Small Federal Subcontractors Suffer From 'Bait And Switch' Schemes

It's tough out there for a small contractor -- especially when you don't get the work you thought you were going to get.

Almost a third of subcontractors say they've been left holding the bag at one time or another, when they go in on a bid with a main or "prime" contractor and then find out the prime contractor is actually going to use another sub to do the work.

That's according to an American Express survey of small federal contractors cited in a recent Washington Post article, which goes into some detail about the frustrating experience of getting "stiffed" by a prime contractor. Sometimes a prime will take a sub in on the bid because the sub is owned by a woman, a minority or a veteran, and the inclusion of such a company is a requirement in the contract.

But once the prime has the contract secured, it's not uncommon for the sub to learn they've been replaced by another firm that will do the job for less.

It's a problem that small contractors could do without -- particularly now that federal spending cuts have made it tough to get a piece of that government work. The success rate for small contractors going after federal bids has dipped since the onset of the Great Recession, according to a separate American Express survey conducted last year.

And further pain could be in store. If the so-called sequestration cuts take effect next January -- an automatic $500 billion deduction to the federal defense budget that will occur unless Congress can agree on alternative means of reducing the deficit -- there will be even less funding to go around, which will likely put greater competitive pressure on small contractors looking to team up with larger primes.