Small business federal contracts are an under-utilized source of potential revenue that small business owners need to consider if they are looking for ways to bring in new clients and increase profits.

Small Business Federal Contracts in a Nutshell

If you are the owner of a small business and you find yourself constantly searching for higher profits and new clients, there's one potential source of opportunities to generate revenue that you need to consider. Far too many small business owners overlook the potential associated with obtaining contracts with the U.S. government. In essence, the federal government is one of the largest corporate entities in the world. Just like most other companies, it has to purchase products and obtain services to continue operating in an effective manner.

Examples of products and services the federal government regularly seeks to purchase include:

  • Vehicles
  • Office equipment
  • Security and defense services
  • Marketing services
  • Transportation services
  • Janitorial services

The government has been known to award contracts to companies of every size. If you sell your products or services to nonprofit organizations or other businesses already, chances are high that you could market your company to government agencies and be awarded a lucrative contract. Despite the high chances of successfully landing a contract and the potential profits, some business owners who are aware of these benefits still choose to avoid them for different reasons, such as:

  • The bidding process can be a bit intimidating.
  • They don't think they will be seriously considered.
  • They're nervous about handling lots of paperwork and "red tape."

There is no end to the list of excuses business owners have convinced themselves of when it comes to avoiding government contracts.

Is Your Business Eligible for Small Business Federal Government Contracts?

The federal government sets aside certain contracts to award to small businesses, and you may be wondering if your company qualifies. In fact, the government awarded contracts worth almost $100 billion to small businesses in 2010, so it may be worth your time to find out if your company qualifies as a small business for the purpose of obtaining these contracts.

There is no one single policy that determines what the government considers to be a small business. Rather, this is determined on an individual contract basis. In some scenarios, a company that has 1,000 employees might be considered small. In others, companies that make less than $1 million a year could be considered too large to be awarded a contract.

The first thing you should do is take a close look at the solicitation for the federal government contract on which you're considering placing a bid. The key words to look for are "Federal Acquisition Regulation," or "FAR." If you see these, it's an indication the contract in question has been set aside by the government and will only be awarded to an eligible small business.

Next, you'll want to look at the North American Industry Classification System, or NAICS code that has been assigned to the solicitation you are considering. This is a six-digit number that classifies the work to be carried out under the contract according to its main purpose. Janitorial services, for example, will most likely be assigned to a NAICS code of 561720, which is specific to janitorial services. A new construction commissioned by the government will most likely be assigned a code of 236220, which is specific to Commercial and Institutional Building Construction.

There will only ever be one NAICS code assigned to every solicitation. When viewing solicitations on the federal government's website, the NAICS code will likely be found in the "General Information" section, which is located on the right side of the website. Otherwise, the NAICS code will be in the solicitation.

The next step is to use the solicitation's NAICS code to figure out what the size standard for the contract you are viewing will be. This is normally a limit that is placed on numbers, such as how many employees a company can have or how much revenue it can generate to qualify as a small business for the purposes of the specific contract in question.

If you need help with small business federal contracts, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies such as Google, Stripe, and Twilio.