The U.S. government is the largest purchaser of goods and services in the world, awarding hundreds of billions of dollars in federal contracts each year. Contrary to popular belief, these contracts often go to small businesses: In 2021, the federal government awarded $145.7 billion in contract dollars to small businesses. This was the first time the government exceeded its goal of awarding at least 23% of all federal contracts to smaller ventures.
Despite reaching its initial goal, the government is still focusing on supporting small businesses with federal contracts. The Biden administration announced the goal of increasing the share of contracts awarded to small disadvantaged businesses by 50% over the next four years.
If you’re interested in competing for some of these often lucrative contracts, follow these steps to prepare your business to bid on a government contract.
[Read more: How to Boost Your Small Business by Becoming a Government Contractor]
Assess your business readiness
There’s no question that competition for government contracts is quite steep. Before you get too far into the bidding process, make sure this is the right option for your business.
According to the U.S. Small Business Administration (SBA), the government favors working with established, reliable businesses that have a verifiable track record of delivering goods and services on time and within budget. The government wants partners that have a strong reputation in their industry.
One way to show your sterling track record is through subcontracting. The General Services Administration (GSA) has found that businesses that have previously worked on federal contracts, either as prime or subcontractors, tend to have more success getting other government contracts. Networking in the federal contracting community can also help.
There are also training and certifications that you can complete to show your readiness. The GSA offers a road map, which walks you through some of the steps you must complete to compete for certain contracts. The SBA notes that some businesses spend between $80,000 and $130,000 during this process to earn their first contract.
Keep in mind that it could take up to two years to see a return on your investment. The government will want to see that you have the cash flow to sustain your business during this time.
Find your NAICS code and business size
Government contracts will ask that you submit your North American Industry Classification System (NAICS) code as part of your application. This code is used by the federal government to classify businesses for statistical purposes related to the U.S. business economy.
The NAICS Association website offers a free search tool that can help you determine which NAICS codes apply to your business. Codes are categorized by what your business offers. For instance, the NAICS code 611430 applies to businesses that provide professional and management development training. It can take a little bit of work to find the right code for your business. Some entrepreneurs prefer using the U.S. Census Bureau code lookup tool to find the best code.
Once you have your code, check the SBA website to determine the small business size standard that applies to your specific NAICS code. Each industry has different standards for what qualifies as “small.” For instance, NAICS code 611430 shows that businesses must have sales below $7 million annually to be considered a small business. This standard will have relevance as you decide which contracts to bid on, as some contracts are only open to small businesses by the SBA/NAICS code definition.
There are a number of places to monitor contract opportunities as the government releases requests for proposals.
Where to look for federal contracts
There are a number of places to monitor contract opportunities as the government releases requests for proposals. Use these resources to see which government contracts your company could bid on.
The System for Award Management directory (SAM.gov)
This is the official database of federal contracting opportunities over $25,000. You must register in SAM in order to participate in government contracting.
“Your small business’ profile in SAM is like a résumé. Creating a profile that’s accurate and appealing is important to winning a government contract. Make sure to use accurate, descriptive terms about your business so that contracting officials will be able to find you in search results,” wrote the SBA.
Previously you needed a data universal numbering system (DUNS) number to bid on SAM contracts. Since 2022, the unique entity identifier used across the federal government changed from the DUNS number to the Unique Entity ID (generated by SAM.gov). The website explains how to register for the ID.
There are a large number of contracts listed in this directory, and it can be a little tricky to find what you need. Nevertheless, SAM is your first resource for diving into the world of federal contracting.
The Dynamic Small Business Search (DSBS)
The DSBS is maintained by the SBA and helps contracting officers identify contractors for potential opportunities. It acts as a search engine for finding small businesses.
Sign up for the DSBS after completing your SAM registration and verifying that you meet the criteria for a small business. Then, you’ll be able to enter your company’s information into a DSBS profile. Listing on the DSBS can help prime contractors find your small business, allowing you to build the kind of contracting history that will allow you to become a prime contractor in the future. It’s a good marketing tool for networking with procurement officers too.
FedBizOpps.gov
If you previously looked for government contracts, you may be familiar with the site FedBizOpps.gov. This site was where government agencies were required to advertise any contracts over $25,000. However, starting in May 2023, FedBizOpps.gov is being retired in favor of SAM.
The GSA MAS Program
The GSA offers Multiple Award Schedule (MAS) contracting in which it issues long-term, governmentwide contracts that provide federal, state, and local governments access to commercial products, services, and solutions at prenegotiated prices.
Becoming a GSA MAS contractor means your business can sell products and services directly to government agencies via a more streamlined ordering procedure. Essentially, it means you’ve been approved to do business with the government.
If you’re interested in becoming a MAS contractor, the GSA offers a comprehensive road map outlining the process.
SBA SubNet
The SBA’s Subcontracting Network System (SubNet) is a database of subcontracting opportunities, where a large enterprise looks to partner with a small business on a government contract. This could be a good option if you’ve never worked on a government contract before and want an enterprise with experience to show you the ropes.
Browsing these platforms and databases will give you a good sense of what opportunities are out there. As part of your research, it’s also a good idea to ascertain the demand for your product or service within the government.
One way to determine the demand for your products or services is to explore the GSA Forecast of Contracting Opportunities tool. The SBA’s contracting assistance programs can also help you identify opportunities that are applicable — especially if you’re a minority business owner.
[Read more: How to Register Your Business With the Federal Government]
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