How to successfully subcontract: A guide for SMEs

The National Procurement Policy Statement asks public sector buyers to remove barriers that stop small and medium-sized enterprises (SMEs) from accessing contracts. This applies to both direct contractors or to indirect opportunities within the supply chain. 

Strategic suppliers and prime contractors are encouraged to increase subcontracting opportunities with SMEs where appropriate.

What is subcontracting?

Subcontracting is the practice of bringing in an outside company or individual to perform specific parts of a contract or project. In most cases, a company subcontracts another business to perform a task that cannot be handled internally, usually due to capacity or capability constraints. 

When a large prime contractor wins a government contract, they may subcontract some work to other suppliers, including SMEs. This subcontracted work counts towards the government’s indirect spend with SMEs.

Why become a subcontractor on a public sector contract?

Each year, the public sector advertises billions of pounds worth of tendering opportunities. However, some SMEs may feel unable to respond to these, because they:  

• lack experience navigating the procurement process
• are unable to provide the full requirements
• have limited time or resources to prepare

The cost of bidding for large contracts can be significant (e.g bid writing, legal advice). Subcontracting offers a pathway for SMEs to gain experience, build a track record with prime contractors without having to navigate the complexities of a direct government contract. 

It can also help SMEs build a network. Working with prime contractors can lead to new business opportunities, connections, and insights into future procurements. 

Other benefits include: 

• access to larger projects
• access to government buyers
• reduced business development costs, as experience grows
• the ability to focus on core specialisations
• greater flexibility and scalability
• and fewer administrative burdens

Careful preparation and planning

Subcontracting can offer many opportunities, though it is important for SMEs to be mindful of potential complexities, such as:

• possible challenges with timely payment from prime contractors
• limited direct involvement in the overall project
• situations of “white labelling,” where a prime contractor re-brands the subcontractor’s offering

Careful preparation and planning are essential, whether working with the public sector directly or indirectly, to prevent challenges and to determine the most suitable approach for your business.

How to find opportunities to become a subcontractor 

If you are an SME interested in working with the public sector through subcontracting, there’s a number of options for getting involved. 

Network proactively

Attend industry events and connect with prime contractor business development personnel to build relationships before opportunities arise. Building relationships early increases the chance of being invited to join a proposal or a project. We host Meet the Buyer events to help you navigate public procurement and network with other SMEs or prime contractors.   

Monitor portals 

Use platforms like GOV.UK’s Contracts Finder for upcoming projects and pre-market engagement opportunities to get an idea of what is coming to market in the next year. You can also set up automated alerts. 

Use our agreements 

Access our  agreements webpage to see which agreements match your expertise and use this as a basis for networking by using the supplier contact details on those pages. 

Neutral vendor models 

Some of our agreements use a neutral vendor model. This allows SMEs to onboard, with agreement from the prime contractor and provide goods and services through their supply chain. Agreements that use this model include: 

• RM6371 Print Marketplace 2
• RM6279 Buying Better Food and Drink 
• RM6288 Workforce Solutions

Building strong prime contractor relationships

To build effective relationships with prime contractors SMEs should focus on 3 key approaches: 

1. Adopt a proactive management style rather than waiting for issues to arise.
2. Be transparent and explain what your organisation can and cannot deliver.
3. Understanding each party’s different motivations, experiences and skillsets will help you work together more effectively.

Success comes from appreciating these differences and valuing the unique talents each organisation brings. Working together in this way helps create productive working relationships that benefit both parties.

And finally

When you start discussions with a prime contractor, make sure you both understand the roles and responsibilities of the arrangement. You can ask for a work share agreement or a pipeline of upcoming work. This can help you manage your resources better. 

To report bad behaviour or misconduct by suppliers contracting with CCS, you should raise awareness with CCS and get in touch, detailing the agreement the call off is procured from. The Public Procurement Review Service is also available for suppliers to raise concerns about poor procurement practice from buyers. 

To stay up to date with the latest information for suppliers, follow our LinkedIn page.

Looking for more helpful guidance to help you supply to the public sector? Read more in our Supplier Specifics series.

Feedback

We welcome feedback, suggestions or questions. Submit your feedback to smefeedback@crowncommercial.gov.uk