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How to subcontract - what you need to consider

This is a list of questions and considerations for organisations considering entering in to subcontracts. Subcontractors deliver some of the work of a contract which has been given to another organisation. 

The prompts we list here are designed to help you assess the quality and risks of these potential relationships. 

1

Considering being a subcontractor?

The prime contractor often relies on other organisations to deliver services/goods who are known subcontractors. 

  • Find out as much as you can about the potential partners by speaking to them and others they have worked with
  • Use these basic questions to review tender opportunities
  • Once you have all the information you need, use a reliable process for working out the risks and rewards of the subcontract
  • Involve your trustees when making the final decision and explain the reasoning behind it
2

Do your research

  • What do you know about the prime contractor? Do they have experience of successfully delivering previous contracts?
  • What systems and capital will need to be in place for them to lead the contract?
  • Are the delivery targets achievable and relevant to users' needs?
3

How much do you know about the prime contractor?

  • What is driving the prime contractor to lead this contract?
  • Do you have an established relationship with the prime contractor?
  • Are you seeking a relationship with them beyond this contract?
  • Are there significant differences in culture between the organisations?
  • How accessible and communicative is the prime contractor?
4

Spot potential organisational issues

  • What is the performance management process in the supply chain?
  • Has the prime contractor stated their commitment to Compact principles?
  • What issues can arise from the balance of power between the prime contractor and the subcontractor(s)?
5

Spot potential supply chain issues

  • Will there be competition within the supply chain for the type of work you do? How will tihs be managed and what are the implications?
  • What factors will affect the flow of referrals through the supply chain? What will determine how many referrals you get and can you influence these factors?
  • Will you have any guarantees of a specified financial volume of work and the number of referrals?
  • If sufficient referrals don't reach you, will there be cash flow problems? Will there be regular opportunities to discuss this? How flexible is the contract termination procedure/performance management objectives?
  • What 'tier' will you be in the supply chain e.g. directly below the prime contractor or another subcontractor?
6

Make it official

  • Make sure that all organisations involved sign a contract
  • The contract should cover the payment schedule and terms, performance management, dispute resolution and termination details at the bare minimum
  • Find out the rights that exist for both parties and what happens if either party wants to vary/break the contract
  • Ask about your intellectual property and what protection you have over things like resources, communications and branding both during and after the contract
  • Are there any gagging clauses or restrictions that could hamper the successful delivery of the contract?
7

Look at organisational capacity and communications

  • Is there any offer of helping to build capacity? What would trigger this?
  • Will the prime contractor provide emergency funding or access to capital, if required?
  • Will there be an established communication process between the prime contractor and subcontractors?
  • Do you have evidence of your organisation's effectiveness, reach and any 'unique selling points'?
8

What systems need to be in place?

  • Will any new business sytems be required such as IT systems?
  • Will support be offered to develop and maintain systems?
  • Will the systems be compatible with your current systems e.g. databases or can they be adapted?
  • Are there are any conflicts with your current systems and policies such as data sharing, confidentiality and so on?
9

Consider the relationship with the commissioners

  • Will you have the opportunity to show the commissioner any emerging or changing needs?
  • Will the prime contractor acknowledge your contributions to commissioners?
  • Will you have any contact with the commissioners?
  • Will the commissioner have any involvement in dispute resolution?

Further information

NCVO has advice on how to respond to tenders and the risks involved

 

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Page last edited May 24, 2017 History

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