Our how-to guides to financing, incorporation and outfitting your new office. Growing Your Business Guides to help you manage your firm efficiently and help you make smart buying decisions. To work well with both the prime contractor and the government, businesses must have an understanding of the protocol and politics that govern subcontracting. Here are a few concepts to give you insight into the culture of subcontracting. This is a key legal term referring to the contractual ties between parties.
Primes often wind up stuck in the middle of disputes.
Subcontractors are party to the agreement with the prime, not the government agency. Therefore they usually do not have the right to take action against the government when something goes wrong. However, a prime may sponsor a subcontractor's claim or make its own claim on behalf of the subcontractor. Primes can find themselves in a sticky spot financially. If something goes wrong and the agency decides to hold back money, the prime may still be legally obligated to pay the subcontractor.