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Start Your Business Startup Basics

How to Land a Small Business Government Contract

How to Land a Small Business Government Contract
Credit: Orhan Cam/Shutterstock

The United States government spends over $4 trillion per year with large and small businesses. While the government places extra emphasis on awarding its contracts to small businesses in general (about a quarter of all contracts), there are also set-aside contracts for small businesses owned by women, minorities and veterans, including military personnel with disabilities.

Paul Karch, president of SelltoGovernment.com, which helps small businesses earn government contracts, said that the application process is a lengthy one, so now is the time for small businesses to start laying a foundation. If you're launching a small business or want to start landing government contracts as an existing small business owner, read on to learn how you can take advantage of these special opportunities. [See Related Story: A Small Business Guide to Government Contracting]

There are several steps that small businesses should take in order to land a government contract.

The first step is to identify what you want to sell, using the codes of the North American Industry Classification System (NAICS). Those codes are listed on the North American Industry Classification Systems Association's website. The codes classify the economic sector, industry and country of a business. Be aware that you may need to have several NAICS codes, depending on your product offering or service capabilities, so look carefully. Make sure that your business has that NAICS code, because it's one of the first things that the government will look at to determine your eligibility as a government contractor; contracts aren't awarded without one.

The Small Business Administration also recommends that businesses interested in securing a federal contract obtain a free Dun & Bradstreet D-U-N-S Number — which is a unique, nine-digit identification number for each physical location of a business — as well as an Open Ratings Past Performance Evaluation. These evaluations are an independent audit of customer references and calculate a rating based upon a statistical analysis of performance data and survey responses.

In addition to a NAICS code and D-U-N-S Number, small businesses applying for a government contract will need to obtain the following to help identify their business, industry and product categories: a Federal Employer Identification Number (FEIN) for filing taxes; Standard Industrial Classification (SIC) code; Product and Service Codes (PSC); and Federal Supply Class Codes (FSC).

Once you know your NAICS codes and D-U-N-S Number, register with the System for Award Management (SAM) website, which is the federal government's primary database of vendors that are doing business with it. According to the Small Business Administration, the Federal Acquisitions Regulation (FAR) system requires that all prospective vendors be registered in SAM before the contract is awarded or a purchase agreement is made.

Once you have all of your codes, you can start looking for contracting opportunities on the government's site, Federal Biz Opps. Registration is free, and you can sign up for notifications as well. Using the site's search function, enter your NAICS code to find solicitations for contracts for which your business may qualify and that you would be interested in pursuing.

Take a close look at each solicitation. While relevant-seeming ones may display one or all of your NAICS codes, there may be other restrictions. For instance, that solicitation may be set aside for an 8(a) contractor — a special certification that must be applied for and awarded. If you are not an 8(a) contractor, your bid will not be considered, even if you can offer the lowest price or the best value.

When you identify an opportunity you want, prepare and submit your bid or proposal. Each solicitation will have detailed information about what should be in the proposal, how to assemble it and the method of submission (electronic or hard copy by mail). Be careful to follow the instructions exactly. Government processors will disqualify noncompliant proposals at the beginning of the evaluation process.

Finally, get your infrastructure in place, so that you will be able to fulfill your contract when you receive the award. Small businesses that overpromise and then underdeliver may suffer serious consequences when they're pursuing future government work.

Knowing that the government does not move at a breakneck speed, Karch advises small business owners to be prepared for an extensive process and not expect immediate results.

"You have to be in it for the long haul," Karch said. "If you're not, don't do it."

Additional reporting by Chad Brooks. Some source interviews were conducted for a previous version of this article.

Marci Martin

With an Associate's Degree in Business Management and nearly twenty years in senior management positions, Marci brings a real life perspective to her articles about business and leadership. She began freelancing in 2012 and became a contributing writer for Business News Daily in 2015.