Types of Government Contracts for Small Business to help you grow
The United States government is known to be the world’s largest buyer of products and services. From a tiny piece of a paperclip to the huge types of machinery, the federal agencies purchase almost everything even research and technical assistance.
However, the federal government does not purchase anything without a concrete process and preferential consideration. That is why the federal procurement data system is brought to life!
A business or enterprise that successfully sell their company’s products or services is enlisted as one of the prime contractors. But the question is, is anyone eligible to be part of the contracting community?
Yes! whether large or small business, as long as they provide the needs of the procuring federal agencies they are qualified to work with any government agency.
If you are reading this, you probably own a small business and wondering whether you can win any government contract. Make sure you read along because you are about to learn the government contracts for small businesses and how to win your first government contract.
What qualifies as a small business for government contracts?
Before a small business gets considered for government contracts, there are factors needed to determine set by an official government organization called Small Business Administration (SBA). The SBA sets many different factors, but they may vary depending on the industry a small business is working in, but business size can be crucial.
To identify whether your small business meets the business size standard, you can use the SBA Size standards tool. To use this tool, you simply need to encode your NAICS code and the number of employees working for your business, both full-time and part-time.
The SBA also offers contracting assistance and small business programs to help small businesses in certain socio-economic classes. The following are some of the contracting programs that may be eligible.
Woman-owned small business (WOSB)
A woman-owned small business can compete for a federal contract specifically set aside for their socio-economic class. However, the federal government limits competition to companies engaging in this contracting program to ensure equal treatment in the full and open competition of the industry.
This contracting program offers a number of benefits for women-owned businesses seeking government contracts. A contracting officer can give sole-source contracts under the women-owned small business program. These prime contracts are for industries with a low representation of women-owned small businesses and minorities.
Service-disabled veteran-owned small business (SDVOSB)
A part of the federal government’s contracting activity is allocated to small businesses owned by veterans who want to work with the government. Small businesses must register with and be confirmed as veteran-owned small businesses (VOSB) or service-disabled veteran-owned small businesses (SDVOSB) in order to be considered for the program.
Let’s say you’re a business owner who wants to get certified in the VOSB contracting program. In such a situation, you can get some support with the VOSB certification via the Department of Veterans Affairs’ Vets First Verification Program.
Historically underutilized business zones (HUBZones)
In the full and open competition, HUBZones certified businesses receive a ten percent price evaluation preference. Aside from being qualified to compete for a particular contract, HUBZone can also compete for agreement through other-socio economic programs.
As long as a small business qualifies, there is no limit on how long it can participate in HUBZone small business programs. However, small businesses must recertify for the HUBZone small business program once a year and take a program examination every three years.
Meanwhile, the Small Business Administration may surprisingly visit a historically underutilized business zone businesses and conduct examinations to make sure that all information submitted for the program application or recertification process is accurate.
Small disadvantaged business (SDB)
Small disadvantaged business is another socio-economic program set by the federal government which receives nearly fifty billion dollars in contracts every year. However, before you classify your business as part of the small disadvantaged businesses, you must first meet the following criteria and qualifications set by the Federal Acquisition Regulation (FAR).
- Owner/s must be certified as socially and economically disadvantaged people.
- One or more economically disadvantaged people owns and run fifty-one percent of the company
- It qualifies as a small business based on the standard size set by the SBA.
Your small business may take advantage of the program mentioned above as you work with the federal government. Nevertheless, the benefits you may get from each program may vary. That is why it is your responsibility as a business owner to select the suitable program that will help your business into a fantastic success.
What are the easiest government contracts to get?
The procuring federal agency may offer government contracts of different types. These contracts come with great benefits that can turn a small business into a big one. For more details about these, here are some:
Set Aside Contracts
To maintain fair competition in the federal marketplace, the government limits competition for specific contracts. Set-asides are contracts that help small businesses to compete and win federal contracts. There are two classifications for this type of contract, and they are as follows.
1. Competitive set-aside
Most of the time, competitive set-aside contracts happen for government contracts amounting to under one hundred fifty thousand dollars. The reason is that government agencies reserved the contract for two or more small businesses capable of performing and delivering the work.
Some set-asides are offered to all small businesses, while others are limited to those that engage in the Small Business Administration’s contracting opportunities programs.
2. Sole-source set-aside
Unlike the competitive set-aside, the sole source set aside are contracts awarded without a competitive procurement process. Sole source is common where a single business can only meet the contract’s specification.
At some point, sole-source contracts are still available for potential vendors and small business owners interested to bid on. However, this type of contract may be withdrawn once the bidding process begins.
To be eligible for a contract, you must register your small business with the System for Award Management (SAM) and participate in any contracting opportunities programs listed above.
Joint ventures or businesses can compete for government contracts available for small businesses as long as they qualify with the SBA requirements. Aside from that, once a joint venture surpasses the SBA requirements, it can also compete in historically underutilized business zones, woman-owned small businesses, and service-disable veteran-owned small businesses set-aside contracts.
The SBA also offers a mentoring program called the mentor-protégé program that lets small business owners form a joint venture with a large business mentor.
Fixed-price contracts are one of the riskiest types of government contracts because the vendor carries all the responsibilities for the expenses, earnings, and losses. The reason is that this contract guarantees a price that will not change. However, this gives a government contractor the benefit of keeping costs under control and completing the project with the least administrative burden on the contracting parties.
