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The "prime contractor" is the one responsible to the client for all of the goods and services in the contract; a "sub-contractor" can be hired by the prime contractor for nearly anything the prime doesn't want to do or can't do in adequate volume or quality or time, as required by the contract.

Some clients, such as the U.S. government, may restrict the types of companies or deliverables that can be "subbed out". For example, there is often a "buy American" clause that provides an advantage for a company owned by Americans, especially if it is also located in America. In other cases, any foreign involvement could be strictly prohibited, such as work on weapons systems and the like. There may also be cases in which the prime contractor must disclose the list of subs as part of the initial proposal, so the client can decide how much risk it is willing to take.

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