How to Get Government Contracts: Tips for Small Businesses
Most small businesses are B2B or B2C. But there's a third option - becoming a government contractor. Here’s what you need to know.
The US government is the world’s largest consumer.
Too few small business owners notice the opportunity they might have working for the US government. Sure, it is a completely different way of working. If it works for you, it could be a wise business decision.
The federal government actively hires small businesses as federal contractors.
So how do government contracts work?
Here’s What We’ll Cover:
How Do Government Contracts Work?
There are two kinds of government contractors that you may fall into:
- Prime contracts
You secure these by bidding on available contracts directly with federal agencies.
- Subprime contracts
This is when you join a prime contractor team for a specific task or project that they may need you for. Subcontracting opportunities tend to be on a smaller scale.
Any small business can register to become a contractor. As long as you comply with the rules and follow the steps, you will have the opportunity to bid on contracts with government agencies easily.
What Are the Benefits of Becoming a Government Contractor?
- The US Government prioritizes small businesses
The federal spend on contracts per year is $500 billion. Their aim is for 23% of that $500 billion to go to small businesses like yours!
- The government supports BIPOC and women-owned businesses
Diversity matters to the administration. That is why small and disadvantaged businesses get a leg up when it comes to federal government contracts. You could have a better chance of securing a contract opportunity if you belong to a minority category.
- They set you up for success
Is there a single customer that you’ve had that legally has to show their entire budget and strategy for the work you are doing? The US government does! You can find the allocated budget for your sector on the Office of Management and Budget website at any time. This can help you create a bid that is more likely to be accepted.
How to Register to Get Federal Contracts
Step 1. Get a Duns Number
A DUNS number (Dun & Bradstreet number) is a nine-digit ID for your business’s physical location. You will need your business contact details, addresses and legally registered names to apply for one. Don’t worry if you are home-based! You still qualify. You can get your DUNS number here.
Step 2. Find Your NAICs Code
The North American Industry Classification System is how the government classifies goods and services. You’ll need to best match your specific industry and service to a NAICS code. The full list is here.
Step 3. Meeting Business Size Standards
The SBA has strict guidelines as to what constitutes a small business. This includes the number of employees, size of your establishment and, sometimes, turnover. There is a size standards tool that is very helpful in determining if you qualify.
Register With the System For Award Management (SAM)
Now it’s time to fully register with Uncle SAM. If you have all the details above, you can complete your application on the SAM website.
Once you're signed up, you are now part of the federal marketplace.
Creating a SAM profile is like your resumé. You want to make it as attractive as possible to give you the best chance of securing future bids. Business contractors like you are all competing for potential opportunities so you need to stand out. This is especially true for prime contracts.
You will use your SAM portal to see potential jobs. During the bidding process, the federal agency that is hiring will review the business profiles of all applicants.
Make Sure You Follow the Rules
Of course with all things federal, there are plenty of regulations to abide by. If becoming a government contractor is part of your long-term strategy, it is worth keeping up to date with regulations in your industry. Make sure you keep a clean house and you’re more likely to secure regular work.
You can read up on how the government purchases goods and services here.
You could be a contractor to the largest buyer in the world! The United States government provides many opportunities to small businesses. If you can stomach the extra paperwork, you could end up with a lucrative arrangement with Uncle Sam.
For more in-depth guides for small businesses, our resource hub has everything you need!