The federal government is the largest customer in the world. While small businesses are constantly on the lookout for increased revenue and more customers, it can pay to keep in mind that our own federal government can be seen as one enormous customer. Federal government contracting is the way for businesses to tap into this lucrative and stable part of the market.
Unlike conventional customers in the private sector, working with the federal government demands a rigorous process and a specific type of arrangement. Federal government contracting is not a simple process, but it is an accessible process, one that is available to any qualified business.
It is a fact that the federal government makes a great customer. But federal government contracting is an involved business. There are many steps and a lot of regulations when it comes to working with the federal government. But taking on the learning curve for federal government contracting is worthwhile since the payoff can be good, and the stability of working as a federal government contractor can be extremely valuable.
What is a federal government contract? How does federal government contracting work? And how can you get into the business of federal government contracting? This guide will introduce you to the processes of federal government contracting.
What is a federal government contract?
A federal contract is a legal agreement between the federal government and private businesses to provide goods and/or services for the benefit and use of the federal government. The government uses contracts to provide funding to private businesses to work in areas like development and research. These contracts are also extended to small businesses to provide materials and equipment to all branches of the federal government.
The federal government is the largest buyer of products and services in the world. Military installations alone account for a $200 billion industry. However, government contracting extends to things like office supplies, janitorial services, and just about anything the federal government may need to keep offices, installations, and services running. What this means for small businesses is that there are tremendous opportunities in federal contracting.
Federal law stipulates that all federal agencies must allocate a specific amount of their contracts to small and minority-owned businesses. Something like 23 percent of government contracts is awarded to the following types of businesses:
- Small, disadvantaged companies
- Women-owned businesses
- Companies in HUBZones
- Disabled veteran-owned companies
In addition to the obvious federal contracts like defense contractors, there is an entire market for small businesses and businesses that have historically been marginalized. The bottom line is that there is ample opportunity for just about anyone in federal government contracting.
How does federal government contracting work?
Federal contracts are heavily regulated. They are governed by a strict set of terms and conditions to ensure fairness and safety and to ensure that contracts are awarded according to the laws that regulate businesses that provide goods and services to the federal government. Full details on how federal government contracts are regulated can be found on the Federal Acquisition Regulation (FAR) website.
Federal contracts are generally awarded for 1-3 years. Provided a business meets the qualifications and meets the terms of the contract, these can be renewed, in some cases indefinitely. One of the advantages of federal contracting is that it can be a long-term source of stable revenue.
There is a lengthy bidding process for federal contracts. This bidding process is also heavily regulated. The federal government provides a detailed guide for how to bid on federal contracts. You can find most of this information in the Federal Procurement Data System.
Types of federal government contracts
There is a long list of types of federal contracts on the website of the federal government. Each of these federal contracts is broken down into subcategories of various types. For example, there are contracts to provide partial services that fulfill the demands of another type of contract. These can get extremely complicated.
A general contract with the federal government varies according to the level of commitment and the number of goods and services a contractor can provide. They also vary according to how much money the federal government has allocated for specific types of goods and services. These general contracts are split into two basic types:
Fixed-price contracts: These are federal contracts in which the money paid to a contractor is determined from the outset, and it is the sole responsibility of the contractor to assume the costs of providing goods and/or services, complete with the potential profit or loss that may come from the work.
Cost-reimbursement contracts: These contracts are negotiated to provide payments that account for the cost to the contractor and the business providing the goods or services takes the profit or loss based on the terms of the contract.
Again, these general contracts can be further broken down. For instance, general contracts also include things like incentive contracts which provide added monetary incentives for providing work, goods, or services of a specific quality or within a set timeframe.
Executive departments on federal government contracts
All government contracts are overseen by the Office of Federal Procurement Policy. This is the agency that administers the federal money that is allocated for federal contracts, and it is the enforcement agency for the complex laws and regulations that attend federal contracts.
How do I become a government contractor?
When first approaching the prospect of getting into federal contracting, you will see that it appears mind-blowingly complicated. The key to this process is to break it into manageable steps. The first steps toward becoming a federal government contract include:
Register your business name
If you have not already taken this step, decide on a name for your business and have the name legally registered. This protects your brand from legal implications, and it gets you in line for legal and tax benefits. The federal government provides a guide and space to legally register your business name.
Apply for a federal tax ID number
Your federal tax ID number functions a lot like your social security number. The difference is the federal tax ID number will be used to maintain your business taxes. Applying for a federal tax ID number is easy and convenient. You simply log onto the IRS website and follow the steps provided.
