Photo by PanuShot/ Shutterstock
Starting a Government Contracting Company: Doing Business with the U.S. Government
Starting a government contracting company is a challenging but worthwhile endeavor. Doing business with the world’s largest customer, the United States government, allows businesses to establish themselves as trusted organizations and grow their customer bases.
See the qualifications, requirements, processes, and compliance practices that GovCon aspirants must follow to become a government contracting company.
Table of Contents
What is government contracting?
Government contracting is the process by which contractors sell products and services to the federal government. It presents a huge financial opportunity for contractors as the United States government is the largest single purchaser of consumer goods in the world.
The government contracting process begins with the bidding process for government contracts. GovCon companies submit bids based on contract requirements of the contracting federal agency. The agency selects the companies to work on the contract among these bids.
Two types of government contracting
- Prime contracting means the companies work directly with the government to fulfill the scope of the work under the contract. The number of prime contractors varies depending on the contract requirements.
- Subcontracting allows contractors to work for the contract but not directly with the government. Instead, subcontractors work with prime contractors and even other subcontractors to provide a specific product or service required for the contract.
Read more: What Are The Basic Requirements For Government Contracts?
How to start a government contracting company
Starting a government contracting company to become a prime contractor or a subcontractor requires the business to:
- Qualify as a small business
- Register as a government contractor
What qualifies as a small business
The Small Business Association (SBA) sets size standards to qualify an organization as a small business, including its subsidiaries and affiliates.
- Manufacturing companies must have less than 500 employees.
- Non-manufacturing firms must have average annual receipts under $7.5 million.
While the requirements remain generally the same, the threshold may vary depending on the nature of the business. Title 13 Part 121.201 of the Code of Federal Regulations (CFR) and the SBA’s table of small business size standards outline these exceptions.
How to register as a government contracting company
Once the business is classified as a small business, it must register with the System for Award Management (SAM) to become a government contractor. SAM is an e-procurement system that federal agencies use to find government contractors.
Being registered at SAM certifies that the small business is eligible to win government contracts. It also allows the small business to participate in SBA contracting programs made for small businesses, such as:
- 8(a) Business Development Program
- Historically Underutilized Business Zones
- Women-Owned Small Business Program
- Service-Disabled Veterans’ Business Program
These programs give small businesses advantages and opportunities against more established government contractors with a portfolio of demonstrated work in government contracts.
Succeeding in government contracting: What contractors need to know
Government contracting is a profitable endeavor, which is why a lot of businesses want to enter this space. However, starting a government contracting company is simply the beginning of the government contracting process.
To succeed in government contracting, contractors must follow best practices to bid and win among the sea of contractors who also want to do business with the government.
Specialize in a specific product or service
“Does the government need the product or service you offer?”
As the government has a huge network of contractors that offer their unique products and services, it is imperative to answer this question as a government contracting company.
Instead of offering a general product or service that other government contractors also offer, find a specific niche in a specific industry that solves a specific problem or bridges the gap in government capabilities and operations.
To know what the government needs or wants to buy, here’s what small businesses can do.
- Look up the North American Industry Classification System (NAICS) code of the industry the business is associated with.
- Enter the NAICS code on USASpending.gov to check the price and scope of contracts awarded to leading industry contractors.
Find contract opportunities for RFPs and RFQs
Whenever the government needs a specific product or service, it circulates notices indicating that it is open to accepting proposals. These notices are called many terms, such as Combined Synopsis, Solicitation, Request for Proposals (RFP) or Request for Quotes (RFQ).
Federal contract opportunities list contact information, deadlines, proposal processes, and other important details. These opportunities are listed on websites such as:
- Federal Business Opportunities (FedBizOpps) for contracts over $25,000
- SAM.gov for a larger database of contract opportunities
Aside from notices for contract opportunities, these websites may also list:
- Pre-solicitations or notices that a contract opportunity will open in the future.
- Sources sought notices or requests for information that help federal agencies understand the capabilities of businesses that will submit proposals for future contracts.
Look for small business set-aside contracts
Small business set-aside contracts are made by the government to level the playing field among government contractors as larger established organizations are usually granted contracts, such as Governmentwide Acquisition Contracts and Multiple Agency Contracts.
Small businesses can take advantage of set-aside contracts in two ways:
- Competitive set-aside contracts are granted to at least two small businesses that can fulfill the task orders and work requirements of the contracts. These contracts are typically priced below $150,000.
- Sole-source set-aside contracts happen when only one small business has the capability to complete the requirements of the contracts. These types of contracts are issued without a competitive bidding process.
Know how to bid and write proposals
After finding the right contract opportunities for products and services, it’s time to bid.
The bidding process centers around the proposal; make sure to write a compelling proposal. Depending on the contract requirements, the details to include in a proposal vary but should include the basics, such as pricing information and technical specifications.
Some of the best practices for a compelling proposal include:
- Don’t overpromise on pricing and technical specifications
- Check the prices of previously awarded contracts in the industry
- Review the grammar, spelling, graphics, and other minor details
- Double-check the details to ensure the proposal meets the solicitation
Consider subcontracting
The procurement process can be a huge challenge, especially for small businesses that are only starting with government contracting. In these cases, it may be best to consider subcontracting for a prime contractor or a subcontractor first.
While not directly working with the government, small businesses can learn how the procurement and contracting process works by subcontracting. Subcontracting also allows a government contracting company to build portfolios for future contracting opportunities.
Category: Articles
