Small Businesses Are Given Special Consideration When It Comes To Government Contracts
In many markets, small businesses are often outcompeted by larger organizations that often have access to almost unlimited resources. So this set aside might increase a small business’s chances of winning a lucrative bid.
The federal government must set aside at least 23 percent of its total spending specifically for small businesses. Several small businesses have made a fortune just on national government contract awards. However, before companies bid for contracts, it is crucial to understand the different types of arrangements utilized by the government.
Time and Materials Contracts
The government rarely awards this type of contract because of the expense. A Time and Material Contract requires paying directly for all costs associated with the particular project. Labor Hour Contracts are defined as a variation of the time-and-materials contract, differing only in that materials are not supplied by the contractor. See 12.207 (b), 16.601 (c), and 16.601 (d) for application and limitations for time-and-materials contracts that also apply to labor-hour contracts. See 12.207 (b) for labor-hour contracts for certain commercial services. Labor Hour Contracts do not include the cost of materials.
Indefinite Delivery Contracts
The government uses this type of contract when it does not know precisely how much of a product or a service will be needed for a project. They will usually list a range, and certain companies will be invited to provide their lowest bids per item.
This includes Task-Order Contracts which permit government stocks of specific items to be maintained at minimum levels and allow direct shipments to the users of products or services. They also enable great flexibility in both quantities and delivery scheduling and the ability of buyers to order supplies and services only after specific requirements for them materialize. Job-Order contracts, a competitively bid, fixed price, multi-year construction contract based on established or published unit prices via a unit price book (UPB) or a price list with a multiplier (termed coefficient) applied to the unit prices also fall under this category
Fixed-Price Contracts
These government contracts are used when the scope of work is clear from the beginning, and therefore a price is determined by the agency in advance. There are many different types of this particular contract.
Firm Fixed-Price (FFP)
This contract means that the price is set in stone and the vendor or small business awarded the contract will be taking all the risk. So if the contract is over budget, the small business owner has to pay out of pocket. However, if the project is under budget, the business will keep the extra profit. This is an excellent contract for companies that are precise with their pricing and have a lot of experience.
Cost-Reimbursement Contracts
Cost-reimbursement is a category of contracts used when it would be too difficult to estimate the cost of the project in advance. They usually define a spending limit but are a much lower risk for the service provider than fixed-price contracts.
Cost Contracts
This contract pays only for expenses, and there is no profit for the small business provider. Cost contracts are often used for research projects provided by non-profit organizations.
Cost-Plus-Fixed-Fee
This contract includes a limit for expenses that will be reimbursed and a fixed payment for the service provider.
Cost-Plus-Incentive
Like Fixed-Price-Incentive contracts, this provides a financial incentive for the service provider to come in under budget while also covering project expenses.
Cost-Plus-Award-Fee
This contract states that the govt client can pay the expenses of completing the project and provides financial awards supported by criteria outlined beforehand.
Cost Sharing
This type of contract only pays a predetermined portion of the overall costs. It is most common in research contracts where the service provider will benefit in other ways from the research results.
Get The Bid Package
After you have ascertained the government contract you want to bid on, it is essential to contact the agency and request a bid package. This package is also often called the solicitation package.
After you receive the package, review it carefully. Find out what the purchasing office wants to buy and determine if your company can meet the requirements.
The Bid Package should contain the following: the buyer’s contact information, including name, address, phone number, and e-mail address, are listed on the bid notice. When you request the bid package, make sure to also ask for amendments.
Be Precise And Follow Directions
Naturally, the government is a stickler for following rules and regulations. It is shocking how many bids get tossed out because companies fail to follow basic directions. Be aware of deadlines, and do not leave anything black when filling out forms. The request for proposals or RFPs has precise instructions, and you must take everything seriously. Just think of it as filing your income taxes, and do not take any unnecessary shortcuts.
The First Step Is Registering With SAM
To do any business with the federal government, you must register your business in the System for Award Management directory. The government will not hire any type of business (large or small) that has not been written in the SAM directory.
Please read one of the helpful blog articles on our site, Everything You Need to Know About SAM for Small Businesses. These blogs will help give you all the information you need to understand how we can help make the process very easy for you. Sam Directory will happily guide you through this often confusing process.
What do I need to register for the Sam Directory?
You will need the following :
- A Data Universal Numbering System or DUNS from Dun and Bradstreet
- Your Tax Identification Number or TIN
- A Social Security Number if you are a Sole Proprietor.
CAGE Code (Commercial and Government Entity)
This code is five characters and unique to your business. It’s your ID code, and government agencies will identify your business using this code. It is a bit like a social security number for your business. If your business includes more than one facility, you will need multiple CAGE codes. Each location must have its unique code, and each site must be registered separately with SAM.