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A Small Business Guide to Government Contracting

A Small Business Guide to Government Contracting
Credit: nelzajamal/Shutterstock

Small businesses are an integral part of the economy of the United States. The government recognizes that fact by spending over $4 trillion per year with large and small businesses, and nearly $440 billion of that is with small businesses only. That makes it a large market worth pursuing, if you have the dedication and perseverance to go through the process and work within the rules for supplying goods and services to the U.S. government.

Paul J. Karch, president of SelltoGovernment.com, which helps small businesses earn government contracts, says that the application process is a lengthy one, so now is the time for small businesses to start laying a foundation. 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."

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. Your NAICS code is 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.

Next, apply for a free Dun & Bradstreet DUNS Number – 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.

Once you know your NAICS codes and DUNS 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. When you register with SAM, you will also be assigned a Commercial and Government Entity (CAGE) code that may be asked for when responding to solicitations.

In addition to a NAICS code and DUNS 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).

Your company can also get a leg up on the competition by obtaining a small business set-aside certification. These set-aside categories include woman-owned, disadvantaged-owned, service-disabled-veteran–owned and HUBZone small business. "Set aside" means that the contract needs to go a small business that has one of those certifications, preventing large businesses from submitting proposals or bids on the solicitation. In some cases, there is a "sole-source award," and the contract is awarded to a qualifying company without a competitive process.

The federal government has formal goals to achieve each fiscal year in awarding contracts to small businesses. The government aims to allocate:

For those who are committed, businesses can do several things to position themselves for success in the government-contracting world, said Lourdes Martin-Rosa, president of Government Business Solutions and a government contracting advisor for American Express OPEN.

"The Small Business Administration (SBA) is mandating procurement forecasts for government agencies, giving small businesses the opportunity to see how much money is going to be spent by division, by quarter, [as well as] who the contracting officer may be and if the contracts are going to be set aside for any particular certification," Martin-Rosa told Business News Daily.

This provides a valuable opportunity for small businesses, because business owners and business development specialists can reach out and ask questions, something that that cannot be done once a solicitation has been released.

Once you have all your codes and any relevant set-aside certifications, you can start looking for contracting opportunities on the government's site, www.fbo.gov (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 solicitations that appear relevant 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.

Martin-Rosa encourages small businesses to monitor and respond to Sources Sought and request for information (RFI) posts on Federal Biz Opps. Though going through the process takes some time, she said, the ability to find, explore and discuss these contracting opportunities is critical.

"What the government really wants to see with a Sources Sought or RFI posting is if they can set it aside in some way," Martin-Rosa said. "Don't be afraid to call the contracting officer and ask questions. Is this a new contract or re-compete? Who is the incumbent? You can do research on the incumbent on www.fpds.com, learn more about the contract and even reach out to them for teaming."

If bidding on your own seems daunting, look at the interested vendors list for that opportunity. Martin-Rosa encourages small businesses to contact other small or large businesses to explore teaming up on a contract. Working with businesses already performing government contracts allows a small business that's new to the market to gain valuable insights. You can learn about meeting contract expectations, completing internal and behind the scenes processes to meet requirements and regulations, and building a past performance portfolio that will strengthen your ability to individually pursue contracts in the future.

"The key to successful teaming partnerships is to find a partner that is an extension of your company in integrity and quality," Martin-Rosa advised. "Small businesses know as much or more than large businesses. You just get to offer it to the federal government at a very affordable price."

Martin-Rosa said she sees a lot of potential in a new rule that the SBA implemented in 2017. Overseas contracts, valued at nearly $100 billion per year, will now be measured toward the SBA small business goals. This opens up the entire world to small businesses, who may lack the resources or experience to try working globally on their own.

"This gives small businesses the chance to learn how to do business internationally," she said. "Having strong certifications, with the commitment to use them, provides expansion opportunity and the security of getting paid in U.S. currency."

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. 

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