How Do Government Contracts Work?

Small businesses go after – and win – government contracts all the time. The key thing to keep in mind is what, as a small business with relatively limited resources, you can realistically take on. You’ll want to hone in on opportunities that are a perfect fit for your company’s capabilities.
As with any business contract, a government contract will include a Statement of Work (SOW) that defines expectations for the execution of the work, along with delivery dates and other requirements. And don’t forget that, since this is the government we’re talking about, layered into these requirements will be substantial regulatory dictates.
A good yardstick in preparing bids is that government agencies expect businesses to make about a 15 percent profit. If you plan on turning in a competitive bid, that number should serve as a guide to what you submit.

Do Your Homework – and Legwork

The best way to launch an effort like this is to really do your homework. The Small Business Administration (SBA) has a voluminous section of its website dedicated to helping small business leaders understand how to apply for government contracts, how to better position themselves to contract in this marketplace, and how to meet their myriad requirements once they win a contract.
And, as with any business deal, relationships matter. If you can find out whom the decision makers are in your chosen area of focus and develop ways to network and show the value of working with your company, it certainly can’t hurt your chances come bidding time. As you prepare a bid, you might want to contact the contracting officer to talk through your questions about contract requirements – he or she is required to provide as much information as possible. This is also an opportunity for you to put a face on your company.

Don’t Forget About Subcontracting

Many business owners who have traveled the gauntlet of government contracts suggest that a good way to learn the ropes is to secure work as a subcontractor for an experienced government contractor. Many large companies farm out subcontracting work to small businesses.
En an Inc. article on tips for landing government contracts, Bill Polizos, director of the small business program at AT&T Government Solutions, suggests that small businesses narrow their focus down to two or three agencies that seem like the best prospects. “Go to the events they hold so you can learn as much as you can about opportunities. As you do that, you’ll bump into us.”

Game Plan

  • The best place to start your learning process is the SBA’s dedicated website for resources on contracting. Here, you can learn about everything from how to determine whether your business qualifies as “small” (hint: it depends on your industry), to how to register – and how to get support as you pursue contracts.
  • To learn about the contracting process, you also might try tapping into local resources, including your local or regional Chamber of Commerce. Many community colleges also offer classes and seminars.
  • Another good resource as you’re getting started is the Federal Procurement Data System. This website lists all federal contracting data for contracts awarded that are higher than $25,000. Sifting through this information can help you learn about which agencies have contracts and with whom they’ve contracted. This gives you the lay of the land regarding on what kinds of contracts specific agencies seek bids.
  • A similar resource, in this case focused on government spending on contracts, is
  • The Federal Office of Small and Disadvantaged Business Utilization Directors Interagency Council sponsors outreach events and other efforts to help small businesses in the contracting process. This organization’s website includes a number of resources, including upcoming outreach events.
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