Becoming a Government Contractor
Jul 26, 2023Are you a business owner thinking about becoming a government contractor? There are many things to consider before taking the leap. While the process is complicated, federal government contracts can provide numerous opportunities for businesses of all shapes and sizes.
Consider the sheer size of the market. The federal government is comprised of numerous agencies, departments, bureaus, and offices — and all of them need various kinds of products and services to do their work. The federal government purchases just about everything. Government contract spending increased by almost $50 billion in 2022, topping $700 billion. Key growth areas included R&D projects, IT, federal infrastructure spending, and support for the war in Ukraine.
While it’s true that most of the leading players involved in government contracting are huge conglomerates involved in defense-related technologies and systems, it’s also true that the federal government has policies and programs in place to encourage competition and create more opportunities across all departments and agencies for a wide range of small businesses. Explore the government contracting landscape online to understand where your company’s products and services could fit into it all. Federal contracts can lead to a predictable pipeline of work for your company, and the government is pumping out a considerable amount of work these days. Can your company get a piece of it?
What is a “small business”?
As designated by Title 13 Part 121.201 of the Code of Federal Regulations, a small business designation by the Small Business Administration (SBA) must meet the size standards set for each NAICS code. Most manufacturing companies with fewer than 500 employees and most non-manufacturing businesses with average gross receipts under $7.5 million will qualify as small businesses under these regulations.
Rules and regulations
Businesses that want to bid on government contracts must understand all the rules and regulations that apply to the various types of contracts. Title 13 Part 125 provides detailed information about all the regulations covering government contracting programs for small businesses. There are also helpful guides and other resources available through the General Services Administration (GSA) and Small Business Administration (SBA) designed to equip small businesses with the tools they need to respond to government Requests for Proposals (RFPs) successfully.
The SBA also works with all federal agencies to facilitate small business set-aside goals yearly. The annual goal is that approximately 23 percent of all government contracts are awarded to small businesses. In conjunction with the SBA, each federal agency establishes which contracts are to be “set aside” for small businesses. While each agency has different set-aside goals, the SBA ensures that the overall goal of 23 percent is met across all government contracting agencies.
There are two types of small business set-aside contracts:
Competitive Set-Aside Contracts are when at least two small businesses can perform the same work or provide the same product. Under these conditions, the government sets aside those contracts exclusively for small businesses. With few exceptions, this happens automatically for all government contracts under $150,000.
Sole-Source Set-Aside Contracts are contracts issued without a competitive bidding process, which typically occurs when only a single business can fulfill the requirements of a contract
Two or more small businesses can form a joint venture to compete for a contract award. A joint venture that includes multiple small businesses still qualifies as a small business for set-aside contracts as long as other SBA requirements are met.
Certain characteristics of a small business competing for a government contract can further enhance opportunities. Within each agency’s set-aside goal, other goals are identified, such as a certain percentage of contracts being awarded to particular types of small businesses — women-owned small businesses, disadvantaged businesses, veteran-owned businesses, and businesses in HUBZones (Historically Underutilized Business Zones).
The SBA has also developed the 8(a) Business Development Program, established by Section 8(a) of the Small Business Act. The nine-year program targets businesses owned and controlled by socially and economically disadvantaged individuals. Participating businesses receive training and technical assistance to help them become competitive. Part of this process is ensuring equitable access to contracting opportunities in the federal marketplace.
Getting started
One of the first steps a business must take in becoming a government contractor is registering the business with the government. Registering at SAM.gov — System for Award Management — requires that the business have a DUNS number from Dun & Bradstreet and Taxpayer Identification Number (TIN) from the Internal Revenue Service (IRS). Registration also requires the registrant to share their financial and banking information.
When complete, the government assigns a Commercial and Government Entity (CAGE) code as a unique identifier for confirming the contractor’s physical address and contact information across all government agencies. Once registered, businesses must complete a “representations and certifications” report, answering the questions in FAR 52.212-3 and FAR 52.219-1 (Federal Acquisition Regulation). This report confirms a contractor’s capability to comply with various federal policies.
While not a requirement, it is highly recommended that new government contractors also complete their SBA profile when they register. This action adds your company to the SBA’s Dynamic Small Business Search utility and enables all government agencies that may need your products and services to find you.
Dealing with contract complexities
While most of the regulatory intricacies governing federal procurement are outlined in the Federal Acquisition Regulation (FAR), individual agencies can also have their own set of regulations. The most prominent is the Defense Federal Acquisition Regulation Supplement (DFARS), which applies to contracts with defense agencies.
Certain aspects of federal procurement are so deeply ingrained that the government expects the contractor to know about them — and assume these clauses are present in the contract — even if they aren’t spelled out explicitly. Known as the “Christian Doctrine,” these policies include such things as termination clauses, changes and payment clauses, domestic content clauses (Buy American Act), and certified costs or pricing data clauses (Truthful Cost or Pricing Data Act). The name comes from a 1963 Court of Claims ruling — G.L. Christian & Assocs. v. United States, 312 F.2d 418 (Ct. Cl. 1963). Since then, “a clause that conveys a deeply ingrained strand of public procurement policy is considered to be included even if the government fails to include it in the prime contract.”
For significant contract awards, contractors could be subject to the government’s cost accounting standards (CAS), a set of 19 standards established to achieve accounting uniformity. It would be unusual for a new government contractor to be subject to CAS. It’s important, however, for all contractors to understand that these accounting regulations exist. CAS is a fundamental aspect of doing business with the federal government for larger contractors.
Do you need an attorney?
If you’re new to the process and thinking about preparing a government bid for the first time, working with an attorney — a legal professional who can assist you in understanding the federal bureaucracy and its nuanced contracting policies — could be instrumental in your success. An experienced attorney can help you prepare a competitive bid proposal, advise you about the mandatory disclosure and record-keeping requirements associated with particular contracts, and represent you, if necessary, in official contract negotiations and court proceedings.
If you’re looking for a legal partner to assist you in successfully securing government contract work — or if you’re experiencing difficulty with an existing government contract — don’t hesitate to contact Orr & Reno for assistance.
About the Authors: Steven L. Winer and Lynnette V. Macomber
