Government Contracting for Small Business
What is Government Contracting?
As the name suggests, government contracting is a contract-based business with the government. By definition, we can say that the process of selling goods or services to the government sector is known as government contracting.
Precisely, government contracting is the trade agreement between the public business sector and the government in which govt pays in return for
· Technical or research-based assistance
A company or business that provides these services and commodities to the government in return for payment is called a government contractor.
How Government Assigns Contracts to Companies?
The process of govt contracting is extensive and time-consuming. Below listed steps will help you get the gist of the government contracting process:
Step#1: Requesting Goods/Services
When a government agency needs either product, service, or assistance from the private sector, it lists the requirement by issuing a statement or request. The govt becomes a “customer” and is officially known as the Program Office (PO). The PO is responsible for enlisting the requirements, determining the funding, and forwarding the contract to the CO.
Step#2: Executing the Contract:
The CO is the Contracting Office. The responsibility of the CO is to execute the contract, ensure all laws are followed and act as a personal shopper for the PO to ensure successful trade. Therefore, it is called a “buyer.”
Step#3: Bidding on the Contract
The private company that aims to become a government contractor places its best foot forward and sends the best proposal to bid on the contract. Like the best vendor that aims to attract customers by providing the best product/service, the private company considers how it can compete and set itself apart from other bidders.
Step#4: Selecting the Contractor
Now the ball again goes in the court of the CO. The CO decides whose proposal works best in the interest of the PO, whose services will benefit the government more, and who can ensure to maintain transparency. Then it chooses the best candidate and assigns him the contract, making him a government contractor.
What makes Government Contracting different?
The government is a large and multifaceted institution. Multinational corporations and other multibillion-dollar private businesses are, too. What distinguishes doing business with the government as a contractor from doing business with private businesses?
Independent businesses exist to generate revenue and serve their own purpose, whereas the government protects and serves its citizens. Instead, for personal gain, Govt uses commodities and services to build roads, staff research institutions, and improve the country's defense systems - all of which benefit the general public.
However, to work under govt contracting is not as simple as working with private businesses. The Govt’s business must be handled with extreme caution. While working for the govt sector, it is mandatory to
ü Follow the rules
ü Adhere to the law
ü Maintain order and business ethics
ü Work in the best interests of taxpayers
ü Ensure high standard of transparency and efficiency
What is meant by Government Contracting for Small Businesses?
Businesses of all sizes bid for government contracts through their country’s federal agencies as well as local and state governments. But mostly, government contracts fall in the lap of small businesses.
Reason: The government must follow specific set-asides when purchasing products or services. A percentage of business is set aside, particularly for small businesses. This is called a sole-source contract. Let’s discuss it further.
Facts: The SBA collaborates with federal agencies to give deserving small businesses 23% of prime government contract money.
Why Government Prefers to Work with Small Businesses?
The government is bound by a sole-source contract to work with small businesses. The sole-source contract is established for several reasons, which are listed below.
· The law is ascertained that what govt need can easily be provided by small companies such as cleaning services, equipment, technology, research facility, etc.
· The government has to ensure that large businesses do not crumble small businesses.
· The government has to provide small companies with the chance to grow and flourish.
· The government should benefit from the emerging and innovative ideas that small businesses have to provide.
· Lastly, the government should collaborate with small businesses to set an example by ending discrimination against disadvantaged socioeconomic groups.
Facts: U.S. Federal Government is known to be the world’s most extensive buyer. U.S. Govt agencies invest almost $100 billion to buy goods and services from small businesses each year.
So far, we have learned why the government must lend contracts to small businesses rather than giant firms and multinational companies. Now, it is time to discuss how collaborating with the government empowers small businesses in the long run.
What are the Benefits Small Businesses Acquire from GovernmentContracts?
Contracting with the government has a lot of advantages for small businesses. It might not be the most profitable business, but it could present you with an opportunity that other private buyers would not be able to supply:
· Be paid Regularly:
While working with the government, you can be assured that this client will not flee, hide, or refuse to pay their expenses.
· Sustainable Income:
Government contracting provides a plethora of profitable, long-term contracts to firms. Many federal government contracts, for example, have three to five-year contract durations. This ensures a consistent cash flow over time with reasonable profit margins.
· Opportunity to expand:
Government contracts can help your company expand quickly. Companies participating in government contracting begin with minor contracts and progress to larger and larger contracts.
· Chance to Promote your Business:
Your company’s increased visibility from government contracts is an effective marketing tool. It will help you promote your business far and wide.
· Gaining Leverage over Competitors:
Suppose you stand victorious in doing business with government institutions. In that case, your worth in the federal market will help you beat the competition and earn more business offers.
Hence, we can say that govt contracts work in favor of small businesses. Now let us move on to our next agenda.
How Can Small Businesses Obtain Government Contracts?
Small businesses cannot solely gain government contracts based on their services. Firstly, they must prove that their company falls under the small business category. Then they have to meet other official requirements to become eligible for working with the government.
Let’s see how it works.
Like businesses, government institutions have contracting regulations based on practical applications. There is a specific criterion and procedure to allot contracts.
Nearly all government contracts are assigned and supervised by the Federal Acquisition Regulation (FAR). FAR requires small businesses to register in several databases besides other obligations to be considered for government contracts.
· Evaluate your business
This is where the small business evaluates itself to see if it has what it takes to win the federal contract. These questions should be considered while assessing the strength of one’s business,
· Do you sell any products or services that the Government needs?
· Are you able to deliver orders on time and in bulk quantity?
· What is your competitive price?
· Fulfill Basic requirements
Small businesses are asked to fulfill some basic requirements to win government contracts. These requirements are as follows:
ü Obtain proper registrations and identification numbers.
ü Size requirements must be met.
ü Become a SAM member.
ü Obey all the laws and regulations.
ü Comply with all cyber-security standards
· Find the Contracts
Small businesses can improve their chances of landing a government contract by searching the federal market for the contracts.
ü The workings of the public sector are usually slow and derailed. Therefore, minor businesses should not wait for the opportunity to strike but should look for contracts at various federal marketplaces themselves.
ü Similarly, minor businesses should register themselves in the DSBS database. It is where the government agencies look for companies to work with.
· Avail Types of Contracts
There are various contracting options available to assist you in getting federal government contracts. Some of these options are
ü Set-aside contracts for small businesses
ü Set aside for govt contracting program
ü Joint Ventures
· Meeting the Size Standards
The size of a company (number of employees or the amount of annual revenue) helps to decide whether it is applicable to be considered as a small business or not. Suppose a minor business meets the size standard of the small company. In that case, they should participate in government contracting programs sooner than later.
· Abide by Governing Rules and Responsibilities
The government has rigid rules and regulations when it comes to signing a contract with a private company. Some of these rules are:
· Work on the regulations set by CFR and FAR. Comply with labor standard statues
· Small business prime contractors are required to undertake minimum amounts of work on federal contracts under set-aside award criteria.
· Follow the non-manufacturer rule.
Government Contracting for Small Businesses – In a Nutshell
In summary, government contracting is how federal agencies seek the public business sector for goods and services through a competitive bidding process. A government contractor is a business that delivers goods and services to the government. Contractors are hired by the government when they win contracts put up to bid.
Government contracting can be a profitable and consistent revenue stream for small businesses. However, small companies must first gain a thorough understanding of the federal market.
Working with the federal government is unlike working with any other client. The FAR is a set of complicated regulations that must be met to win the contract.
I hope this post gave you a clear understanding of how small companies need to get ready for government contracts.