Small business government contracts allow qualifying companies to bid for the billions of dollars in annual contracts designated for small businesses. The government awards $500 billion in product and service contracts each year, 23 percent of which must go to companies of this kind.

Qualifying for Small Business Government Contracts

Small businesses that pass the government's rigid application process are eligible to bid for more than $125 billion in annual contracts. First, you need to review the North American Industry Classification (NAICS) code for your industry to determine whether your business is considered small by the government. This is dependent on a maximum number of employees and amount of gross profits.

Many small business owners are wary of seeking government contracts because they fear the red tape and paperwork and feel they only have a small chance of being selected. However, the breadth and depth of products and services purchased by the government offers plenty of opportunity for small businesses, particularly those that already sell to other businesses or nonprofit organizations.

Registering for Government Contracts

Once you've determined your NAICS code, these are the steps to search and apply for contracts:

  • Obtain a Dun & Bradstreet number for each of your business's locations. This can be done online for free and you'll have the number within one business day.
  • Request a Past Performance Evaluation from Dun & Bradstreet, which consists of a numerical performance rating based on a survey of your former and current clients.
  • Register your business in the government's System for Award Management (SAM). This free service allows you to track the status of your contract applications. Contractors and government agencies use SAM to search for businesses based on criteria such as location, size, ability, ownership, and experience.
  • Registration in SAM automatically enters your business in the Dynamic Small Business Search (DSBS) database. This is another tool agencies use to seek contractors. Updating and refining your profile monthly ensures that your current information will show up in searches for which you are qualified.
  • Optimize your profile with keywords that describe the products and services you offer. Think about what you have to offer a government agency and how it may differ from the services you offer in the private sector.
  • The capability statement, similar to an elevator pitch, is a critical part of your SAM profile. It should explain what your business does and how it can benefit potential government customers. Avoid technical descriptions in favor of plain language that appeals to decision makers.
  • Explore the process of applying for contracts with a free Government Contracting 101 course from the U.S. Small Business Administration. It also has many other courses, including offerings for women and veteran-owned small businesses.

Searching for Government Contracts

Small businesses can use a few different tools to search for government contracts.

  • SUB-Net is a site where government contractors can search for subcontractors. You can enter your NAICS code to find opportunities for which your company qualifies.
  • FedBizOpps is a database for federal agency contracts with a value of more than $25,000. This site requires a separate registration.
  • GSA Schedules is a database that includes $50 billion in long-term government contracts. This site offers a vendor toolbox to explain its process.

Benefits of Government Contracts

If you want to grow your small business, obtaining government contracts can be a lucrative way to do so. The U.S. government is the largest purchaser of services and products in the world, making it the largest pool for finding new customers. What's more, it is legally required to award work to a certain number of small businesses, providing an advantage over larger companies that you won't find in the private sector.

You can seek agencies through the Federal Data Procurement System that have not yet met the 23 percent small business target and market your services to these customers directly.

Government contracts also offer more upfront information than in the private sector, including the exact requirements of and budget for the job. The government is required to publish a detailed account of the funds allocated for each purchase in the public domain, which is available for review through the Office of Management and Budget.

If you need help with applying for small business government 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, Menlo Ventures, and Airbnb.