The Essential Small Business Guide to Federal Contracts

By Pam Baker | Posted November 28, 2012

Federal contracts look like a mixed blessing to many small business owners. On the "blessing" side, they tend to be larger and more lucrative than the private contracts that a small business typically lands. According to a 2011 American Express OPEN government contracting survey, "small business contractors are more likely to exceed $1 million in revenue versus their non-contracting peers. Nearly half (47 percent) earn revenues in excess of $1 million, versus the 5 percent of all small businesses that have achieved that level of business success."

In the "mixed" column, small businesses often fear that competing for federal contracts is considerably harder and far more confusing. They also worry that the process takes much longer to close. Fortunately, landing a federal contract doesn't have to be that hard, and the odds are actually in your favor.

"Contrary to popular belief, doing business with the federal government is easier than you think," says Lourdes Martin-Rosa, American Express OPEN advisor on government contracting and a mentor to small businesses interested in accessing and landing federal contracts. "There's no secret recipe to obtaining the government as a customer and getting in on the billions of federal procurement dollars."

How to Land Your First Federal Contract

Winning a federal contract essentially depends on you knowing what to do, when to do it, and who to turn to for professional help. Before you get started with the process, keep in mind that the federal government wants to work with you as much as you want to work with it.

"In 2011, the U.S. government spent nearly $91.5 billion on products and services supplied by small businesses," says Martin-Rosa. "Given the government's procurement goals of awarding 23 percent of its spending to small businesses, 5 percent to minority-owned businesses and 5 percent to women-owned businesses, federal contracting is an important avenue of growth for many small businesses to consider."

According to Martin-Rosa, conducting business with the feds doesn't differ from doing business with the public sector. "Hard work, perseverance, marketing techniques and relationships are required to win contracts," says Martin-Rosa. "There are, however, important steps you must take to pursue federal contracts."

12 Steps to Securing a Federal Contract

Martin-Rosa provides these 12 specific steps and other knowledgeable sources augment her points. All the sources quoted in this article agree on a precise path to that all-important first federal contract.

1. Get your business noticed

Register your business in a portal called System for Award Management (SAM). The key database under SAM is the Central Contractor Registration (CCR), and you need to make sure to complete it with all the accurate data related to your company.

The CCR contains the company profile, which houses information about the services and products that a company provides; points of contact, the status of the small business and documentation of performance in the marketplace. Essentially, this is the first key step in doing business with the federal government.

Also be sure to add your business to the Small Business Administration's Dynamic Small Business Search. Registration is free, but you must have the following information in order to register:

2. Certify your business to gain a competitive edge

Visit the Small Business Administration website to determine if your business qualifies for any Small Business Certifications. You may be able to identify your firm as a small business, veteran owned, small disadvantaged business, and/or woman-owned small business. Any of these certifications help you stand out from competitors.

"Although the certification processes may be time consuming and perceived to be invasive, the certifications offer many sales and development opportunities for those businesses that complete the processes," adds Crystal L. Kendrick, president of The Voice of Your Customer, a minority-owned marketing firm that was named NMSDC National Minority Supplier of the Year. 

"The federal government also tracks sales to certified disadvantaged businesses by agency and encourages those agencies that do not meet their goals to increase their spending with certified disadvantaged businesses," says Kendrick. "Certifications are effective ways to reduce the competition pool and to introduce your business to the federal procurement officers."

More Tips to Help Land a Federal Contract

3. Learn which federal agencies buy your type of products and services

Before any solicitation goes out, learn as much as you can about your prospect and with whom it currently does business. Successful government contractors routinely peruse FedBizOpps.gov, an online listing of government contracts that detail all contracts with a value exceeding $25,000.

You can better understand the government as a customer by visiting a site called USAspending.gov. It details how our tax money is spent, what agency issues contract awards and who the federal government buys from and for how much. An educated business owner is a successful business owner.

"I would add that small businesses submit sources-sought statements and request that their local SBA office submit SBA Search Letters for upcoming procurement opportunities," says Kendrick. "Federal procurement officers use these documents to identify set-aside and sole-source opportunities for certified disadvantaged businesses."

4. Check out the procurement forecasts for your targeted federal agencies

The good news is that the government is a transparent customer, which makes it easy to find out its future purchasing plans. Every federal agency produces -- and is required to post on its website -- an annual procurement forecast, maintained by its Office of Small and Disadvantaged Business Utilization (OSDBU) or equivalent.

Contact each agency OSDBU at FirstGov.gov to see what goods or services they anticipate buying. Once you have an idea, get to know your potential customer by visiting the agencies' websites. Familiarize yourself with their missions and assess what you can offer to help them fulfill their goals.

5. Make your price list easy to understand

Address all required items, even if they're not applicable. If you're in a competitive area, you may need to discount your top commercial price. But don't discount so much that you will lose money on the transaction, and keep in mind that government agencies seek the best value, not necessarily the lowest price.

