How to Win Government Contracts: A Complete Guide for the Small Business Owner

Pumping nearly $1 trillion each year into businesses across the country, the U.S. government remains the largest single purchaser of goods and services to both large and small enterprises with their letting of contracts and Request For Proposals (RFP). The federal government has lots of money to spend and is the only investor who is printing more of the stuff. Businesses of all sizes and those in nearly any industry can win high-value contracts with the federal government.

winning and financing a government contract

How to Win Government Contracts: A Complete Guide for the Small Business Owner

These contracts don’t just go to big defense and transportation agencies, either. Fully 23% of U.S. government contracting funds go to small businesses. Even pedestrian firms such as staffing agencies, janitorial services, merchandise developers, and technical consultants can offer valuable services to fulfill small and large federal contracts.

Your company’s biggest challenge to securing federal dollars is winning the initial award. We compiled this basic guide about what you need to know to win government contracts; you can grow your business, scale your team, and improve your reach.

How to Prepare for and Find Government Contracts

Finding government contracts can feel like searching for that proverbial needle in a haystack. Uncle Sam puts out so many calls for proposals each day that it can overwhelm the most intrepid small business owner to sort through them and select the most likely options. Before you start searching through online databases or signing up for emails at FedBizOpps.Gov, be sure you are ready to take on the complexities of a government contract. The last thing you want is to make a high-volume mistake that could cost you big in lost products, delayed checks, and even fines. Realize, too, that many contracts show low-profit margins although they result in high business volume and a regular revenue stream.

Due to the sheer complexities of federal contracts, some companies choose to work as a subcontractor for another firm to learn the ropes of government contracting first. Working as a subcontractor also helps bolster your first bid. It provides you evidence that your company can not only deliver the goods but manage the back-office end of a federal contract, too.

Use the SUB-Net website to search for subcontractor opportunities.

Once you are sure the time is right for you to seek federal funding, make sure to register with the System of Award Management (SAM) using your DUNS number. Signing up for SAM is free and easy. However, unscrupulous companies will send pushy emails offering to shepherd you through the process in exchange for hundreds or thousands of dollars. They are scammers. Ignore them. Just go to the SAM site, fill out the form, press the button, and you’re done.

After you complete that step, you can start searching the online federal marketplace. Contracting Opportunity Finder, a beta initiative of USA.Gov, serves as a searchable database specifically targeted for companies new to U.S. government contracts, and it lets you search by keyword, location, date, or business label. Other government websites such as the FedBizOpps database and each agency’s Offices of Small and Disadvantaged Business Utilization also list current requests for bids. Beware of any site that wants to charge you to search for government contracts. All official listing sites are free.

Easiest Government Contracts to Win

The easiest government contract to win is the one you can execute and manage. Government contracting does not require sleight-of-hand tricks in wording or budgets, just perfect alignment with what the federal agency wants to do and your ability to execute on it at a reasonable cost. That said, searching for small contracts can be a good idea for beginners. While the high-dollar numbers at the top of thick request packets can entice you, it’s better to build your contracting business slowly. You can even bid on projects worth as little as $3,000. It can seem like much work for a small reward at first, but it’s always a good idea to make your first errors when the stakes are low and the problems easier to fix. Learn as you go.

Another way to make government contracting easier is to identify a mentor or coach through your industry’s professional organizations. Attending a conference or networking online can give you access to experienced consultants who won’t overcharge you for the benefit of their advice and help. You can also contact a local Procurement Technical Assistance Center (PTAC). The federal government set up PTACs to help guide small businesses through the process of finding and bidding on contracts.

Once you’ve located the right opportunity for you, decide if you will submit the bid. Although having the federal government as a client can prove profitable, you want your contract to be the right decision for your agency. Ask for advice, run your forecasts, and use your data. Only then should you make a bid.

How to Bid on Government Contracts

Begin by writing a capability statement. This document includes a thumbnail sketch of your business and makes a brief statement about your past performance. Your goal in this document is to give the contract agent an idea of the scope and ability your company possesses to execute a contract plus alleviate any concerns. Typically, a capability statement includes company information, a brief narrative history, biographies of key staff, certifications, your DUNS number, a list of your vendors, and a list of your clients. The Federal Contracting Center offers a free online document about how to write a capability statement, which can serve as a helpful guide.

