The U.S. government purchases a surprising number of products and services each year. There are also many small businesses who have products or services they would like to sell to the government. Luckily, a large percentage of the billions in yearly contracts are legally required to go to small companies seeking to do business with the government at the local, state, federal, and international levels.
So, why don’t all small businesses take advantage of government contracts? Because it’s not easy, and most business owners don’t understand the process to win government contracts. For starters, the government requires small business owners to go through a rigid qualification process. But, once you qualify, you’ll be eligible to take a piece of the billion dollar pie.
The qualification process to win government contracts
For businesses wanting to get their foot in the door, there are steps to take and qualifications to meet to successfully win a contract bid.
First, you have to do your research to understand the federal marketplace and how the target agency prefers to purchase goods. This will help you craft your bid. Although price plays a role, so does a strong past performance, experience, and company stability.
Proposals differ but will typically include developing a capability statement and small business profile, as well as a Dynamic Small Business Search profile. After you submit your bid, you may be asked to give an oral presentation. This will likely happen when the agency has narrowed their decision down to two or three bidders.
During the federal procurement process, you may be contacted regularly for more information. This is great because it means they are interested.
All things considered, researching the market and crafting an error-free proposal are the hardest parts of winning a government contract.
Who typically gets government contracts?
Businesses of all types and sizes are allowed to bid for government contracts through municipal and state governments, as well as United States federal agencies. These contracts are usually offered for goods and services, or technical assistance and research.
If your business is successful in acquiring a government contract, it can be used to supplement your current streams of revenue, boost your reputation, and increase your chances for future contract opportunities.
Although multi-million dollar federal government contracts awarded to large companies get most of the attention, don’t let that discourage you from selling to the federal government. There are plenty of opportunities for small businesses as well.
Are there products or services the government frequently buys?
At any given time, government agencies may procure anything from town cars to paper towels. The key is to make sure you have what the government is looking for and successfully bid on the contract. For example, your state government may be looking for leather office chairs in the upcoming quarter.
As a small business, you supply office equipment, but before you bid on the contract, you must meet the specifications of the bid. If the state wants leather chairs and you stock or manufacturer only nylon chairs, you will waste your time bidding on this contract.
Sometimes the government will present a contract for a service, such as disposing of confidential documents. The government may also ask for bids for information technology, technical assistance, intellectual property, or research on a new product design. The only way to know what your state or local government needs is to check out municipal government websites and the Federal Business Opportunities website.
Are you a small business in the eyes of the government?
By law, small businesses receive a large percentage of government contracts, so it’s important to understand the guidelines for submitting bids, as well as what constitutes a ‘small business’ in the eyes of the government.
The government has rigid guidelines about what makes up a small business. To complicate matters, the guidelines vary according to industry. To find out if your company qualifies as a small business in your industry, choose the primary North American Industry Classification System (NAICS) code for your business from this chart.
Then, take a look at the Table of Small Business Size Standards to find the code that lists the gross profits and maximum number of employees that a business in your industry can have and still be considered a small business by the government.
It’s important to know that when searching for contracts, you won’t be limited to your primary NAICS Code. All you need to do is meet the requirements of the solicitations you’re looking for.
Get your DUNS number
Before you can even register to do business with the federal government, you must have a Dun & Bradstreet — DUNS — number for each physical location you operate your business from. The process is fairly straightforward, and you can obtain the number for free and have it within one day using the DUNS request service.
What is a DUNS number?
The DUNS number is a unique nine-digit identifier for businesses that is assigned once the ‘identity resolution process’ determines a company is unique from any other business in the Dun & Bradstreet data cloud.
DUNS Numbers are often used as a reference by business partners or lenders to predict the financial stability of a company — a requirement to apply for government contracts.
Register your business on SAM
You’ll need to create a user account, and register your business on the System for Award Management (SAM) website. Registration is free, and there are tools available that allow you to keep track of your registration status.
You can register by following the instructions in the SAM User Guide. SAM also serves as a marketing tool because government agencies and contractors in search of subcontractors use the database to look for businesses based on size, location, experience, ability, and ownership.
Once your business is registered in SAM and you’ve filled out your small business profile, you’ll automatically be entered in the Dynamic Small Business Search (DSBS) database. Contracting officers use the DSBS to search for small businesses that can fill their contracting needs.
