Government contracting can be a lucrative opportunity for businesses, but it also comes with its own set of pros and cons. One important aspect of government contracting is being listed in the SAM (System for Award Management) directory, which serves as a central repository for government contractors.
One of the major advantages of government contracting is the potential for stable and long-term revenue streams. Government agencies often have large budgets and ongoing needs, providing a consistent source of income for contractors. Additionally, working with the government can enhance a company’s reputation and credibility, opening doors to new opportunities in both the public and private sectors.
Being listed in the SAM directory offers several benefits. It allows businesses to showcase their capabilities to government agencies actively seeking contractors. This increased visibility can lead to more contract opportunities and partnerships. Moreover, being part of the SAM directory streamlines the procurement process by making it easier for government agencies to find qualified vendors.
However, there are also some drawbacks to consider when engaging in government contracting. The bidding process can be highly competitive, requiring significant time and resources to prepare proposals that meet strict requirements. Additionally, working with governmental regulations and compliance standards can be complex and demanding.
Furthermore, reliance on government contracts may expose businesses to potential risks such as budget cuts or changes in political priorities that could impact funding availability.
In conclusion, while being listed in the SAM directory offers numerous advantages such as increased visibility and streamlined procurement processes, it is essential for businesses considering government contracting to weigh these benefits against potential challenges such as intense competition and regulatory complexities. By carefully evaluating both pros and cons, companies can make informed decisions about pursuing opportunities within this sector.
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.
Cons
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
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.
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.
As a smart entrepreneur, you have already used our site to register in the SAM directory. Congratulations on taking this important first step to become a government contractor.