Why Should I Become a Federal Contractor?

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Federal Contracting Made Easy – 001

Do you want to bid on government contracts but don’t know where to start?  Are you presently a federal contractor but have questions that no one seems to know the answer too?  If so, then Federal Contracting Made Easy is for you.  Listen in and learn: How to find Federal

Why Should I Become a Federal Contractor?

That is a very good question.  Why should I become a federal contractor?  Before we answer that question let’s go over some background information that will set the stage as to why you should consider federal contracting as a way to diversify your business.

What is a Set-aside?

As a federal contractor, you will have the opportunity to apply for four different classifications of small business if you meet the program requirements.  Each of these classifications called “set-asides” offers its own advantages.  So let’s begin with what is a set-aside?

A Set-aside is:

  • It is a reservation by the government to restrict bidding by businesses to certain socio-economic classifications.
  • Help provide a level playing field for small businesses, the government limits competition for certain contracts to small businesses. Those contracts are called “small business set-asides,” and they help small businesses compete for and win federal contracts.
  • Set-asides were created to level the playing field for small businesses. Imagine competing against Boeing, Lockheed Martin or Honeywell on every contract.  The Government wants small businesses to compete on contracts.  The majority of new innovation comes from small businesses just like you.

4 Types of socio-economic classifications (set-asides): Each of these will be discussed in further detail in a later article

  1. Socially Economically Disadvantaged Business (SDB) or 8(a) Disadvantaged  Businesses in the 8(a) program have the following benefits
  • Sole Source Opportunities
  • Compete for set-asides reserved for 8(a)program participants only
  • Get a Business Opportunity Specialist to help navigate federal contracting
  • Form joint ventures with established businesses through a mentor-protege program
  • Receive management and technical assistance, including business training, counseling, marketing assistance, and high-level executive development.
  1. HUBZone Program (The Historically Underutilized Business Zones (HUBZone) program) provides federal contractors with the following benefits.
  • Receive management and technical assistance, including business training, counseling, marketing assistance, and high-level executive development.
  • Preferential access to federal procurement opportunities.
  • 10% Price Preference when competing on Full and Open Acquisitions
  • Sole Source Acquisitions are possible
  • Form joint ventures with established businesses through a mentor-protege program
  1. Service Disabled Veteran Owned Small Business 
  • Priority for VA Contracts
  • Sub-Contracting Opportunities
  • Preferential access to federal procurement opportunities
  • Sole Source Acquisitions are possible
  1. Women-Owned Small Business
  • Preferential access to federal procurement opportunities
  • Sole Source Acquisitions are possible
  • Joint Ventures with established businesses are possible
  • Sub-Contracting Opportunities

You can compete for contract awards under multiple socio-economic programs, as they apply.

Who is the largest buyer of products and services in the World? USA Federal Government

Each Year the Government spends approximately $500 Billion on products and services. As a federal contractor, you would be able to bid on these acquisitions. The Government wants small businesses to bid on work that they have to offer. That is the whole purpose of having set-asides.  In order to ensure that they are meeting the objectives for having set-aside’s the Government has established goals.  Now let’s talk about how these goals relate to the $500 Billion that we discussed earlier.

  • Of the $500 Billion that the Government spends 23% or approximately $115 Billion has to be set-aside for small businesses.
  • Another $25 Billion (5%) has to be set-aside for Small Disadvantaged Businesses or otherwise known as 8(a) and another for Women-Owned-Small-Businesses/Economically Disadvantaged Women-Owned Small Business. (WOSB/EDWOSB)
  • 3% or $15 Billion is set-aside for HUBZone and Service Disabled Veteran Owned Small Businesses. (SDVOSB)

Wow, that’s a lot of money!!!  

The Pros of becoming a federal contractor

  • Now back to the question of why would you want to become on a federal contractor. Federal contracts can be very lucrative, or you would not see big companies going after them.  For small businesses winning such contracts is a well-tested way to create a high-growth business.
  • Compensation – The Federal Government will compensate any business a fair market compensation or better.
  • Flexibility – You can perform one contract and if you decide that being a federal contractor does not fit your business model then you don’t have to do another contract.
  • Free Resources – The government wants to work with small businesses. They offer a lot of online resources and also free resources.
  • Limited playing field – set-asides
  • Excellent Payment History – the government has a solid history of paying its bills. For small businesses, this is a big benefit, as it provides reliable cash flow.

It would not be fair to just list the pros without listing the Cons of being a federal contractor

  • Slow Payment – The government may be a reliable customer however it can be a bit slow to pay. If the government is slow to pay, they generally will pay the small business interest on top of the payment.
  • Rules and Regulations – There are a ton of rules and regulations when dealing with the federal government. If you win a government contract you may have to submit government-approved accounting systems, purchasing methods, project management tools and more.  You may want to evaluate the costs of complying with the regulations against the financial gain before making the decision to bid on a federal contract.
  • Auditing – the government can audit your financial records at any time. As long as your books are in order you have (generally) nothing to worry about.
  • No Stability – Government Contractors can be fired at any time. As long as you are able to fulfill the terms of your contract to the government’s satisfaction, it’s unlikely that you will be let go before its completion.

Now I would like to add a caveat that even though the government is the largest buyer of products and services, not all businesses will find opportunities.  It depends on your industry, where your business is located and other factors.   But we got ahead of ourselves here.  

So as you can see it is very enticing to want to bid on federal contracting.  Now spend some time thinking if government contracting is right for you and next week we will discuss ways to find federal agencies to market too.

If you enjoyed this podcast please subscribe and leave a review.  For program show notes and more information please go to www.FederalContractingMadeEasy.com.

 

 

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