Subcontracting

What is Subcontracting?

Subcontracting occurs when a supplier (the prime or head contractor) who holds a government contract engages another business (the subcontractor) to perform part of the work. The prime contractor remains fully responsible to the government agency for all deliverables, including those produced by subcontractors.

How Does Subcontracting Work in Government Procurement?

The typical subcontracting arrangement involves:

• The prime contractor wins the government contract through a formal tender process
• The subcontractor is engaged by the prime contractor under a separate agreement
• The government agency has a contractual relationship only with the prime contractor — it does not directly manage subcontractors
• Risk and accountability flow through the prime contractor, who is responsible for subcontractor performance

When is Subcontracting Used?

Subcontracting is common when:

• The scope of work requires specialist skills that the prime contractor does not have in-house
• The project is too large for one organisation to deliver alone
• The prime contractor wants to include local or regional suppliers to meet Local Content Requirements
• Surge capacity is needed for short-term peaks in workload

Government Restrictions on Subcontracting

Government contracts often include specific clauses about subcontracting:

• Approval requirements — the agency may need to approve subcontractors before they commence work
• Disclosure in tenders — RFTs typically require tenderers to identify proposed subcontractors and their roles
• Limits on subcontracting — some contracts restrict the proportion of work that can be subcontracted
• Conflict of Interest obligations — subcontractors’ conflicts must also be declared
• Security clearances — subcontractors may need to meet the same security requirements as the prime contractor

Subcontracting and the ICN Gateway

The ICN Gateway is a key platform for finding subcontracting opportunities on major projects. Project proponents break large contracts into work packages, many of which are suited to smaller businesses.

Tips for Tenderers

• As a prime contractor: choose subcontractors carefully — their performance reflects directly on you. Include subcontractor details in your tender response.
• As a potential subcontractor: build relationships with prime contractors in your sector. Register on the ICN Gateway to increase visibility.
• Manage subcontractors actively — do not assume they will self-manage. Quality assurance, milestone tracking, and regular communication are essential.
• Ensure back-to-back terms — your subcontract should mirror the obligations in your head contract to avoid gaps in accountability.