The "Middleman" Myth in Government Contracting
The idea that you can win government contracts by simply acting as a middleman—submitting bids and handing off the work to a subcontractor—is a common misconception. While subcontracting is standard practice, the federal government has strict rules to prevent businesses from winning contracts without adding real value. If you don’t demonstrate experience, meet subcontracting limits, and manage compliance, you may struggle to win or maintain contracts.
The Reality of Middlemanning
Many new contractors assume they can bid on any contract in SAM.gov as long as they find the right subcontractor to perform the work. However, federal acquisition strategies are designed to prevent middlemanning—where a company wins a contract but does little more than pass the work along. Agencies want contractors who provide oversight, technical expertise, and direct contributions to the project.
The Limitations on Subcontracting Rule
The FAR 52.219-14 Limitations on Subcontracting Clause prevents prime contractors from outsourcing all work to a subcontractor. The rule varies by contract type:
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Service contracts – The prime must perform at least 51% of the labor (excluding materials).
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Supply contracts – The prime must manufacture the product or source it from another small business.
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Construction contracts – The prime must self-perform a percentage of the work, which varies by contract type.
If a prime contractor fails to meet these requirements, they risk bid rejection, contract termination, and even legal penalties.
Why Agencies Avoid Middlemen
Government agencies expect contractors to add value beyond paperwork and subcontracting. Contracting officers look for:
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Past performance – Has your company successfully managed similar contracts?
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Technical capability – Do you understand the work and have the ability to oversee it?
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Financial stability – Can you handle project costs and potential delays?
Without these qualifications, a business acting as a middleman is unlikely to win contracts.
The Risks of Being a Paper-Only Prime
Even if a company successfully wins a contract as a middleman, they face significant risks:
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Full liability – The prime contractor is responsible for all contract performance, even if a subcontractor fails.
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Non-compliance penalties – Failing to meet self-performance minimums can lead to suspension or debarment.
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Competitive disadvantages – Many subcontractors can bid directly, eliminating the need for a middleman.
How to Succeed Without Middlemanning
Instead of acting as a pass-through entity, businesses should:
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Build past performance by starting as a subcontractor.
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Develop expertise in contract management, compliance, and oversight.
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Form joint ventures or mentor-protégé agreements to gain credibility.
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Offer real value in project execution, not just administrative functions.
The idea of middlemanning may seem like an easy entry point into government contracting, but federal procurement rules actively discourage it. Contractors who fail to provide real oversight, expertise, or direct contributions are unlikely to win or keep contracts. Instead, focus on building capabilities, gaining past performance, and developing real expertise in federal contracting.
At US Federal Contractor Registration (USFCR), we help businesses navigate federal contracting, ensuring they remain compliant while maximizing opportunities. Whether you need assistance with SAM registration, bid preparation, or compliance strategies, our team is here to guide you through the complexities of federal procurement.
To speak with a Registration & Contracting Specialist, Call (866) 216-5343