  • Next, identify the type of solicitation you are responding to. In general, the federal government offers four kinds of solicitations:
  • Request for Quotation (RFQ) – You are not making an offer. You simply send information and a quote.
  • Request for Proposal (RFP) – You send a full business proposal.
  • Invitation for Bid (IFB) – You submit a sealed proposal to provide a specific good or service.
  • Request for Information (RFI) – A preliminary document used when the government wants a better understanding of your industry before issuing another kind of solicitation.

No matter what kind of solicitation you are responding to, be sure to read the document thoroughly. Highlight any areas you do not understand so you can ask the contracting officer about them. Don’t be afraid to call your officer since helping companies create their bids is his or her job. After a careful read-through, use USASpending.gov to research past bids so you can make sure yours is competitive. It’s also a good idea to research your price estimates thoroughly, so you don’t accidentally eliminate your profit margin just to get a contract. Finally, when you write your proposal, respond to each requirement in the bid. A missing section can disqualify you from consideration. Make sure to have a colleague review the document for completeness and accuracy before submission.

Types of Government Contracts

The U.S. government offers numerous types of contracts, including fixed-price contracts, cost-reimbursement contracts, incentive contracts, and indefinite-delivery contracts.

  • Fixed-Price Contracts – These are the most common contract the U.S. government extends to small businesses. While they come in multiple forms, all fixed-price contracts have a clear scope of work and a price determined in advance.
  • Cost-Reimbursement Contracts – Used when the costs would be too difficult to estimate ahead of the project. These type of contracts work on a defined spending limit and therefore limit the risk to the supplier.
  • Incentive Contracts – In these contracts, the contractor receives an incentive payoff determined according to a sliding scale once the project is complete.
  • Indefinite-Delivery Contracts – The U.S. General Services Administration says, “Indefinite delivery, indefinite quantity contracts provide for an indefinite quantity of services for a fixed time. They are used when GSA can’t determine, above a specified minimum, the precise quantities of supplies or services that the government will require during the contract period.”

Being prepared with all the proper licensing, forecasts, insurance, back-office staff, and vendors can help you secure and manage any type of government contract.

Top Tips to Get Government Contracts

Winning and financing government contracts (link to the previous article here) is both a direct and complex process. The steps are clear and well-documented, but the sheer volume of effort required to secure a contract can seem daunting.

Here are our best tips for submitting a winning bid and becoming a government contractor:

  • Know Your Business – The more thoroughly you understand the workings and operations of your enterprise, the more likely you are to submit winning bids for the right RFPs.
  • Learn the Rules – Nothing can foul up a proposal or even an award like a contractor who fails to meet government expectations out of ignorance. Save yourself many headaches later by knowing the contract’s guidelines and relevant laws before responding to a request and again before signing an offer.
  • Attend Conferences – Government agencies frequently sponsor conferences in which they announce upcoming RFPs or offer assistance in navigating the world of government contracts.
  • Take Advantage of Mentors – You can reach out to experienced government contractors and coaches you know for advice, or ask to get matched with the right mentor for you through the SBA Mentor-Protégé Program or the GSA Mentor-Protégé Program.
  • Learn to Love Paperwork – You’ll be doing a lot of it! In most cases, it is best to hire a specialized manager or administrator with government contract experience to oversee this aspect of the project. Many of these people work as outsourced employees or freelancers, so you don’t have to take on a new FTE.
  • Build Relationships at Government Agencies – As long as the team at your funding agency remains a cloud of faceless bureaucrats in your mind, you’ll find it hard to work with them. When you get to know them as people and trust them as partners, however, they can make your life as a contractor run a lot smoother.
  • Keep Trying – If securing a government contract were easy, every small business would have one. Keep learning and submitting better bids until your award shows up.

Financing a Government Contract

Once you’ve secured a government contract, it’s time to get your financing in order. The U.S. government pays contractors on a net-30 to 60 days schedule. However, contractors typically have to pay vendors before funds come through from the government. For small businesses, the delay between paying their own bills and receiving the government’s reimbursement can severely strain cash flow.

That’s why government contractors turn to a factoring or funding company such as the Paragon Financial Group. We bring more than 25 years of experience in government contract financing. We can help provide the working capital you need to see your contract through. For more information about how to win and finance government contracts, contact Paragon today!

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