In the never-ending search for new customers and better profit opportunities, there’s a single source of new revenue opportunities that far too few small business owners are recognizing: the U.S. government.
The federal government is a huge organizational entity—and just like any other business or organization, the government needs to purchase goods and services in order to function effectively.
Everything from military vehicles and equipment to paper clips and Post-its—from contracted defense, policy, or marketing expertise to transportation and janitorial services—are routinely contracted by the federal government to businesses of every size. Particularly if you sell to businesses or nonprofit organizations, there’s a good chance you could market your services to government agencies as well.
Yet despite these opportunities, even small business owners who are aware of government contracting opportunities find a multitude of reasons to avoid seeking government contracts: They find the process intimidating. They think their firm wouldn’t be considered. They’re wary of dealing with endless paperwork and bureaucratic red tape. The excuses and hesitations go on and on and on.
Why Seek Government Contracts for Small Business?
Yet despite these perceived downsides, there are a lot of good reasons to seek government contracts for small business, and business owners who ignore these opportunities are missing out. Let’s take a look at just a few of the reasons that your small business should actively pursue government contracting opportunities as part of your customer development strategy.
The World’s Largest Buyer
With an annual contracting marketplace of between $350 billion and $500 billion, the U.S. federal government is the world’s largest single buyer of products and services. Ignoring the contracting opportunities available through the federal government means effectively writing off the single largest avenue for finding new customers.
Favorability to Small Businesses
Of the approximately $350 billion that the U.S. government spends annually on federal contracts, the law requires that 23% of those funds be allocated to small businesses. Now, that might not sound like a huge figure—but in what other bidding scenario do you have any sort of guarantee that the prospect will choose a small firm like yours over a much bigger name company with more resources? In private industry, that’s virtually unheard of.
What’s more, through the Federal Procurement Data System, you actually have the ability to identify government agencies that aren’t yet meeting that 23% target. If you respond to a request for proposal from an agency in this circumstance, you’re almost guaranteed preferential consideration over non-small business firms.
More Information Gives Small Businesses a Leg Up
Think about the last proposal or bid you sent to a prospective customer. When preparing that bid and setting your rates, how helpful would it have been to know exactly what the customer was looking for and how much they were prepared to spend? It would be a game changer! Yet when you’re bidding on government contracts for small business, this dream can be a reality every single time.
Federal agencies are required by law to create written budgets annually detailing exactly what they intend to purchase and the funds they have allocated for those purchases. And the best news for business owners? Those budgets are available in the public domain through the Office of Management and Budget (OMB) website. If you’re willing to dig in and do some research, you can get the inside scoop on your prospective customer’s strategy and goals for the contract you’re proposing as you prepare your bid.
How to Register for Government Contracting
Now that you’ve been convinced of the value of government contracts for small business, let’s talk about how to get started with government contracting. As you may have assumed, a few extra steps are involved in qualifying to serve as a contracted vendor for the U.S. government, and that includes registering in what’s called the System for Award Management.
Obtain Your DUNS Number
For each physical location of your business, you need to obtain a Dun & Bradstreet D-U-N-S Number before proceeding with registration for government contracts. You can obtain a D-U-N-S Number for free using the online D-U-N-S Request Service.
Find Your Company’s Relevant NAICS Code
Most businesses also need a North American Industry Classification System (NAICS) code, which classifies your business’s industry, country, and economic sector for purposes of government contracting. This code is needed in order to register your business.
Consult the Small Business Administration (SBA) for guidance on identifying your industry code, keeping in mind that if your business operates across multiple industries or sectors, you might need to report multiple NAICS codes.
Determine Your Business Size
You might assume that determining your business’s size isn’t something that requires much thought. After all, it’s your business. You know how big or small it is! However, for the purposes of qualifying for set-asides of government contracts for small business, you need to qualify according to SBA size standards. One of the first steps in becoming a government contractor is to accurately determine if you can qualify as small under SBA size standards. In other words, you must be defined as a small business when submitting proposals for small business contracts.
To help you easily answer this question, the SBA offers a Size Standards Tool, which uses your NAICS number along with some basic information about your business to determine whether it qualifies as an SBA-designated small business.
Register in the System for Award Management
More commonly known as SAM, the System for Award Management is a database maintained by the U.S. government of companies that are interested in government contracts. Whereas a business customer in the private sector might come across your business on Google, LinkedIn, or some other search or social network, decision-makers at government agencies are using SAM to identify potential vendors.
For this reason, small businesses looking to obtain government contracts should invest a similar level of effort into creating a compelling and search-friendly SAM profile as they would spend on search engine optimization or the company’s LinkedIn profile.
