Small Business Subcontracting Guide 2025: Requirements & Opportunities
Complete guide to small business subcontracting in government contracts. Learn about subcontracting plans, goals, compliance requirements, and how to find subcontracting opportunities.
Quick Answer: Small Business Subcontracting
Large businesses with federal contracts over $750,000($1.5M for construction) must submit subcontracting plans with goals for small business participation. This creates opportunities for small businesses to work as subcontractors on major government contracts, building experience and past performance.
Small Business Subcontracting Overview
The federal government requires large prime contractors to make good faith efforts to subcontract with small businesses. This policy creates significant opportunities for small businesses to participate in major federal contracts.
Why Subcontracting Matters
For Small Businesses
- • Access to large contract opportunities
- • Build past performance record
- • Learn from experienced primes
- • Establish relationships with agencies
For Prime Contractors
- • Meet contract requirements
- • Access specialized capabilities
- • Improve proposal competitiveness
- • Build diverse supply chain
When Subcontracting Plans are Required
Contract Thresholds
General Contracts: $750,000+
Contracts exceeding $750,000 require subcontracting plans from other-than-small businesses
Construction Contracts: $1.5 Million+
Construction contracts have a higher threshold of $1.5 million
Who Must Submit Plans
- ✓Large businesses (other-than-small)
- ✓Small businesses that subcontract with non-small businesses
- ✗Small businesses performing work themselves (exempt)
Important: Subcontracting Limitations
Small business set-aside contracts have limitations on subcontracting. Generally, small business primes must perform at least 50% of the work (services) or 15% (supplies) themselves, limiting how much can be subcontracted.
Federal Small Business Goals
The government establishes annual goals for small business participation. These goals flow down to prime contractors through subcontracting requirements.
Current Governmentwide Goals
How Goals Apply to Subcontracting
Prime contractors must establish their own goals based on:
- →The subcontracting opportunities in the contract
- →Available small business sources
- →Agency-specific targets
- →Geographic and industry considerations
Subcontracting Plan Elements
FAR 19.704 specifies the required elements of a subcontracting plan. These plans must be reviewed and approved by the contracting officer.
Required Plan Elements
Dollar Goals
Separate percentage goals for each small business category
Total Subcontracting Amount
Estimate of total subcontract dollars
Description of Work
Types of supplies and services to be subcontracted
Outreach Methods
How the contractor will identify and solicit small business sources
Program Administrator
Designated employee responsible for implementing the plan
Reporting & Recordkeeping
Procedures for tracking and reporting subcontracting achievements
Finding Subcontracting Opportunities
SBA SubNet
Free database of subcontracting opportunities:
- →Prime contractors post opportunities
- →Search by NAICS, location, keywords
- →Direct contact with primes
Prime Contractor Outreach
Reach out directly to major primes:
- →Check company websites for supplier portals
- →Attend matchmaking events
- →Register in prime databases
Other Resources
PTAC Counseling
Free assistance identifying opportunities
Industry Days
Meet primes before solicitations drop
SAM.gov
Find upcoming contracts and awarded primes
Trade Associations
Industry-specific networking
Compliance & Reporting
Prime contractors must report their subcontracting achievements through the Electronic Subcontracting Reporting System (eSRS).
eSRS Reporting Requirements
Individual Reports (ISR)
- • Submitted per contract
- • Due semi-annually
- • Reports actual vs. planned
- • Contract-specific goals
Summary Reports (SSR)
- • Company-wide summary
- • Due annually
- • Aggregate achievements
- • Required for commercial plans
Failure to Comply
Contractors who fail to make good faith efforts may face:
- •Liquidated damages (actual or standard damages)
- •Negative past performance ratings
- •Ineligibility for future contracts
Frequently Asked Questions
Can I be both a prime and subcontractor?
Yes. Many small businesses start as subcontractors to build experience, then pursue prime contracts while continuing to subcontract on other projects. This builds diverse past performance.
Do subcontractors get CPARS ratings?
Not directly from the government. Your performance is with the prime contractor. However, you can ask primes for reference letters and document your work for future proposals.
How do I know if a prime has subcontracting goals?
Large businesses with contracts over the threshold are required to have plans. Check contract award notices on SAM.gov to identify large business primes, then reach out about opportunities.
Do small business certifications matter for subcontracting?
Primes need certified small businesses to meet specific category goals (WOSB, SDVOSB, HUBZone, etc.). Having certifications makes you more valuable as a subcontractor and opens more opportunities.
Find Prime Contract Opportunities
Identify large contracts where primes will need small business subcontractors. BidFinds helps you find opportunities before awards are made.
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