Small Business Teaming Strategies: Partner for Larger Contracts

Teaming allows small businesses to compete for opportunities that would otherwise be beyond their reach.

Benefits of teaming:

• Access larger contracts with expanded capabilities
• Fill gaps in experience or expertise
• Share risk and investment
• Build past performance on bigger programs
• Learn from more experienced partners

Teaming structures for small businesses:

• Subcontracting to a large prime — Easiest entry point
• Subcontracting to a small business prime — Another small leads
• Small business prime with subs — You lead the team
• Joint venture — Formal entity with partners
• Mentor-protégé — Developmental partnership

When to team:

• Contract requires capabilities you lack
• Past performance requirements exceed your history
• Customer relationships need strengthening
• Contract size requires more resources
• Risk is too high to take alone

The most common entry point:

Many small businesses start by subcontracting to established prime contractors.

Why primes want small business subs:

• Large primes have subcontracting goals to meet
• Small businesses offer specialized expertise
• Lower rates than large company employees
• Flexibility and responsiveness

Finding prime contractor opportunities:

• SBA SUBNet — Prime contractor subcontracting postings
• SAM.gov — Large contract awards (who won?)
• Industry days — Primes look for teaming partners
• Prime contractor websites — Many have supplier portals
• Networking events — SAME, NDIA, industry associations

What primes look for in subs:

• Relevant capabilities and experience
• Competitive rates
• Proper certifications (small business, clearances)
• Responsive, professional communication
• Strong capability statement

Building sub relationships:

• Start small — prove yourself on smaller tasks
• Deliver excellent performance
• Be easy to work with
• Don't oversell capabilities
• Build toward larger roles over time

Leading the team:

On small business set-asides, you can serve as prime contractor with subcontractors supporting you.

When to prime:

• Small business set-aside opportunities
• Work fits your core capabilities
• You have (or can build) customer relationships
• You can meet past performance requirements
• Ready to manage contract and team

Limitations on subcontracting:

Small business primes must perform a certain percentage of work themselves:

• Services: 50% of personnel costs
• Supplies: 50% of manufacturing cost
• General construction: 15% of costs
• Specialty construction: 25% of costs

Similarly situated entity rule:

Work performed by similarly situated subcontractors (same small business type) counts toward your requirement:

• On 8(a) set-aside, 8(a) sub work counts toward your 50%
• On WOSB set-aside, WOSB sub work counts
• Allows teaming between similar small businesses

Building your team:

• Identify capability gaps
• Find complementary partners
• Negotiate teaming agreements early
• Ensure team chemistry

What is a joint venture?

A separate legal entity formed by two or more companies to pursue specific contracts.

JV advantages:

• Combine capabilities and past performance
• Share risk and investment
• May qualify for set-asides when neither firm alone would
• More formal commitment than teaming agreement

Small business JV rules:

• JV must qualify as small for the NAICS code
• Members' revenues/employees combined for size determination
• Managing partner requirements for certain set-asides
• 2-year rule on awards (replaced 3-in-2 rule)

Mentor-protégé JVs:

Under SBA mentor-protégé, a small business can JV with its large business mentor:

• JV uses protégé's size status
• Can bid on small business set-asides
• Access to mentor's resources and capabilities
• Must be in approved mentor-protégé relationship

JV considerations:

• Legal costs to establish properly
• Governance structure matters
• Clear roles and responsibilities
• Exit strategy if things don't work

Where to find partners:

Industry events:

• Agency industry days
• Small business conferences
• PTAC events
• Trade association meetings

Online resources:

• SBA Dynamic Small Business Search
• Agency vendor portals
• LinkedIn
• GovWin teaming network

Direct outreach:

• Research companies in your space
• Contact business development teams
• Attend their events and webinars

What to look for in partners:

• Complementary capabilities (not competing)
• Compatible culture and values
• Financial stability
• Good reputation
• Relevant past performance
• Appropriate certifications

Due diligence:

• Check SAM.gov registration
• Verify certifications
• Research past performance (USASpending)
• Talk to references
• Review financial health if possible

Key teaming agreement elements:

• Scope — What opportunities are covered
• Roles — Who does what (prime vs. sub)
• Work share — Percentage split
• Exclusivity — Can you team with others?
• Confidentiality — Protecting proprietary information
• Duration — When does agreement end?

Negotiate before the RFP:

• Work share percentages
• Key personnel commitments
• Pricing approach
• Decision-making authority
• Dispute resolution

Protect yourself:

• Don't share proprietary info until agreement signed
• Ensure fair work allocation
• Include termination provisions
• Address what happens if you don't win

Moving to subcontract:

If you win, the teaming agreement typically converts to a subcontract. Key terms should flow down:

• Work scope and share
• Pricing/rates agreed to
• Key personnel
• FAR flow-down requirements

Size status in teaming:

• Size determined at time of initial offer (or JV formation)
• Growing beyond size threshold during contract doesn't disqualify
• But affects future opportunities

Affiliation concerns:

SBA examines whether teaming arrangements create "affiliation" that combines revenues/employees:

• Extensive control over another firm
• Common ownership or management
• Newly organized concern rule
• Unusual reliance on one teaming partner

Avoiding affiliation issues:

• Maintain independence in management decisions
• Don't let one partner dominate
• Multiple customers and teaming partners
• Document arms-length relationships

Ostensible subcontractor rule:

If a subcontractor performs primary work or is unusually relied upon, you may be affiliated:

• Prime must perform significant work itself
• Can't be a "pass-through" arrangement
• Sub can't manage the prime's team

Strategic teaming questions:

• What capabilities do we need that we don't have?
• What past performance gaps need filling?
• Who has relationships with target customers?
• Who can we work with effectively?
• What's our ultimate goal — learn, grow, or win?

Building toward prime:

Many small businesses follow this progression:

1. Sub to large prime — learn the game
2. Sub to small business prime — get closer to customer
3. JV with experienced partner — share prime role
4. Prime with subs — lead your own team

Don't be a permanent sub:

• Subcontracting builds experience but not independence
• Work toward prime contractor role
• Build your own customer relationships
• Use sub experience to win prime contracts

Evaluate partnerships honestly:

• Is the work share fair?
• Are you learning and growing?
• Is the partner helping you advance?
• Would you be better off on your own?