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Thursday, March 21, 2024

Managing Teaming Relationship Risk in Small Business Federal Government Contracting

Most small businesses, particularly those selling services, will encounter the need to team with industry partners in small business federal government contracting. 

As a prime contractor, a supplier or a subcontractor, the need to carefully develop stable relationships is a prime driver for success in the government contracting venue. 


Be prepared to encounter challenges in the areas discussed below. They are presented because they occur enough that you should be aware of them.  It is astute to manage the associated risks.

Initial challenges for the small business in government contracting are not so much in the areas of barriers as they are in lack knowledge (which I concede is a form of barrier but one that can be dealt with). In short, be aware of what you do not know you do not know.

Lack of knowledge goes all the way from local and state employment law to federal  contracting rules. Enough small businesses have succeeded in the venue that it has proven small enterprise education, with trained personnel in government and prime contractors to do so, greatly enhances success.

Contracting officer's, either government or corporate, and their staffs are often not equipped in the skills necessary to guide the small business. 

Large business and government agencies often inadvertently take advantage of the small enterprise lack of knowledge or make poor assumptions regarding what a small business knows. This can lead directly to abusive practices.

A prime example of an abusive practice is large corporations signing teaming agreements during proposal efforts and then not awarding subcontracts to the small enterprise as agreed, keeping the majority of work for themselves.  They then recruit the help away the small enterprise.

Agencies often take extended time frames to put in place prime contracts after source selection and award to a small business. They do not realize that a small enterprise does not have deep pockets and must have cash flow to sustain a new program with new employees.

Funding levels on programs are often insufficiently committed and the small enterprise is not adequately informed about limitation of funds and funding exposure

One of the most common traumatic situations is newly established enterprises having no job cost government compliant business system in place. The industry partner(s) or the government have assumed that capability will materialize and when it does not the government audits the bills, finds no backup and shuts down the cash flow until the system is fixed. At that point the business can fail. The company should have become educated much earlier in the process about these requirements.

The number of poorly performing SETA contractors in roles not suited to them in government contracting officer support is increasing in federal agencies. These firms need to be vetted and better managed for the omissions and commissions they contribute to the above. 

Not every small enterprise can get into a class on government contracting at George Washington University, The Defense Acquisition University or send their personnel to lengthy and costly seminars conducted by organizations like the National Contract Management Association. These are all great education sources but do not come close to filling the complete requirement and cost time and money.


The nature of the government contracting venue is that you may very well find yourself teaming with a company on a major, long term project and competing against them on another project where the team makeup is different. It is therefore essential to protect your intellectual property, your rates and your personnel.


Not every company that approaches you with a suggested teaming arrangement will be ethical, straight forward and honest. Vet them carefully through the Better Business Bureau, a Dunn and Bradstreet Report, references and searches on their prior business arrangements, contract awards, business activities, subsidiaries and history. 


There are free or very low cost resources through local government organizations who can assist the small business in understanding the government contracting venue.


Be straight-forward and honest with your industry teaming partners.

Do not violate share arrangements, teaming agreements or non-disclosure agreements. Such violations are a death knell for your reputation in the business.

Do not become known as a resource raider by hiring away from other firms with whom you have teamed.

Give it your best shot as a prime or a sub but involve the government contracting officer if you must resolve industry teaming disputes that may damage your past performance record.

Exclusivity is the practical way to go on any given program. Team early and exclusively then give it your all and be a winner. Your reputation is key, ethics count and your customers as well as your industry are observing you.


Anonymous said...

Thank you so much for this article. I have heard about the abuses of using small business (especially women owned/minority owned) and those small business does not get any work share from the prime. Is there anything the small business can do in this situation? How does a small business protect themselves from this without alienating themselves from future work if the culprit is a big defense contractor?

Ken Larson said...

Thank you for your comment Anonymous. The best protection against abusive teaming arrangements is very careful vetting of prospective teaming partners,tight teaming and contract agreements and a willingness to put the prime contract contracting officer into the loop if an abusive activity is underway.

Avni said...

Insightful article! There is one more useful resource for doing market research for government procurement, and it is GovShop. It lists government contracts that can be searched by keyword, agency name, commodity codes, or product or service codes. With the updated database for opportunities and suppliers, it is easy to fetch information a business needs.