bad experience we’ve had ourselves or rumors about the pitfalls of subcontracting. As a subcontractor on a number of projects, I’ll admit that I’ve had my share of bad experiences, however as I become more knowledgeable, I’ve implemented a strategy for subcontracting that mitigates risks and allows my firm to benefit from the subcontracting goals established on city, state and federal contracts. Here are my tips:
- Never Deal with People You Don’t Know: early on in my career, after I got certified, I was invited to bid on multiple projects. I bid on all of them, I was overjoyed to be invited to the dance. I did not know back then, that responding to random bid opportunities was a complete was of my time. I rarely heard back from anyone after submitting a quote, and in the instances where I did actually get work, I always got burned. This brings me to my next point.
- Read Solicitation Documents from beginning to end: in the early days, when I received a request for a quote, I provided a price and hoped for the best. I neglected to review contract documents that included the scope of work, prevailing wage requirements and escalation clauses. I assumed that the prime provided me with all necessary information. Furthermore, since I did not read contract documents in explicit detail, I did not clearly understand remedies available to me in the event things did not work out. Now, before submitting a quote for anything, I always review the entire bid documents as well as amendments.
- Develop Relationships With Primes You Can Trust: my experience with subcontracting has dramatically improved since my early days. I now focus on developing relationships with prime contractors that I can trust. Trust is developed overtime by exchanging information, and conducting due diligence. Before I enter into a contract with another company, I want to make certain that they have a strong track record of past performance, good credit history and that we share similar values with respect to how we treat our clients, employees and other MWBEs.
- Formal Agreement Created by an Experienced Attorney: typically a larger company will provide a subcontractor agreement for you to sign. First, you need to read that agreement yourself and make certain that the terms and conditions are acceptable to you. Next, you need to have an attorney review the agreement, even if you think its okay. Often times, I will disagree with my attorney on certain point, however I am walking into the relationship with eyes wide open. I understand the potential risk of doing business in a certain environment and can choose to accept them or not.
- What About Getting Paid – so here is biggest objection that I hear constantly from small MWBE firms, they don’t want to subcontract because they are afraid of not getting paid. Well, the reality of the situation is there always a possibility that as a subcontractor you’ll have trouble getting paid. That said there are a few things you can do to palliate the risk asoscoiated with subcontracting:
- Negotiate payment terms – no one says you have to accept whatever is offered to you just because you are a subcontractor. Negotiate terms that make sense and put those terms in writing.
- Remedies for termination – make sure your contracts have a remedy for terminating service within a certain timeframe if you are not getting paid or if the prime is not performing in accordance with the terms of your agreement. Do not hesitate to terminate the agreement if you are not getting paid.
- Timely Delivery of Invoices and Required Documents – make sure you have a system in place to collect and gather data necessary to process a request for payment.
- Choose Wisely: there are some government agencies that have policies in place for payment to MWBE vendors and those policies are strictly enforced. If you don’t get paid, the prime won’t get paid. And, there are agencies where there is no enforcement in place. I would suggest that in addition to selecting a quality prime contractor to work with – be equally as selective when choosing which government agencies you want to subcontract with.
I have to say that sub-contracting can be challenging, however it’s can also be tremendously rewarding. I have successfully grown my business gaining valuable past performance, experience and resources through teaming and sub-contracting. I have had my share of issues, but I’ve learned and grown from them. I personally know that for me, subcontracting is an important factor when looking to leverage MWBE certification to increase revenues.