How to sell to the government
It’s a good idea to learn all you can about the process of selling to the government to achieve the greatest success. The Small Business Administration’s Learning Center offers a free, three-part, on-demand course called Government Contracting 101 that you can take at your own pace.
The SBA’s Government Contracting Classroom also offers other self-paced online courses on a variety of topics. You’ll find courses for women-owned small businesses, courses for veteran-owned small businesses, courses about how to prepare government contract proposals, and more.
You can prepare long before bidding on a government contract by:
- Being sure that bidding on a government contract is best for your company. The process takes time and company resources. You may want to create a plan detailing staffing needs and how much money you hope to gain from the contract.
- Researching the demand for your products or services.
- Researching the price for your products or services.
- Making sure your business is eligible.
What’s the best way to find contracts?
Now that you’ve done all of the hard work, it’s time to begin your search for contracts. There are various ways to do this.
Prime contractors that have large contracts with the government have to provide subcontracting opportunities as part of their contract, and they list those opportunities on SUB-Net. If you’re registered to do business with the government, you can answer these solicitations. You should start at the SUB-Net database, then enter the NAICS code for your business to find solicitations.
When a federal agency has a contract that’s valued over $25,000, they must list it on the Federal Business Opportunities database. Once your business is registered, you can search these opportunities and bid on them.
Search GSA Schedules
This database lists government-wide, long-term contracts for products and services. Billions in purchases flows through this database every year. GSA Schedule purchases represent a large percentage of all federal procurement spending. Acquiring a Schedule contract can open doors for your company, but doing so takes commitment, time, and effort on your part. GSA offers a vendor toolbox to help small businesses get acquainted with its process.
What is an RFP?
RFP stands for ‘request for proposal.’ It’s an invitation from a government entity or agency to bid on contracts for products or services. But an RFP is more than just a request for a bid or quotation. It’s the most cost-effective solution to bid on contracts based on the criteria laid out in the request.
When a government bid becomes available, the government agency writes an RFP. It’s then that interested companies can submit proposals. RFP’s are usually issued when the requirements of the contract are $25,000 or more, or when choosing a supplier can’t be done based solely on price. Often the reason for an organization to put out a request is to make sure they receive multiple bids.
If your company decides it’s prudent to respond to a request for proposal, you must write a proposal that provides all of the information requested in the RFP. After you have included all essential information, proofread your proposal for mistakes. Any errors may lead to your proposal being rejected by the government contracting office.
Protesting or disputing a government contract
If your business bids on a contract and the government makes a decision that you disagree with, you have options to protest or dispute the decision. In general, there are rules in place that give you the right to file a bid protest or to protest the award of the contract to another bidder. You also have the right to dispute a decision if a problem arises after you have won a contract.
You may want to file a protest or dispute if the winning bid is:
- A bid that is vague or lacks detail, making it difficult to understand what’s needed.
- An overly detailed bid (just the opposite of the above).
- A bid that is too restrictive or lists specs that are not needed.
- A bid that contain ambiguous language.
- A bid that conflicts with HUBZone issues. (The HUBZone program provides assistance to poor or depressed geographic areas by awarding federal contracts to small businesses that hire workers and operate in those areas.)
- The failure of the agency to list the contract for small businesses.
When you dispute or protest a contract, the agency typically prefers you try to resolve it with them prior to filing with the General Accounting Office (GAO) — an independent agency that provides government agencies with information to help save money and work more efficiently. GAO provides an efficient and inexpensive forum for the resolution of bid protests.
Experience is the best teacher
The government provides two mentoring programs to help small businesses that want to win contracts. The first is the General Services Administration GSA Mentor-Protege Program. Qualified business owners will be paired with experienced owners of similar companies who can help them maneuver through the system.
Businesses that are socially or economically disadvantaged and qualify for the SBA’s 8(a) program will also be paired with a mentor in the SBA’s Mentor-Protege Program who has experience in federal contracting.
After you’ve done the hard work and secured a government contract, make sure you have the software to manage your contracts securely and efficiently. In addition, if you are interested in learning more about smart funding options for your small business, explore your possibilities with Quickbooks.