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What benefits can be expected by your company if small businesses are considered in the subcontract solicitation process?
Sometimes companies should involve subcontractors in the execution of contracts if such a requirement is determined in the tender documentation. There are several benefits expected considering small business in the contract solicitation process. According to US Small Business Administration (SBA) (2020), the agency aimed “to ensure a balanced proportion of purchases and contracts or subcontracts for property and services for the Government to maintain and strengthen the overall economy of the Nation” (p. 3). When deciding to attract small businesses as subcontractors, it is necessary to minimize project risks and maximize the project’s expected value. Engaging third-party firms makes it possible to speed up complex tasks and improve the quality of work performed. Benefits include a potential reduction in the overall project duration due to small businesses’ involvement with higher qualifications than planned. Besides, subcontractors’ participation allows the company to use additional and the company’s resources for other important projects.
Moreover, the company that won the government contract may not always complete all work under the contract autonomously. For example, the project requires complex equipment or qualified specialists, which the winner does not have or their number is insufficient. In this case, co-executors’ involvement will help the prime contractor fulfill the obligation on time, without fines and penalties. Furthermore, SBA emphasizes another vital concern in terms of 2020 circumstances. Every project that involves small businesses is a win-win situation for the US nation in general, contractors and their workers, and the communities (Federal government exceeds small business contracting goals, 2020). Due to the Covid-19 pandemic outbreak, it is essential to recover the national prosperity after the economic crisis.
To what extent will adding these requirements mean additional costs will be incurred in administration and reporting of compliance?
For each task, it is necessary to assess the most severe risks associated with its implementation, the company’s skills and resources, and subcontractors’ facilities and resources. Prime contractors often perform various types of work such as preparation of a feasibility study for an investment project, selection of technologies, choice of equipment suppliers, control of the volume and quality of work, risk management, supervision of subcontractors. Prime contractors’ vendors abstain from the administrative expenses, costs, and supplies needed to manage government contracts’ execution. Administrative fees may include recurring costs for salaries, office supplies and equipment.
With a large number of small companies involved, accurate and constant control over their interaction is required. Besides, SBA suggests companies involving small businesses as subcontractors to track compliance with specific requirements (Prime and subcontracting, n.d.). Consequently, businesses are obliged to present regular subcontract statements applying the Electronic Subcontract Reporting System (eSRS) (Prime and subcontracting, n.d.). The prime contractors submit reports constantly regardless of the absence of activity in certain periods (Prime and subcontracting, n.d.). One of the prime contractors’ principal duties is keeping records of the main types of their activities.
All responsibility for the information accuracy entered in the reports lies with the company operating as a prime contractor. All tasks for which subcontractors are involved are monitored at each of the critical stages (Prime and subcontracting, n.d.). In case of inconsistency in quality or technology, the project may be suspended or terminated, and the contract may be renegotiated with another company. A documentation package of the appropriate sample is drawn up to distinguish the duties and critical stages. Claims against subcontractors, penalties, termination of the contract, and other relations are the prime contractor’s prerogative (Prime and subcontracting, n.d.). Financial settlements with small businesses are also in the scope of the company’s activity.
References
Federal government exceeds small business contracting goals by awarding record-breaking $132.9 billion to small businesses. (2020). US Small Business Administration. Web.
Prime and subcontracting. (n.d.). US Small Business Administration. Web.
US Small Business Administration (2020). FY 2021 Goaling Guidelines. Web.
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