Request a DUNS number
Your DUNs number is similar to your federal tax ID number. This too is easy to do and convenient. Simply go to the Dun & Bradstreet official website and follow the steps provided. It usually takes 2-3 business days for this process to be completed. To complete the process of acquiring your DUNS number, you will need:
The legal name of the company (write it exactly how it appears on your federal tax ID)
Physical address
Business’s contact information
Name of the CEO or business owner
Legal structure or type of business
Year the company was established
Primary line of business
Total number of employees (including both full and part-time staff)
Make sure you know your North American Industry Classification Systems Code (NAICS)
To do this step you need only go to the website to see which NAICS code applies to your business. Select the codes that best apply to your business and the services/products you provide. If you have more than one type of business, you will need to select NAICS codes that apply to each.
Confirm your business size
To check to make sure your business size fits within the definitions as spelled by Small Business Administration (SBA), simply check the Size Standard Tool available from the US government.
Register your business with the System for Award Management (SAM)
The final step to begin bidding on federal contracts is to register with SAM. This too is fairly easy. Go to the SAM website and register. To prepare for this step, make sure you have the following.
- DUNS number
- Taxpayer Identification Number (TIN) and taxpayer name
- Contractor and Government Entity (CAGE) code for locally registered entities or NATO Commercial and Government Entity (NCAGE) code for foreign entities.
- Financial and banking information for your Electronic Funds Transfer (EFT)
Who publishes federal government contracts?
All federal contracts available for private businesses are listed on the System for Award Management (SAM) website.
The Federal Register is the daily journal of the United States Government, and it also lists contract opportunities.
How to bid on federal government contracts
The Small Business Association (SBA) also lists federal contract opportunities along with guidelines on how to bid for these contracts.
After searching the databases for available government contracts, settle on which proposals you can manage and begin the process of bidding.
Carefully review the RFPs
The Request for Proposal is posted by the federal agency that requires bids. This document provides all the important details for how you will craft your bid. These RFPs can be quite long, more than 100 pages. This step requires patience and time.
Review supplies/services and prices/costs
This section will list all deliverables for the federal contract. It will provide a detailed list of everything that will be expected of your company in order to meet the terms of the contract. This section of the RFP will also provide you with details on all billable items, things you can charge the federal government for to complete the job. From this section, you can determine pricing. There are different pricing structures. Some provide funds for expenses upfront; others provide mechanisms for reimbursement. These will be detailed in the government contract and RFP.
Descriptions/specifications/statement of work
Section C of the RFP will provide details on what is expected of the contractor. This is where you formulate a detailed plan of action and description of the work you will provide. You need to formulate this plan with market considerations in mind since you will be bidding against other contractors.
Outline your contract proposal
The key to crafting your proposal is strategic planning. Do a proposal layout to go over each point in the RFP and the ways you will address them in your proposal. Once you have formulated a sound proposal that accounts for costs, the type of contract you are after, and your realistic ability to meet the demands of the proposal, you are ready to put in your bid.
Sources to stay current on government contracting
Below are the primary sites to search for federal contracts:
System for Award Management (SAM) website.
The Federal Register.
The Small Business Association (SBA).
Federal government contracts FAQS
What is a federal government contract?
A federal contract is a legal agreement between the federal government and private businesses to provide goods and/or services for the benefit and use of the federal government. The government uses contracts to provide funding to private businesses to work in areas like development and research. These contracts are also extended to small businesses to provide materials and equipment to all branches of the federal government.
How does federal government contracting work?
Federal contracts are heavily regulated. They are governed by a strict set of terms and conditions to ensure fairness and safety and to ensure that contracts are awarded according to the laws that regulate businesses that provide goods and services to the federal government. Full details on how federal government contracts are regulated can be found on the Federal Acquisition Regulation (FAR) website.
Can small businesses get federal contracts?
Federal law stipulates that all federal agencies must allocate a specific amount of their contracts to small and minority-owned businesses. Something like 23 percent of government contracts is awarded to small businesses.
How can Federal Gov Advisors help you find these contracts for you?
As you can see, there is a lot to getting federal contracts. It is a lengthy and complex process with many regulations to contend with. Getting help from professionals who know the complexities of bidding on federal contracts is the best way to get your foot in the door as a federal contractor.
Federal Government Advisors (FGA) is a Tampa-based consultancy that specializes in contract consulting. The goal of our efforts is to put our clients on a path to win government contracts. We are not yet another “federal award registration” firm. We have in-house experts who can make capturing, bidding, and winning on federal, state, and local work radically smoother than it would be for a novice to navigate the federal contract system themselves.
The process we implement doesn’t add deadhead to your company’s operation — it makes your existing processes and endeavors more abundant. We are not in business to change the fundamental underpinnings of your operation — only to enhance them.
Federal Government Advisors exist to make opportunities available to companies that otherwise would not have had them. Whether it be a simplified acquisition contract or a protracted formal bidding process — our resources go a long way to level the playing field for small and medium-sized businesses. Many of our clients have made lucrative mutually beneficial arrangements with other clients of ours as a result of our robust system and protocols for bringing buyers and sellers together.
