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Defence Contracting: Everything You Need To Know

Updated: Sep 19, 2023

This article addresses all the questions we receive from businesses that just starting to enter the world of Defence Contracting. If you're not sure what a defence contractor is or have never considered working for one, this article is for you!

Many businesses don't know where to begin when they want to start working with government agencies. There are many opportunities out there and it's important that you understand what they are before making any decisions on how you want to proceed.

What is defence contracting?

Defence contracting is the procurement of goods, services and works from the private sector by military forces or government agencies. It is a form of outsourcing and off-shoring.

Defence contractors may provide any product or service that meets the needs of the military or government agency that purchases the contract. These needs range from food, water and fuel to information technology (IT), administration and human resources.

The majority of defence contracts are awarded to large businesses with extensive experience in the industry. However, smaller businesses have also been successful in obtaining contracts for specific projects or programs.

Important note: defence contractors may be either publicly or privately held corporations, enjoying close relationships with their customers that can involve substantial political influence. In addition to the military sector, defence contractors also sell to non-military government agencies such as law enforcement agencies, intelligence services, emergency services and scientific research agencies.

Defence contract types

There are several types of contracts in the defence contracting industry. Here are the most common ones:

Fixed-price contracts - are a type of contract where the contractor agrees to deliver a product or service at a fixed price. The customer is not responsible for any cost overruns, and the contractor assumes all financial risks related to the success of the project.

Cost reimbursement contracts - are a type of contract in which the contractor is paid for costs incurred and other allowable expenses. In a cost-reimbursement contract, the contractor is paid for his or her costs and any profit as determined by the government. The government does not reimburse the contractor for unallowable costs or overruns in labour or material.

Time and materials (T&M) contracts - are used in the defence contracting industry when the buyer has a requirement for a work product but does not have any specific end-user requirements. The time and materials contract will provide the contractor with payment for their services based on the hours that they spend on performing the work.

Indefinite quantity, indefinite delivery (IDIQ) contracts - are a type of government contract in which the government can order as many units as it needs and for as long as the contract is in place. These contracts are typically used for large projects that will require continuous supplies and services over an extended period of time.

Defence contractors

Prime Contractors

A prime contractor is responsible for managing the entire project from start to finish. They may also be responsible for supplying some or all of the equipment required by the project. The prime contractor will then subcontract some or all of their work out to other companies.


Subcontractors are hired by the prime contractor to complete work under a contract with another party (usually the government). Subcontractors usually have their own team of employees who carry out work on behalf of other organisations. They are often hired by larger companies that can't afford to employ their own workforce full-time but need someone to perform certain tasks at a particular time or place.


Consultants are independent professionals who advise organisations on how best to achieve certain goals or complete certain tasks within a set budget.

How to do defence contracting in the right way

Defence contracting is a highly regulated process. The tender process for defence contracts can be complex, and it is important to understand how to conduct business in this sector.

Here are some tips for doing defence contracting in the right way:

Know your market - It's important to understand what your customer needs from you before you start work on a project. If there are any red flags, such as failure to meet deadlines or unrealistic expectations, you need to know about them upfront so you can plan accordingly.

Make sure there's a business case - You should always be able to justify the need for your services with hard facts and figures. Make sure that the numbers add up and that there's no room for error or risk.

To gain more knowledge and direct assistance concerning launching your Defence & Aerospace collaboration journey, contact us at


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