Prime Contractor vs. Subcontractor
Who holds the contract, who answers for performance, and what each role needs to do well
A prime contractor holds the contract directly with the government and is responsible for all performance under it, including work it subcontracts. A subcontractor holds a contract with the prime. Its obligations come from that subcontract, which usually passes down many of the prime contract's clauses.
At a Glance
Prime contractor
- Contract held with: The government
- Accountable to the government for: All contract performance
- Obligations come from: The prime contract
- Paid by: The government
- Key relationship to manage: The customer and the subcontractor team
Subcontractor
- Contract held with: The prime
- Accountable to the government for: Nothing directly; accountable to the prime
- Obligations come from: The subcontract and its flow-down clauses
- Paid by: The prime
- Key relationship to manage: The prime
What Does a Prime Contractor Do?
The prime has the direct contractual relationship with the government, often called privity of contract. When a subcontractor underperforms, the government looks to the prime to fix it, because the prime answers for the whole contract.
That means a prime manages risk it can only partly see: the quality of a partner's staff, its financial health, and its ability to deliver on schedule.
What Does a Subcontractor Do?
A subcontractor performs part of the work under its agreement with the prime, even when its people work alongside government staff every day. Its payment terms, compliance obligations, and performance expectations all come through the prime.
A subcontractor usually has limited direct visibility into how the government views overall contract performance, and its standing with the prime has a large influence on whether it is invited onto future pursuits.
Small Business Primes and the Limitations on Subcontracting
A small business that wins a set-aside as prime has to perform a required share of the work itself. For services, the limitation on subcontracting generally caps the amount a small business prime can pay to subcontractors that are not similarly situated at 50 percent of the amount the government pays the prime. The clause in the contract sets the exact rule.
Why the Difference Matters for Capture
Most companies play both roles over time. Priming a pursuit requires the past performance, management capacity, and financial strength to carry the whole contract. Subcontracting well requires reliable execution and a strong working relationship with the prime.
Teaming decisions made during capture, including who primes, who subcontracts, and how work share is divided, shape the management volume, the past performance story, and the price.
Frequently Asked Questions
What is privity of contract?
Privity is the direct contractual relationship between two parties. In federal contracting, the government has privity with the prime contractor. Subcontractors have privity with the prime.
What is a teaming agreement?
A teaming agreement is an arrangement, recognized in FAR Subpart 9.6, in which companies agree to pursue a contract together, typically with one acting as prime and the others as subcontractors if the team wins.
What is the limitation on subcontracting?
It is a rule, implemented through FAR 52.219-14, that requires a small business prime on a set-aside to perform a minimum share of the work. For services, a small business prime generally cannot pay more than 50 percent of the amount it receives to subcontractors that are not similarly situated.