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The United States government buys lots of products and services from US businesses. With the approximately $500 billion in government contracts it awards each year, nearly a quarter are legally required to go to small businesses that have navigated the process of how to get government contracts. What exactly are these highly desired opportunities for your small business, and how can you cash in? It’s a good question—although not the simplest answer.
Above all else, government contracting is an extremely competitive field, especially for small businesses. Even though federal law requires the government to provide opportunities for small businesses, a huge number of small businesses all bid to get the same contracts.
It’s not surprising—after all, don’t you want one? Doesn’t everyone? They’re big jobs, which means big money.
All of that competition can pose difficulties for new companies looking into how to get government contracts. But once you’re registered and in the government’s databases, it can be a lot to easier get government contracts for small business.
Since there’s a lot that goes into the process of how to get government contracts for small business, we’ll break it down step by step. By the end, you’ll know how to registering your small business to apply for contracts. And all the effort will be worth it once you’ve been awarded your first government contract.
There are seven essential steps to get a government contract for small business. Each involves a lot more breakdown on its own. But here’s the important process to follow to make sure you’re both qualified to receive government contracts and registered in the government’s database to do business:
You’ll need context for what all of this means, though, before you know exactly how to get a government contract. Let’s get started.
Even if you know how to get government contracts, you simply might not be eligible. That’s because small businesses are required to go through a rigorous qualification process in order to compete for government contracts. If your small business qualifies, that’s great! You can register as a government contractor and begin to seek contracts.
How do you know if you’re qualified? Luckily, you can take a quick quiz to figure it out. The SBA’s government contract eligibility quiz is a pre-check for the registration process. You’ll need to make sure you have your annual revenue handy before you take it.
You’ll also need one more thing before you take the SBA quiz, though. In order to figure out how to get government contracts, you have to know about the North American Industry Classification System code under which your business falls.
Don’t worry if you’ve never heard of the NAICS or its index of codes. The vast majority of people haven’t (and if they’re not figuring out how to get government contracts, won’t need to). All you really need to know is that the NAICS code classifies your small business according to the type of economic activity it holds and also determines whether the federal government considers your business a “true small business.” And you can find your NAICS code here.
Part of determining whether your business is a true small business is figuring out how your company fits within the government’s size standards. The government sets out predefined standards around business size to regular actually qualifies as a small business. This determines the largest size a business can be in order to compete for contracts with other similar-sized businesses. The government defines a small business’s size by its industry, the number of employees it has, and its number of annual receipts.
Without the NAICS codes or size standards, the government would have no way of regulating what type of businesses are eligible to compete for government contracts. For example, a large corporation with an enormous budget could attempt to compete for the same government contracts as a young small business with a proportional budget, thereby monopolizing the competition. By defining and regulating the standards for what a small business has to be in order to compete for contracts, the government is able to keep the competition confined specifically for small businesses.
This sets the stage for businesses to participate and compete for small business contracts without one business monopolizing the contracts.
→TL;DR (Too Long; Didn’t Read): You can go through a pre-check quiz on the SBA site to make sure you’re eligible. You’ll need to know your annual revenue, as well as a special code for your industry that makes sure you’re classified as a small business.
In order to get government contracts, you’ll have to decide what kind of contractor you’ll be. There are two types of government contractors: prime contractors and subcontractors. Prime contractors are those that bid for and subsequently win contracts directly from government agencies. Subcontractors join prime contractors’ teams and provide a specific capability or product that the prime contractor requires. These contractors generally have a more honed area of expertise.
Prime contractors are legally responsible for all aspects of a government contract. Since they’re fulfilling all of the work, this means that they have to oversee this contract the way they would a small business—such as hiring other employees (like subcontractors, for instance) and ensuring the government contract is carried out until complete.
Prime contractors include lots of industries, with businesses focused on fields as different as animal control services and law research. Other examples of businesses that commonly operate as prime contractors include construction companies, scientific research labs, IT support services, and service-based companies in industries such as transportation and disposal.
Contracts for prime contractors are more competitive than those for subcontractors, and there is definitely more work and risk involved. But with that scope does come more control and a bigger payoff.
Subcontractors enjoy the luxury of not having full responsibility for the entire contract but rather for a small area of specialization. This is a great way to get involved in government contracting as you can build valuable experience (called “past performance”) that will help you qualify for future contracts. Think of it like building your business’s credit!
Starting as a subcontractor can be a great way to get your sea legs in government contracting, and you’ll probably make more contacts if you tagalong with a well-established prime contractor.
→TL;DR: Decide if you’ll be a prime contractor or a subcontractor—you’ll either own and execute contracts in their entirety or focus on an area of specialty, respectively.
The federal government’s System for Award Management (SAM) will be your main point of contact for your contracts, and it’s also where you’ll register to get contracts for the first time too. As a small business, you’ll create a user account, register your business with the US government for free (or update or renew an existing registration if you’ve inherited a business that may have competed for government contracts before). You can expect an average of 7-10 days for your registration to process, during which SAM will request validation of your business from outside parties such as the IRS.
SAM also works as a database for government agencies and contractors to seek subcontractors to fulfill their contracts, so it’s important to keep your registration up-to-date. After your registration is approved, you will automatically be input into the SBA’s database, the Dynamic Small Business Search (DSBS), a database similar to SAM.
Government agencies and contractor offices will use both of these databases to fill their contracting needs. But a huge part of how to get government contracts is bidding for contracts on your own—so you’ll be using this system a lot.
Once you’ve registered your business in SAM and confirmed your approval, it’s time to finally find out exactly how to get government contracts. At this point, you’ll need to have made your decision as to whether you’re going to be a prime contractor or a subcontractor (remembering that prime contractors are responsible for the full deal, whereas subcontractors join contracts to fill a specific task).
→TL;DR: Register in the government’s database, and make sure you’re approved to bid on contracts. You can find opportunities directly on government sites, or use outside resources to locate opportunities, too.
Government contracting for your small business and leaping into the field is a big undertaking. But taking the steps and learning how to get government contracts will pay off sooner rather than later—your business will quickly gain experience for any other opportunities that come your way.
Since the field for government contracts is highly competitive—and getting more competitive each day—you might not score a contract right away. But your small business will find its niche. And since the field is growing, more opportunities are popping up all the time—especially if you begin as a subcontractor.
Be sure to note trends and patterns with how government agencies are spending money. Keep track of which small businesses are receiving money and what their industries are, plus what contracts are being awarded and when. Staying ahead of trends can help inform your betting to find out which government contracts your business is most likely to win. Contractors can also keep an eye out for federal contract trending forecasts that explore the upcoming fiscal year’s trends—to make sure you get in on the action.