Being a subcontractor on a government project can be a game-changer for your business — it provides invaluable experience that'll boost your chances for future agency work, and you can make dozens of new contacts within your industry. But subcontracting can also turn into a nightmarish mess of roadblocks and disputes. The key to avoiding all that? The subcontracting agreement. In a subcontracting agreement, the devil is in the details. Any ambiguity of wording, any handshake agreement that's not also put in writing, is open for misunderstanding and contention between the prime and the subcontractor. Most prime contractors choose to work with trusted subcontractors again and again, so it's important that you prevent any issues from arising once work as begun. When you receive the subcontracting agreement, review it carefully with the following questions in mind:
- Compensation: When will you be paid? When the prime is paid for the contract, or when the subcontracting work is done? Will you be paid by the hour or a flat fee? How will expenses be covered?
- Hours: How long will your part of the project take? What provisions are there for exceeding that allotted period of time? If you are being paid on an hourly basis, what's the maximum number of hours the prime is willing to pay you for, and how will that affect the project?
- Deadlines: Are all deadlines final? Does the prime contractor want to review your work before the deadline? If so, make sure that benchmark dates are identified throughout the project timeline, and set up review appointments as far in advance as possible. If the prime doesn't review your work until the night before it is due, there won't be enough time to make necessary changes.
- Legalese: Be absolutely clear on the terms of any and all noncompete and nondisclosure agreements. It's really the prime's responsibility to draft these, but have your lawyer look them over, too.
- Communication with the agency: Some primes will not want you to have any direct contact with agency personnel, while others will make provision for you to receive necessary specifications, etc., from the agency. When is it okay to contact the agency? (Note: In instances of legal/ethical misbehavior, it may be permissible for you to notify the agency regardless of the subcontractor agreement).
- Intellectual property: Does any intellectual property resulting from the project belong to you? The prime? The agency?
- Default: What happens if you default on the subcontract? What happens to you if the prime defaults on its contract with the agency?
- Liability/indemnity: Just as the prime's contract with the government will have provisions for liability and indemnification should things go wrong, the subcontracting agreement will most likely also contain those provisions as well. Make sure you are familiar with your liability risk under the agreement.