On an annual basis, the federal government spends about $500 billion on goods and services. As spending declines across the board for most businesses in the private sector, federal spending is actually rising.
While a significant percentage of stimulus money is allocated for construction projects through federal or state procurement, too few small businesses actually take advantage of federal contract opportunities. Recent data from the Small Business Administration (SBA) indicate the federal government fell short of the congressional mandate to direct 23 percent of its contracts toward small businesses.
Although various factors are behind this shortfall, two things are pretty clear. First, if more small businesses were competing for these contracts, more would win them. Second, small business owners that are savvy about the process of securing government contracts are the most likely to land the work. Gather Basic Information
When dealing with the government, a handful of numbers and codes are critical to identifying a company. A good starting point is the Data Universal Numbering System (DUNS) number, which the government uses to identify all contractors. One can be received for free from Dun & Bradstreet
A federal tax ID number—known as an Employer Identification Number or Taxpayer Identification Number—also is needed. One can be acquired through the Internal Revenue Service using Form SS-4.
To classify potential contractors by their line of business, the government relies on both the North American Industry Classification System and the Standard Industrial Classification codes. (Click here
to learn which codes best apply.)
Finally, contractors should ensure they have accurate financial routing information for their businesses, as the government prefers to pay invoices by electronic funds transfer. With these basics, companies have everything they need to create a profile on the Central Contractor Registration (CCR) database
. The CCR is where all government agencies and prime contractors go when they’re looking for potential vendors. While entering data, contractors should keep in mind that their profile is their company’s introduction to potential clients, so message clarity is important. Take Advantage of Special Certifications
The federal government is obligated to award a certain percentage of its contracts to various underrepresented and disadvantaged groups. If businesses qualify, they should register with the SBA. The small disadvantaged business and 8(a) programs are designed to help specific groups secure federal contracts and subcontracts.
Veteran-owned businesses, service-disabled veteran-owned businesses and women-owned businesses all may qualify. Among these groups, women business owners particularly stand out, as they won only 3.4 percent of all federal contracts (in spite of the government’s obligation to award 5 percent of all contracts to women-owned businesses). Consider Subcontract Work
Because the government often relies on established relationships when selecting general contractors, first-time bidders can be at a disadvantage. Fortunately, large construction projects often depend on a host of subcontractors, which could be a small company’s ticket in. The experience gained as a subcontractor will serve companies well as they compete for prime contracts in the future.
Many small business owners believe that landing government contracts is too daunting, or somehow out of their reach. By tackling the process with a straightforward approach, they will find the skills they’ve developed to grow their businesses in the commercial sector—commitment, hard work and strategic networking—are just as valid in the government sector. Companies should put their strengths to work and take advantage of the sector that can weather any economic downturn.