To get started, your business will need to register as a government vendor in the SAM system. While your SAM profile must be updated at least once a year to remain active, firms committed to obtaining government contracts should update and refine their SAM profile at least quarterly, if not monthly or more.
- Completing Your Small Business Profile: As you fill in your SAM profile for the first time, start by registering for the site and running a few different searches for businesses similar to yours to notice what information their profiles include. Just like with traditional search engine optimization, the keywords you include are highly important. However, keep in mind that the services you offer to a government customer might differ slightly from your private sector offerings—meaning your search terms may differ as well.
- Writing Your Capability Statement: Your business’s capability statement is perhaps the most important section of your SAM profile. This is the government version of your elevator pitch—your opportunity to concisely explain what your business does and how your offering may be beneficial to government customers.
Remember here that while you’re pitching to a government agencies, the decision-makers within those agencies are real people just like you and me. Avoid the temptation to share too much information or to fall into overly technical and bureaucratic descriptions of your products or services. Working with a government agency doesn’t require stifling the personality behind your brand!
Solicit Past Performance Evaluations
For small businesses new to government bidding, it may be worthwhile—though not always required—to obtain an Open Ratings Inc. Past Performance Evaluation. Performed by a private sector of the Dun & Bradstreet Co., this independent auditing and rating system analyzes survey responses from your past customers to calculate a numerical rating of your past performance.
Finding Government Contracts for Small Business
Beyond registering on the System for Awards Management to allow government agencies to seek out your small business, there are also active steps you can take to identify government contracting opportunities that would be a fit for your company’s products or services. Here are the primary means you’ll want to use to find government contracts for your small business.
The Federal Business Operations site, FBO.gov, is your go-to resource for all currently open opportunities for contracts with the federal government valued at $25,000 or more. In addition to searching current opportunities, you can also use the site to view previously awarded contracts, which may help you with preparing future proposals.
Understanding Prime Contracts Vs. Subcontracting
While the FedBizOps database handles direct contracts with government agencies—known in government terms as prime contracts—there is another form of government contracts for small businesses to explore: subcontracting.
As the name suggests, subcontracting opportunities involve negotiating contracts with current government contractors to complete a portion of the work designated by the prime contractors. In other words, subcontractors are the vendor’s vendor. Subcontracting on government contracts can be both a lucrative business opportunity and a great chance to learn more about government contracting before attempting to bid on prime contracts directly with the U.S. government.
Similar to FedBizOps, the SBA maintains a separate searchable database called SUB-Net specifically to highlight available subcontracting opportunities. If you’re just getting started with government contracting or would like a layer of experience between government agency clientele and your own business, searching SUB-Net for subcontracting opportunities is a great starting point.
Marketing Directly to Agencies
If you’re in a very specific industry or know exactly which government agency your small business is most suited to contract with, you do have the option of marketing your firm directly to either targeted agencies or prime contractors. To do this, you would use FedBizOps and SUB-Net to identify existing procurement needs and then communicate directly to those agencies why your company is the right choice to fill that night.
Opportunities to connect with agency decision-makers are available through procurement conferences, industry events, and even contract matchmaking events.
Even if an agency doesn’t have a current contract opening, taking advantage of direct marketing opportunities will help your business to establish its name among the government contracting community as a key “contract player” in your line of work. Check out the website for your local SBA district office to find trainings and events in your community that involve your target agencies.
Working With a Bid-Matching Service
For small businesses with more generalized offerings that are unsure of their ideal government agency fit, subscribing to a bid-matching service can be a useful means for finding government contracts. Most local Procurement Technical Assistance Centers offer free bid-matching services, but you can also retain private and more customized services at a reasonable cost. Working with a bid-matching service also offers the added benefit of connecting you to experienced government contracting mentors who can help guide you through the proposal and procurement process.
Prepare Your Government Contract Proposal
Though you likely have extensive experience creating proposals and scope of work orders for prospective clients in the private sector, little can prepare you for the unique process of preparing a government contract proposals. In fact, completing a bid or proposal for a government agency may be more akin to completing your taxes or a stack of forms for the DMV.
Even so, there is plenty of opportunity to share your unique value add and let your business shine within the pages of your proposal—as long as you fit within the confines of agency formats and expectations.
Understanding the Solicitation Type
There are a few different avenues that government agencies use to request proposals from potential government contractors, and as you may have come to expect, each comes with its own jargony acronym and paperwork rundown. But the type of solicitation used for a particular contract tells you a lot about what the agency expects from your proposal, so it’s important to understand the difference.
Following are the main three solicitation types you’re most likely to see on FedBizOps or any other listing of government contracting opportunities.
