Growing BusinessSAFEGUARDS

What You Need to Know About Government Contracting


It’s a massive market: The U.S. government is the largest purchaser of goods and services on earth. It awards some $500 billion in contracts each year. And about 23 percent these contract dollars are earmarked for small businesses. At any given time, there are typically more than 25,000 active federal contracts looking for bids. There’s plenty of work out for bid with state and local governments as well.

But pursuing contracts with government agencies is not for the faint of heart. In addition to the many procedural milestones involved, you need to know your business’s capabilities backwards and forwards. Gaining an understanding of the bidding process is essential—and you’ll need to build relationships along the way.

Still, if you’re willing to put in the time and legwork, chances are, you can find a successful niche in the wide world of government contracting.

How Do Government Contracts Work?

A contract is a contract, right? Wrong. There are some major differences between government contracts and those your business may pursue in the private marketplace. The biggest difference is probably the hassle factor.

You can expect to have to go through a lot of upfront heavy lifting in registering and certifying your business. Government contracts also typically involve considerably more paperwork in the bidding process, along with doorstop-sized RFPs. There are also a slew of compliance issues to deal with once you secure a contract. But on the bright side, the federal government makes payments on its contracts every two weeks—and its checks rarely bounce.

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How to Qualify for Government Contracts

To register as a federal contractor and qualify as a small business, you’ll need to begin by:

  • Registering your firm with the federal governments’ System for Award Management (SAM)
  • Obtaining a Dun & Bradstreet D-U-N-S Number, a nine-digit ID number for each physical location of your business
  • Determining the North American Industry Classification System (NAICS) code for your company. This classifies your business’s economic sector, industry, and country
  • If you’re interested in working with the GSA (U.S. General Services Administration), you’ll also need to obtain past performance evaluations of your company.
  • If you intend to qualify as a business with an SBA program that grants preferred access to certain federal contracts, you’ll need to go through further qualification steps to meet these programs’ requirements.
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Complying with EEOC & DOL Requirements

Along with government contracts come many responsibilities. The terms of federal contracts require businesses to meet certain regulatory requirements, including labor, OSHA, environmental, and other regulations. You are also expected to comply with equal employment opportunity (EEO) and Department of Labor (DOL) regulations.

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Opportunities for Women-owned & Disadvantaged Small Businesses

The SBA is charged with making sure that historically disadvantaged business owners are given the chance to win federal contracts. These include businesses that are at least 51 percent owned and run by:

  • Socially and economically disadvantaged individuals
  • Women
  • Service-Disabled Veterans

Another special set-aside for federal contracts by the SBA is for businesses located in Historically Underutilized Business Zones (HUBZones). The federal government has mandated that three percent of all federal prime contract dollars (those awarded directly by the federal government) go to HUBZone-certified small businesses.

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