Print   RSS

Should your SMB compete for government contracts

Learn whether it is a good idea for small business owners to chase government contracts.

James Douglas Burbank

April 25, 2017

Depending on where you stand on the political spectrum, you will have different opinions on how much the government and its different levels should be involved in the world of business, especially small business.

And while this is always a great debate, the reality is that different levels of government have work that needs to be done and small businesses of different kinds are often looking for a way to get in on those contracts.

Unfortunately, most small business owners soon discover that this is a very complex field to navigate, for a number of reasons.

The Allure of Government Contracts

Regardless of how you feel about government involvement in the world of business, the fact remains that government contracts can be great for a small company.

First of all, you can rest assured that you are going to get paid. Government always pays up and you can plan the future of your enterprise on a steady influx of revenue that is guaranteed to you by the contract. This is the kind of security that small businesses rarely enjoy and it can truly be liberating knowing where your next check is coming from, so to say.

It should also be pointed out that these contracts often last for a long time, which means that this steady revenue will be pouring in for a hefty period of time, letting you plan your expansions and new ventures without fearing a sudden drop in revenue. Moreover, you do not have to worry about the economy going south or anything like that, either.

In addition to this, government contracts often come with maintenance contracts afterwards. For example, if you are hired to do the lighting on government buildings in a state capital, you will most likely also be given a contract to maintain them for years to come. In other words, added security.

Last but definitely not the least, the government often pays nicely.

The Myriad Complications

On paper, government contracts are straightforward affairs – the government will provide an invitation for bid, you apply and if you are the most sensible choice for a contractor, your company wins the contract. What could be simpler than that?

In reality, things start getting complicated from the very start.

For example, there are a number of ways in which the various levels of government can invite companies to bid on their contracts. For example, there is the Request for Proposal (RFP)where the agency in question needs to learn more before they award the contract and there is the Invitation for Bid (IFB) where they know pretty much everything about the future contract and they just want to get the best-suited company to handle this contract. This is a gross oversimplification, bear in mind.

Of course, there are myriad paperwork and legal hoops that the company will have to jump in order to even be considered as a potential contractor. Just on the surety bond front, there are more than a dozen different types that your company would need to get before they could become a contractor (most often performance bonds).

There are also Federal Acquisition Regulations (FAR) that can take months to begin to grasp, let alone master and they can change from time to time, making things even more complicated. There is also the option to become a subcontractor who will get part of the contract from the prime contractor.

On top of all this, small businesses that wish to compete for contracts have additional obstacles to think about. For one, there is the fact that it will be difficult for them to compete with large companies in terms of offering the lowest price. Also, government decision makers have a certain aversion towards awarding big contracts to small companies when they compete with large and tested ones (even though their bid might be superior).

Not to get political or anything, it should also be pointed out that there is a bit of cronyism in the whole government contracting business, at least judging by small business owners who have played the field.

Improving Your Chances

Luckily, there are a few things that you can do as an SMB owner to improve your chances of landing a government contract or subcontract.

First of all, you need to familiarize yourself with the laws and the regulations. Small Business Administration website is a great place to start. You should also consider talking to a consultant who has been in the game for a while and who knows the ropes.

You should also make sure that your company is building up its reputation through good performance and a spotless record. Of course, you should also take care of all the legal and paperwork before you bid for any contracts. You may also want to become involved in the local community and perhaps even in some political events in order to build your connections.

Another good way to go would be to start small. You do not have to go for large federal government bids. Your local government will also have jobs needed to be done, even your city government. Building your company up this way can go a long way. You may also want to do some subcontracting first until your company is ready to take on an entire contract.

Closing Word

Some small business owners do not want to hear about government contracts and they probably have good reasons for this. That being said, no one can deny that government contracts can be alluring for an SMB, even though winning one might prove to be a much more complicated affair than it seems at first.

 Feedback   Submit Article