Where do prime-sub relationships fail?
We knew we struck a chord during the research phase of our WT Insider report on the prime-sub contractor relationship when Lodestar, our research partner, said they had never seen so many written responses in a survey.
“You have an extremely engaged audience,” I think are the words they used.
We sure do. Nearly 1,500 written responses were submitted to questions such as “Why do you say working with prime contractors over the last two years is much easier/somewhat easier/more difficult?”
Other open-ended questions asked: "What is the single most important thing a prime can do to partner more effectively?" and "What will be the largest challenge to partnering over the next two to three years?"
With this blog and the next couple, I’m going to explore these comments and highlight some of the findings of our research report.
Let’s start with the negative: Why has the relationship become more difficult?
The budget was the most common response, and the feeling that subcontractors often pay the price when budgets get squeezed. One prime I spoke to pretty much confirmed this when he told me that when the customer pushes price, the prime pushes that down onto its subs.
There also is a sense that as the pie shrinks, that primes are trying to keep more for themselves.
The tighter market is forcing some large primes to cling to old ways of doing business instead of restructuring and becoming more agile, one commenter wrote. They need to read “Who Moved My Cheese,” he suggested.
But subs also are concerned about a lack of candor and communications on the part of the primes.
Some people were harsh:
Many Prime Contractors are building teams to win contracts, and then not meeting work share agreements. It has become more difficult to trust many of the large industry players as they underbid many contracts and then attempt to recoup those costs from subcontractors, or simply do not enter into subcontracts that reflect the terms of the original teaming agreement.
The word “trust” pops out at me in that quote, and the word trust occurs over and over in the comments.
“The primes do not pursue a full, open and transparent exchange of information related to the work the subcontractors believed they were entitled to do,” a commenter wrote.
Commenters complained about the difficulty negotiating with primes on workshare because everyone is fighting for margins.
So, what do subcontractors want? Again there were a lot of uses of the word trust. Responsiveness was another common response.
For me, one of the takeaways of the entire report is that some dysfunction in the prime-sub relationship has always existed, but it is now much worse because of the budget environment.
No one group is to blame, as many commenters said there is pressure on all sides because of contraction in the market.
No one can do anything about the budget, but the importance of the relationship to the success of the primes and the subs, and ultimately the government customer, begs that this dysfunction not be ignored.
Hopefully, our report will give you some pause, and an opportunity to look at your prime-sub relationships and ask yourself what you can do better.
The entire report is available exclusively to WT Insiders, and if you want a copy of all 1,500 verbatim comments, let me know and I'll send you a copy.
Posted by Nick Wakeman on Jun 28, 2013 at 9:52 AM