GOVERNMENT CONTRACTS FOR SMALL BUSINESS

by Paul Harry Dec 04, 2021

In the search for better small business funding and new customer opportunities, there’s a source of new revenue opportunities that far too few small business owners recognize: the U.S. government.

The federal government is a huge organizational entity — and just like any other business, they need to purchase goods and services to function effectively. Through government contracts for small businesses, you just might become one of those suppliers.

Everything from military vehicles and equipment to paper clips and Post-its is routinely contracted by the federal government to businesses of every size. 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 — not the least of which is that they find the process intimidating.

Here, we’ll tell you why you should put your fears aside and consider government contracts for small businesses. Then, we’ll show you how to find government contracts for bids and how to put together your application so you have the best possible chance of winning that bid and the business.

HOW GOVERNMENT CONTRACTS WORK

Requesting proposals, evaluating bids, and awarding contracts should be on a level playing field. The government should consider a bid from any qualified business with set-aside and sole-source contracts, federal agencies must publicly list their contract opportunities. Some of these contracts are set aside only for small businesses.

At times, set-aside contracts might make up certain types of tasks on larger contracts. In others, entire contracts may be reserved for small businesses. When a contract is set aside for one specific small business, it’s called a sole-source contract.

WHY SEEK GOVERNMENT CONTRACTS FOR SMALL BUSINESSES?

There are a lot of good reasons to seek government contracts for small businesses, and business owners who ignore these opportunities are surely 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:

1. The Government is the Largest Buyer in the World

With annual liquidity between $350 billion and $500 billion, the federal government of the U.S is the world’s largest buyer of products and services. Ignoring the contract opportunities made available by the federal government means writing off the single largest means for engaging new customers.

2. Government Contracts favor Small Businesses 

Of the approximate amount of $500 billion that the U.S. government annually spends on federal contracts, it’s a goal to allocate 23% of these to small businesses.

Might not sound like a huge figure but just where else do you have any sort of certainty that the prospect will choose a small organization like yours over a much bigger company? In private industry, that’s almost impossible.

What’s more, through the Federal Procurement Data System, you are well able to identify government agencies not attaining the 23% target. If you respond to a request for a proposal from an agency in this circumstance, you’re almost guaranteed preferential consideration over non-small business firms.

3. More Information gives Small Businesses an added Advantage

Knowing how much your prospect would be willing to spend would be a game-changer. Yet when small businesses bid on government contracts, the dream of attaining this fit of knowing the mind of their prospects would be a dream.

Agencies of the federation, by law, are to annually create written budgets, detailing all they intend to purchase and the funds they have allocated for those purchases.

What’s in for business owners? These budgets are made available in the public domain through the Office of Management and Budget (OMB) website. Anyone willing to take a peep in and do some research could get an inside scoop on the prospective customer’s strategy and goals for the contract you’re proposing as your bid is prepared.

HOW TO REGISTER FOR GOVERNMENT

Having convinced you of the value of government contracts for small businesses, we’d talk about getting started with government contracting. A few extra steps are involved in qualifying to serve as a contracted vendor for the U.S. government, and that includes registering in the System for Award Management.

Here’s how to register:

1. DO OBTAIN YOUR DUNS NUMBER

For each physical location of your business, you need to obtain a Dun & Bradstreet DUNS Number before proceeding with registration for government contracts. You can obtain a DUNS Number for free using the online DUNS Request Service.

2. GET YOUR COMPANY A NAICS CODE

Most businesses need a North American Industry Classification System (NAICS) code, which classifies the business’s industry, country, and economic sector for purposes of government contracting. The code is needed to affect your business registration.

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.

3. HAVE A CLEAR PICTURE OF YOUR BUSINESS SIZE

For the singular purpose of your small business qualifying for government contracts, you need to qualify according to SBA size standards.

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.

4. REGISTER IN THE SYSTEM FOR AWARD MANAGEMENT (SAM)

The System for Award Management (SAM) is a database of companies that are interested in government contracts, maintained by the U.S. government. 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 use 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 SEO strategy or your company’s LinkedIn profile.

To get started, your business needs to register under the government vendor category in the SAM system. Firms committed to obtaining government contracts should update their SAM profiles quarterly, if not even more.

Remember that although you’re pitching to government agencies, the decision-makers within those agencies are real people. Avoid the temptation 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!

5. SOLICIT PAST PERFORMANCE EVALUATIONS.

Being new to seeking government contracts, it may be worthwhile to get an Open Ratings Inc. Past Performance Evaluation. This which is performed by a private sector of the Dun & Bradstreet Co. is an independent auditing and rating system which analyzes survey responses from past customers to calculate a numerical rating of your past performance