- Request for quotation (RFQ): A request for quotation is the simplified version acquisition procedure for government agencies typically used for contracts under $150,000. However, while this is by government standards consider a “simplified” proposal process, you may still find it more involved than other scope of work proposals your business has completed for private entities. Consult the FedBizOps database to view past RFQ proposals to better understand how an RFQ should be successfully completed for a business in your industry.
- Request for proposal (RFP): Requests for proposal apply to larger negotiated acquisitions, meaning they allow for some back and forth between the government agency and the prospective vendor to settle upon mutually agreed pricing and terms.
The process starts when a government agency issues an RFP describing the requirements of the contract, anticipated terms and conditions, and the information needed from applicants as part of the proposal. Complete and accurate information is key to responding to a request for proposal, so if you have any confusion about how to respond to certain provisions within an RFP, ask the contracting officer for clarification before submitting your proposal.
- Invitation for bid (IFB): Invitations for bid refer to sealed solicitation processes for government procurement, meaning there is no negotiation between agency and vendor. The submitted bid package is considered final, and price point is most often seen as the key differentiator between qualified bidders.
Because of the sealed and final nature of the bidding process, responding to an IFB may be the case in which you’ll want to be most cautious in completing your documentation and setting your prices the first time. There won’t be an opportunity for any discussion or amendment, so if you overshoot the bid or leave out key information, the agency will almost certainly reject your bid in favor of another candidate.
Following the Uniform Contract Format
No matter the specific type, all solicitations share in common the expectation that aspiring contractors follow a very specific and uniform format. Success in procuring government contracts has as much to do with your ability to follow instructions in the proposal formatting and submission process as the substance of your proposal. So, make sure that you follow all schedules and forms within the solicitation in the exact order, structure, and time frame that is requested.
The SBA’s free “Government Contracting 101” online course is a great resource for in-depth understanding of the purpose, forms, and expectations for each of the 10 sections within the Uniform Contract Format.
Pricing for Government Contracts
Federal contracting officers are expected to ensure that supplies and services for government agencies are purchased at fair and reasonable prices, and they conduct a significant amount of market research to understand typical pricing before making a proposal solicitation. At the same time, most solicitations are met with a competitive number of bids, leaving you as the business owner tasked with issuing a competitive bid while still reasonably maximizing your profit potential.
As you can imagine, setting your contract pricing well will be critical to your ability to win profitable government contracts. You need to consider your costs both during bidding and the fulfillment of the contract while allowing enough room for day-to-day overhead.
Remember as you bid that contracting officers aren’t necessarily seeking only the lowest price but rather the best value with all factors considered. Look for ways to add value in your bid without increasing overhead costs to maximize your company’s appeal as the “best value” offer.
Additional Resources for Small Business Owners
While we hope this has been a useful primer on how to obtain government contracts for small business, there is certainly more to be learned within this expansive and complex industry. Fortunately, the SBA as well as other federal agencies have gone to great lengths to provide valuable resources for small business owners interested in federal contracts. Here are a few of the most useful resources we recommend.
The SBA 8(a) Program
Small, minority-owned, or otherwise disadvantaged businesses may benefit from participating in the SBA’s 8(a) program—a business development and mentor program that, among other benefits, provides training and resources to help participating businesses compete in the federal contracting marketplace.
SBA Government Contracting Classroom
Do you want to develop a more in-depth understanding of government contracting before diving into the federal marketplace? The SBA Government Contracting Classroom is a wonderful online course series that thoroughly explains what you need to know about government contracts for small business. After this article, the online courses here are a great step to learn more about the specific forms and processes involved in registering for, finding, and winning government contracts for your small business.
Procurement Center Representatives
If you feel more comfortable learning about government contract opportunities in an in-person environment, seek out your local SBA Procurement Center Representative (PCR). Procurement reps offer training, mentoring, and counseling to aspiring government contractors along with in person matching events between agencies and qualified small businesses. Here’s how to find the PCR in your area.
GSA or SBA Mentor-Protege Program
Both the SBA and the Government Services Administration offer mentor-protege programs to help qualified small businesses connect with more experienced government contractors.
While the SBA Mentor-Protégé Program is open exclusively to participants in the 8(a) development program, you might be eligible to participate in the GSA Mentor-Protégé Program with no additional business development requirements.
There’s no denying the learning curve involved in entering the government contracting space. But as with everything else you’ve taught yourself and learned on the go as a small business owner, procuring government contracts is absolutely a skill that you can learn.
Do a lot of research, find your lane, and don’t be afraid to ask for help from a contracting veteran. Through an investment of time and effort, you can absolutely expand your small business into the lucrative world of government contracting!
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