INTRODUCTION
Talented free lancers
often wish to grow independently as individuals in the government contracting
market and face difficulties in doing so. Many have service and product
development skills of value to federal agencies, but few succeed without
forming a company and beginning to view their objectives as an enterprise
instead of a single person entity.
This article will
examine the principal differences between free lancing and small business
contracting from the perspective of the market realities that drive success in
the venue.
DEFINITIONS:
We have previously
discussed the organization entities that are involved in federal government
contracting:
Free Lancer:
A particular type of
individual – the “Free Lancer”, finds his or her way to the federal market via
established companies and performs single person services while not on a
company payroll as an employee, having no taxes, benefits or deductions taken
from their pay and not covered by any form of insurance.
The company issues a
purchase order to the individual at an hourly rate and submits a Form 1099 to
the US government reporting what is paid for services. The free-lance
contractor must self-insure during the contract period and pay taxes on the
money earned at the end of the tax year. Little, if any intellectual property
protection exists for the individual and the larger firm may require non-disclosure,
exclusivity and noncompete agreements that may limit the future efforts of the
free-lancer.
Contractor
The term “Contractor”
in government parlance refers to businesses, not individuals. To become a
contractor to a government agency, you must therefore form you own business.
Government agencies rarely engage individual contractors or free-lancers. If they want individuals to perform services
they put them on the agency payroll. If they want to acquire specialized
outside services they contract with companies.
Subcontractor
A subcontractor is a
company that takes on a flow-down of liability from a prime contractor to
complete a major portion of a large scale job for the prime contractor's
customer. The subcontractor is obligated to the prime contractually in an
identical fashion as the prime is obligated to the government agency. The prime
contractor issues a subcontract with a statement of work and flow down terms
and conditions from the prime contract to the subcontractor. In many instances
the government requires review and approval of major subcontractor selections
and holds the prime contractor accountable contractually at the prime contract
level for the subcontractor(s) efforts.
Free-lancers and contractors, as described above, rarely become
subcontractors.
The Necessity to Grow
From a Free Lancer to a Contractor and/or a Subcontractor
Although talented
professions may believe there is growth in the market for high performing
individuals, the government contracting industry has very little room for them
except in specialty roles and then usually only temporarily. Prime contractors also view Free Lancers as
interim performers of a short term variety and usually offer them the option of
joining the company or moving on. The
government tends to view them as “Roosting” and not long term in reliability.
No past performance
record is kept on individual Free Lancers by the government or prime
contractors under FAR. Such records
pertain only to incorporated entities.
Companies bringing free lancers on board cannot claim their historical
work as credible under government past performance guidelines until the
individual has contributed to the company success as an employee, losing his
free -lancer status in the process except for resume and organization chart purposes
on future projects.
With federal agencies
there is a strong movement to issue umbrella, multiple year, long- term
contracts, many to multiple sources for qualification and then order services
as required with bundled capabilities in teams of companies. Free Lancers do not qualify for such efforts
without a company identity.
On cannot acquire a
GSA schedule as a Free Lancer. Once must
form a company and apply as a business entity to achieve that form of marketing
vehicle.
Further, the
government hesitates to become involved in contracting with individuals unless
they are heavily insured and such insurance costs heavily for individuals and
in many cases cannot be achieved at all.
Therefore, to
progress economically and independently the Freelancer must incorporate, form
an enterprise and begin to thinking in terms of a company entity in lieu of a
single person image for the future. This can be achieved by adding personnel via
incumbent work forces, using contingent hire agreements or engaging in product
development with industry partners and government financing. The following articles at this site provide
details:
SUMMARY
For stability,
growth, cash flow, industry reputation and partnering, past performance
consideration and economics, consider the transition from a single individual
free-lancer to a company. Brand your
company and not yourself and think bigger than you are in terms of involving
others in your operations to best position your supplies and services in the
federal contracting market.