"To increase the likelihood of success, it is important for small businesses to be realistic about their scope, capabilities and experiences," says Kendrick. "Small business owners can spend quite a few resources to submit proposals when they may only meet a few of the criteria. These strategies may work in local or regional markets, but federal markets are far more competitive."

6. Sharpen your elevator pitch

When courting customers -- even Uncle Sam -- it's critical to summarize your firm's capabilities clearly and succinctly. A successful pitch includes, but is not limited to, a company overview, core competencies, past performance, differentiators and company data.

7. Look for micro-purchases or credit card purchases to get your foot in the door

These types of small purchases let the government make non-competitive bids for agency requirements. The government defines micro-purchases as expenditures of less than $25,000, while the bar for credit card purchases stands at less than $3,000.

Important: the small size of the contract doesn't matter; you can now add past performance to your company's capability statement. Federal agencies have a specialist to assist small businesses, so start by contacting the small business specialists at the agencies you are targeting. You'll find contact information for these specialists online at the respective agency's website.

8. Team with another SMB to improve your chances

A study by American Express OPEN found that business owners that team with another business win 50 percent more contracts. Teaming can also help novice business owners gain the experience and credibility they need to win more government contracts.

With various set-aside contracting programs for small businesses, partnering with an 8(a) or with a women-owned firm can help increase your chances of winning contracts. To find teaming partners, visit USAspending.gov  and Federal Procurement Data System. These two websites offer a wealth of past-performance information that lets you see buyers and competitors. You can also customize the information and pursue teaming relationships with those firms currently doing business with an agency you are targeting.

Small Business Tips for Winning Federal Contracts

9. Learn from others

Use all available resources to find information that will save you time and money. For example, you can find how-to articles, guides, videos, and tips on how to do business with the government on American Express OPEN Forum. You'll find free monthly webinars at Give Me Five, a website for women-owned businesses seeking federal contracts, which is also sponsored by American Express OPEN.

"Some free resources for companies interested in government contracting can be found at the local Procurement Technical Assistance Centers (PTAC) offices," adds Jennifer Schaus, owner of Jennifer Schaus & Associates, a boutique consulting firm in Washington, D.C. "These are federally funded programs that conduct seminars about the various components and marketing tools in federal contracting."

Schaus also recommends that small business owners:

  • attend "Industry Day" at the agencies
  • participate in mentor-protégé programs within the agencies (this is where the large firms mentor and sub-contract with the small guys)
  • meet with the OSDBU - Office of Small & Disadvantage Business Utilization (every agency has one)
  • attend some of the new Small Business Administration seminars
  • attend trade shows, conferences, networking events and associations

And don't overlook industry resources as many of them have federal contracting ties that can help you, too.

"Industry events around the beltway frequently bring up federal-contracting and industry leaders like the Northern Virginia Technology Council (NVTC) and the AFCEA, says Lateef Mauricio, managing partner of NOVA Advertising, a strategic marketing firm that specializes in marketing and business development in the government contracting industry.

Also, Mauricio adds, "the American Council for Technology and Industry Advisory Council (ACT-IAC) facilitates networking opportunities and may serve as vendor advocates."

Your own city may offer help for small businesses interested in securing federal contracts. If your city doesn't, certainly cities around the D.C. area do. For example, the Baltimore Washington Corridor Chamber (BWCC) hosted its 21st Annual Government Procurement Fair this past Halloween.

Mark your calendar to catch the event next year. It's the longest-running procurement fair in the Baltimore-Washington region, and it's faithfully attended by more than 50 federal, state and local government agencies every year.

10. Step away from your computer and smartphone

While it's often much quicker and less stressful to email a potential customer, face-to-face meetings and networking are far more effective in creating meaningful connections and establishing relationships with government procurement officials. Make the time to regularly visit the D.C. beltway and to attend key conferences such as the GSA Expo or the OSDBU Procurement Conference. Do not limit your communications to email and phone -- though both are important follow-up methods.

"Work closely with the agency's Office of Small Business Utilization (OSBU)," agrees Michael Perch, a principal consultant at RoadMap Consulting (RMC), a firm that specializes in helping small businesses secure government designations and win government contract bids. "They can provide valuable insight into specific contracting opportunities." 

11. Remember to dedicate time to pursue government contracts

Treat this time like a client meeting, and specifically allocate time blocks into your schedule. If you don't, your strategy becomes a hope or a wish and, with inconsistent effort, it will be extremely difficult to effectively attract the new business. For example, one successful woman contractor sets up weekly time dedicated to government contracting pursuits.

12. Last but not least, be patient and persistent

Business development takes time; don't give up. According to American Express OPEN's survey of government contractors, it took active contractors 1.3 years and four bids before they won their first prime federal contract. But here's the encouraging news; experience pays off.

With experience comes increased contracting success -- small firms with 10 or more years of contracting experience win more than half (53 percent) of the bids they submit versus just one in five of the proposals submitted that are won by companies with three years or less of contracting experience.

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