The cost-reimbursement contract estimates the needed expenses and a budget ceiling that the prime contractor must meet and must not exceed without the consent of a contracting officer.
Incentive contracts are used whenever procurement opportunities can be obtained for less than any amount of money, or a fixed-price contract is not appropriate in certain circumstances. Incentive contracts pay up the contractor’s technical performance.
Additionally, incentive contracts are used to help the procurement goals by:
- Establishing achievable results and passing them on to the contractor clearly and accurately.
- Encourage government contractors to make an extra effort; and
- Discourage failure to make the best use of time and resources.
Indefinite-delivery contracts can be used to purchase goods and services when the exact timings or volumes of future deliveries are uncertain.
It is also divided into three categories: definite-quantity contracts, requirements contracts, and indefinite-quantity contracts.
1. Definite-quantity contracts
The supply of a defined number of goods and services for a set length of time is referred to as a definite-quantity contract. When it can be determined at a later date that a specific number of products and services will be required throughout the contract period, this kind of contract might be employed.
2. Requirements contracts
A requirement contract is a contract between the supplier and buyer where the seller agrees to supply the government buyers with all the products and services needed.
3. Indefinite-quantity contracts
Indefinite quantity contracts provide an indefinite amount of supplies and services within a set time period. Quantity limits can be displayed in many ways, such as a number of units or a dollar amount.
Time-and-Materials, Labor-Hour, and Letter Contracts
1. Time-and-Materials contracts
A government contract for time and materials is the total opposite of a fixed-price contract. When changes cannot be forecast on the scope of the project, time and material contracts are used. The construction and product development industries frequently use this type of government contract.
2. Labor-hour contracts.
For these contracts, the government reviews material costs and sets a per-hour labor rate together with a price ceiling. The difference between this contract and the time and material contracts is that the vendors do not provide the materials.
3. Letter contracts.
A letter contract is, also known as Undefinitized Contract Actions (UCA), is a document that allows prime contractors to start performing services or delivering products immediately.
A letter contract is used by the federal government when it is impossible to establish a procurement contract in time to fulfill the deadline. However, a letter contract should still be as detailed and specific as possible, given the situation.
Alongside that, the procuring agency awards a letter contract based on the price competition and the overall price ceiling. For more information about each type of contract, you may visit acquisition.gov.
How do I get a list of government contracts?
The federal government publicizes government contracts on different government official websites and platforms. Here are some official government websites where you may find lists of government contracts.
SAM.gov is where all the contracts valued at $25,000 or more are posted. You can also find the previously awarded government contracts on the website, which can help you gain insights into preparing your bid successfully.
The FedBizOpps or FBO, where the federal agencies advertise their business, publish RFIs, RFPs, and other procurement announcements, has been integrated into SAM.gov and is now called the Contract Opportunities.
Dynamic Small Business Search (DSBS)
Dynamic Small Business Search is one of the free-to-use and secure websites that Small Business Administration (SBA) maintains, which stores and display small business profiles registered with System for Award Management (SAM). It also provides access to a list of federal contracts reserved for small businesses.
Subcontracting with another private sector or prime contractor is the best place to start in the government contracting industry, it will also give you a better understanding of government contracting and help you get ready for bidding on your first prime contract. Subcontracting opportunities involve working with an established government contractor for a portion of the contract awarded to them.
By using another platform managed by the SBA called SUBNet, you can gain access to all the announcements for small businesses to explore subcontracting opportunities.
The General Services Administration website is used to list all of the federal business opportunities and procurement connections. Commonly known as the Federal Supply Schedule and Multiple Award Schedule (MAS), GSA is where service, long-term, and larger contracts are found.
The GSA was created intentionally to help government agencies engage with small business owners. Also, the GSA is responsible for a large share of all federal management expenses and captures billions of dollars in purchases every fiscal year.
How do I get a first government contract?
Before becoming part of the prime contractors on the list that SBA maintains, your business needs to undergo different processes. Registering your small business to qualify for government contracting opportunities is daunting. Still, once you have accomplished the following basic steps, there will no longer be any hindrance for your business to grow in the new marketplace.
Apply for a Federal Tax ID
Once you have established your business, you can go into the Internal Revenue Service’s official website to apply for a federal tax ID. Federal tax ID is essential in transacting with the federal government and especially for opening a corporate bank account where government agencies can transfer their payments to you once the project is done.
Request for your DUNS Number
Data Universal Number System or DUNS is a unique nine-digit code that quickly identifies a specific business. Requesting your own DUNS number is easily achievable by submitting your application through the Dun & Bradstreet official website.
Identify your NAICS code
In order to identify your North American Industry Classification System code, you just simply need to visit their website and select the NAICS code that best describes the operations of your business.
Register your business at SAM
Once you have accomplished the three previous requirements, you can then register your small business at the System for Award Management or SAM. As mentioned earlier in this blog, SAM maintains a list of federal contracting opportunities that are open for procurement, but it also handles the list of interested businesses that are willing to work with the government. So, make sure you are registered to this federal procurement data system to be able to start bidding on government contracts.
Complete your SBA profile
Government agencies and contracting officers make the best use of all the resources and search tools available during the procurement process. Most of the time, contracting officers look at the vendor or contractor’s SBA profile to quickly identify if a business can meet particular needs.
That is why it is crucial that you register and fill out an SBA profile after registering on SAM to ensure that your small business will appear on the federal searchable database.
You may read this government contracting guide article for more information on getting into the government contracting industry.