The Small Business Advantage In Federal Contracting

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.

What Qualifies As A Small Business?

In order to be considered a small business, a company has to meet the following requirements:

  • A business must meet small business size standards.
  • Part of a business must be within the U.S.
  • A business must operate mainly within the U.S. or make a significant contribution to the U.S. economy through the payment of taxes or the use of American products, materials, or labor.
  • A business must be independently owned and operated.
  • A business cannot be dominant in its field on a national basis.
  • The first thing a small business must do in order to qualify for government contracts is to register with the SAM Directory.

The Federal Government Offers Great Opportunities For Many Types Of Businesses

The government actually designates a portion of the contracts for women-owned small businesses, small disadvantaged businesses, companies within historically underutilized business zones (HUBZone), and service-disabled, veteran-owned small organizations. This allows for underserved groups to have a real chance to get awarded lucrative government contracts.

The Government Is Fantastic For New Businesses

The government has a lot of demand but it goes out of its way to make sure all competition is open and fair. It will need to work with almost any business for products and services with competitive pricing.

The United States government is known for running with high levels of precision and accuracy. Making sure the government contracts are fulfilled is a great way for a new small business to streamline its process and delivery methods.

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.

Minority-Owned Business Status

Five percent of the Federal government contracts are supposed to be awarded to members of an economically or socially disadvantaged group. This allows minority groups to remain competitive in the government market.

Under the Small Business Act, certain individuals are presumed socially disadvantaged: 

  • African-Americans
  • Hispanic Americans,
  • Asian Pacific Americans
  • Native Americans (American Indians, Eskimos, Aleuts, or Native Hawaiians)
  • Subcontinent Asian Americans.

An individual who is not a member of one of the groups listed can be admitted to the program if he/she shows – through a “preponderance of the evidence” – that he/she is socially disadvantaged. For instance, an individual may show social disadvantage due to race, ethnic origin, gender, physical handicap, long-term residence in an environment isolated from the mainstream of American society; or other similar causes.

Additional Requirements

In addition, the business must show economic disadvantage by submitting a narrative and personal financial documentation about the company’s income, assets, and net worth.

Generally, successful applicants must also meet the following additional requirements:

  • The business must be small according to the Size standards for small business concerns;
  • The business must demonstrate a potential for success (generally by being in business for, at least, two years);
  • The business must be unconditionally owned and controlled by
  • by one or more disadvantaged individuals who
  • are US citizens and who are of good character.;

Registering For Minority Certification

In order to qualify for the five percent of the contracts that are reserved for minority-owned or disadvantaged businesses, one must be certified by the government. This means that a business is giving up on 24 billion dollars worth of revenue by not registering.

Registering also has other advantages. The SBA offers specialized training programs and mentoring to registered organizations, free of charge. You also get admitted to opportunity fairs and networking events through the National Minority Supplier Development Council.

Prior to applying for the 8(a) Program, each firm is urged to take an on-line training and self-evaluation course that can be found here at the 8(a) Business Development Suitability Tool.

The first section of the on-line course explains the 8(a) Program intimately. It culminates in an eligibility self-assessment test. The test consists of a series of straightforward yes/no questions that evaluate the degree to which your firm meets the essential qualifications for the 8(a) Program.

If key eligibility criteria are not met, you will be directed to the SBA resource deemed most appropriate to help you at this time.

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.

How Do You Get Started Working With The Government?

SAM stands for System Award Management.

In order to do any business with the federal government, you must register your business in the System for Award Management. The government will not hire any type of business that has not registered in the SAM directory.

We have an article on our site, Everything You Need to Know About SAM for Small Businesses, that gives you important information about this process.