What Should I Know Before My Business Accepts a Government Contract?

If your small business is new to the world of government contracting, it may feel overwhelming to try to figure out where to start, and what steps you need to take in order to lock in a contract with the world’s largest customer – the Federal Government. There are many rules and hoops to jump through, but many advantages in selling your products and services this way. This is where a Daytona Beach federal contractor law firm can help.

The reality is that the government favors choosing small businesses to provide a percentage of all goods and services it purchases every year. An example of that is the so-called ‘set-aside’ contracts, designed to provide a fair chance for small business owners to compete and bid on different opportunities to win a federal contract. Let’s look at some basics of preparing a winning bid and discuss important rules you will need to follow when entering into a contract with the government.

How Can My Business Get a Government Contract?

The first thing you should do to make your business eligible to compete for a federal contract is to get all the required registrations and ID numbers.

This can include a list of numbers and registrations, such as:

• A DUNS (Dun & Bradstreet) Number for each physical location of your business;
• A NAICS (North-American Industry Classification System) Code for the products and services you supply;
• Registering with SAM (System for Award Management), which is a database used by government agencies that are searching for contractors.

You will also need to double-check that your business is indeed classified as a small business by the SBA before you even begin the process. Most manufacturing companies with less than 500 employees or non-manufacturing companies with less than 7.5 million in annual receipts are typically considered small businesses.

A couple of great starting points for your business to get a government contract are getting into the GSA (General Services Administration) and thus being approved to do business with the government, and also getting a subcontracting opportunity with a larger contractor through networking or by entering into subcontracting directories such as those maintained by the SBA, the GSA and the U.S. Department of Defense.

What Are the Rules and Regulations for Government Contracting?

A typical federal contract can mean an enormous and lucrative opportunity for a small business, but it comes at the price of a hefty – and often confusing – stack of rules and regulations. Many of those are outlined in Title 13 Part 125 of the Code of Federal Regulations (CFR). There are also certain provisions present in a government contract that seek to maintain the integrity of the procurement process, and it is important to take time to fully understand these.

If you are a prime business contractor, you need to be aware of your limitations regarding performing minimum levels of work and using small-business subcontractors to complete the majority of the work. Likewise, a business providing manufactured goods is required to perform at least 50% of the cost of manufacturing such goods – with an exception for a non-manufacturer small business that is allowed to provide goods it did not produce, as long as those manufactured goods came from another small business.

These are just examples of regulations that aspiring federal contractors must follow, and there are additional industry-specific laws that may need to be observed. Reading and understanding the FAR (Federal Acquisition Regulation) is highly recommended as a starting point. You can also consult a seasoned Federal Government Contractor Attorney to get assistance in understanding the technicalities of such contracts.

How is the Federal Government Different Than a Commercial Customer?

In many ways, having the federal government as a buyer is much like having a regular buyer in the sense that once you win the contract, you are expected to provide the services or deliverables on time, on budget, following the agreed-upon requirements, and maintaining good quality standards. The biggest difference is that your federal contract may be amended or terminated by the government if you don’t meet your contractual obligations – or simply by convenience.

If a contract is terminated by convenience, it simply means that the government can cancel contracts for goods and services that are no longer necessary, and the contractor will be paid for any work completed up to that point. On the other hand, a contract terminated by default is based on poor contractor performance, and while the contractor will get paid for work completed, the government has the power to bill that contractor for any price differences if the goods are still needed and end up having to be sourced elsewhere at a higher cost.

How Can I Get Help to Win My First Government Contract for My Business?

Unlike regular commercial clients, the federal government shares important information to assist small businesses that wish to sell their goods and services by entering into a federal contract. Through some simple research, you can look into the government’s purchasing history for a particular product, including how many times it bought a certain product and for how much. They are genuinely interested in opening the door for qualified small businesses to participate in contracts and offer many outreach programs to help small business owners understand the process and put forward a successful bid.

Besides taking advantage of the many resources made available by the SBA and other agencies, we also recommend talking to a Federal Contractor Attorney to get help drafting a proper contract and bid, ensuring your business is compliant, and increasing your chances of success. When your business masters the process of selling goods and services to the federal government, you are opening the door to tapping into a major client that can potentially spend millions and help propel your small business forward – and that alone is worth all the effort.

By: Melody Lankford
After graduating from Davidson College, Melody Lankford earned her J.D. from Florida State University’s College of Law in 2004 and was admitted to the Florida Bar that same year. Ms. Lankford joined Raydon Corporation as in-house counsel in 2004. She worked there until 2012, when she founded the Lankford Law Firm. She is an experienced Daytona Beach small business attorney who offers sound legal counsel and experience-based insights to her business clients.