The Advantages and Disadvantages Of Being A Government Contractor


The United States Government Is A Very Powerful Client With Deep Pockets

The Federal government usually spends around 500 billion dollars a year on goods and services. This makes the U.S. government an extremely attractive client. There are few other organizations with this type of spending power and clout.

The government also tends to buy goods and services in bulk. If your business has the infrastructure to handle large orders, then the government can help you grow substantially at an accelerated pace.

Government agencies also buy goods and services in large quantities. Large orders can be a double-edged sword for small businesses. However, if managed correctly, they can help you grow substantially and rapidly.

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. This set aside actually might increase a small business’s chances of winning a lucrative bid.

The federal government is required to set aside at least 23 percent of its total spending specifically for small businesses. Several small businesses have made a fortune just on federal government contract awards.

Important Laws

Section 8(d) of the Small Business Act and, in most cases, FAR 19.7 incorporate several laws regarding small business subcontracting. These laws require prime contractors to provide subcontracting opportunities to small businesses. This includes:

  • HUBZone small business 
  • Small disadvantaged business 
  • Women-owned small business 
  • Veteran-owned small business (VOSB)
  • Service-disabled VOSB

So the government requires that on contract over $500,000 or a million when constructing a facility that is public, that large prime contractors must turn in plans for subcontracting percentage goals for small business, HUBZone small business, small disadvantaged business, women-owned small business, VOSB, and service-disabled VOSB. These plans must describe in detail the methods used to make sure that small businesses have a fair chance to compete for government contracts. This is required to be submitted for review prior to the award of any government contract that meets this threshold. If a prime contractor fails to comply with this regulation then they might be subject to liquidated damages or termination for default.

This rule does not apply to contracts that are under the prescribed dollar amount, contracts that are going to be completed fully outside the United States of America, contracts that have no subcontractor opportunities, and small businesses.

Government Contracts Offer Security In These Uncertain Times.

Covid-19 has halted a lot of different industries. However, the government must continue to move forward for the health and welfare of its people. Government contracting can be a shining light in the pandemic darkness and provide a lifeline to many struggling businesses who are trying to survive this unprecedented situation.

You should remember that government agencies are in need of goods and services in a year-round capacity. This makes them one of the few consumers that are actually recession-proof and a great source of steady reliable income.

Are There Any Other Advantages For A New Business To Registering For The SAM Directory Besides Government Contracting Opportunities?

A business has to be registered with SAM before they can begin to apply for valuable federal grants.

What Is A Federal Grant?

A grant may be a way the government funds your ideas and projects to provide public services and stimulate the economy. Grants support critical recovery initiatives, innovative research, and lots of other programs within the Catalog of Federal Domestic Assistance (CFDA).

The following are the steps to apply for a grant:

  • Step 1: Obtain a DUNS Number
  • Step 2: Register with SAM
  • Step 3: Register with


High-Level Security and Background Checks

It is important for government contractors to be able to pass several security clearances. A background check on your company and employees is often a condition of employment.

This will include the following:

  • Employment
  • Education
  • Criminal Records
  • Credit History
  • Motor Vehicles and License Records

You should make sure that all your personnel and employees are able to pass this intensive screening. If there are any issues, make sure the government is made aware of it ahead of time, so that an explanation can be given. For example, if you are participating in programs that rehabilitate criminals by giving them jobs. Transparency is often the best way to deal with situations that might cause an issue in obtaining lucrative government contracts.

Certification and Education

Usually, the agency sets specific educational and certification guidelines when they post a request for proposals or RFP. These requirements can vary depending on the type of work that is needed. However, there are some steps that any business can do to become more attractive for government contracting work.

Understanding Audits

Your company should be clear on what the DCAA considers the responsibilities of federal contract actors. They include the following:

  • timeliness of payments to subcontractors
  • documentation of contractor oversight of subcontractors
  • documentation of enforcement of flow downs
  • documentation of support for subcontractor billings
  • documentation of subcontractor reviews

Federal government agencies receive their funding from taxpayer dollars and they need to justify their spending in order to prevent waste. We will help you make sense of government accounting so you can develop a methodology that works for you and your business.

How Do You Get Started?

Make Sure You Have Your CAGE Code (Commercial and Government Entity)

This code is five characters and unique to your business. It’s basically 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, then you will need multiple CAGE codes. Each location must have its own unique code, and each location must be registered separately with SAM.

SAM Directory Can Help

Remember, registering for the SAM directory gives a business automatic entry into the extremely lucrative marketplace of the federal government. It is also a crucial step for applying for rewarding government grants that can help your business reach its full potential.  Let us, the professionals at SAM Directory, make sure that you do all that is needed to not miss out on this important opportunity. We will make certain that your application is processed quickly and efficiently so you can start being a federal contractor as soon as possible. We remove this hassle so you can go about the important mission of running your company. Stay tuned for this next article in this series.