Why Small Businesses Need To Care About Compliance As Government Contractors

Understanding The Regulations

There are many advantages to being a successful government contractor. However, the government has stricter rules and regulations regarding accounting when compared to private sector clients. It is important to keep up with federal regulatory requirements

Federal government agencies receive their funding from taxpayer dollars and need to justify spending 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.

The Integrity Of The Procurement Process

All bidders on government contracts must have equal access to any information needed to create a comprehensive bidding package. A company bidding on a federal contract may not receive information that is not public to provide an unfair competitive advantage in the field. This includes things like an innocent email accidentally going to the wrong person.

Contingent Fees

A government contractor is not allowed to agree with a third party where the third party will pay a fee contingent on the successful winning of a federal contract. This is to ensure contractors are not tempted to cut corners to be paid.

The Government Is Different

Small businesses should know that doing business with the federal government is different from doing business with civilian companies or individuals. The government must protect the public interest and not abuse funds in the public treasury. They must be very responsible with the money provided by their citizens’ hard-earned tax dollars to avoid all inferences of unfair advantage.

A small business must make sure that they are not participating in the following:

  • Bribes
  • Gratuities
  • Kickbacks
  • Conflict of interest
  • Lack of procurement integrity

Any suspicion of this type of conduct can bar a business from doing business with the federal government for life and can include criminal sanctions. It would help if you were very careful not to do anything that might violate the integrity of the government process. These provisions include the “officials not to benefit” clause, the “anti-kickback” provisions, the “gratuities” clause, etc.

Simplified Procedures

In 1994 the Federal Acquisition Act or FASA simplified the buying procedures of the government.

Many more harsh restrictions on government purchases were removed for any purchase less than $100,000. Now agencies use much simpler procedures for analyzing and soliciting bids up to the $100,000 amount. However, the government must still advertise all purchases over $25,000 at www.fbo.gov.

These simplified procedures mean that approval levels are lower, there is much less documentation, and administrative details are less complex. The government now has to reserve purchases that are between $2,500 and $100,000 for small businesses. The exception is the contracting officer cannot obtain offers from two or more small businesses that are competitive in price and quality.

Purchases not exceeding $2,500 individually or through multiple items are considered micro-purchases. These do not require competitive quotes but are open to small businesses. Micro-purchases are often made using government-issued purchase cards or typical credit cards.

Contracting Officers

The Federal Government always conducts any procurement business through contracting officers. These contracting officers have the authority to bind the government to a contract unless otherwise stated in writing. Make sure that the person you are dealing with is the contracting officer authorized to represent the agency or office that will award the contract.


Government procurement has always been advancing many national, economic, and social objectives. Government contractors must comply with the rules and regulations of labor standard statutes. This will include the Service Contract Act, Contract Work Hours and Safety Standards Act, and other statutory requirements that further socio-economic objectives, except for certain contracts where such legislation is specifically stated as non-applicable.


The government usually makes sure contracts are competitive through sealed bidding. First, the agency makes sure that its requirements are accurate and complete. Then an Invitation For Bid or IFB is issued. The IFB will describe the type of product or service the government procures. It also includes:

  • Preparation Instructions 
  • Conditions of Purchase
  • Packaging 
  • Delivery 
  • shipping 
  • The payment with contract clauses to be included
  • Submission Deadline

The sealed bids are public at the purchasing office when designated in the invitation.

The bids are read aloud and then recorded. The contract will be rewarded to the bidder with the most competitive pricing and can meet the government agency’s requirements. 

Government-wide IFBs can be found at FedBizOpps, which links directly to the invitation. Potential contractors can search the Central Contractor Registration to identify qualified small business opportunities. Any small business that wants to sell to the government should be registered on CCR.

Government Contracts Can Be Very Lucrative For Small Businesses

The United States government issues 500 billion dollars in federal contracts every year. They also set aside 23 billion dollars specifically for small businesses. However, many small businesses find the process of winning government contracts daunting and give up before even really trying. 

Sam Directory will guide you through the process of writing a successful government contract proposal. We are invested in your success and want to help you succeed in winning a lucrative federal contract.

Make Sure You Have Your 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 it. It is a bit like a social security number for your business. You will need multiple CAGE codes if your business includes more than one facility. Each location must have its unique code, and each must be registered separately with SAM.

How Do You Get Started Working With The Government?

SAM stands for System Award Management.

To do business with the federal government, you must register your business in the System for Award Management. The government will only hire businesses that have 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.