Are You Ready for Government Contracting?

Government entities at all levels – federal, state, and municipal – purchase a broad number of products and services from private businesses; adding government customers can provide a good, steady stream of ongoing work.  Despite the potential benefits, it is important for any business to understand the official procurement process. There are many regulations, laws, and procedures involved with government contracting and it is a more complex, involved business process than what is usually found in the private sector.

Reviewing the following questions to help determine whether you are ready for government contracting.

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Are you an established business?

  • In Alaska, an established business has an Alaska business license and also has appropriate insurance coverage. Further, most government contracts require businesses to have liability insurance. Checking to see if you have appropriate insurance coverage is important.
  • If you are in a business requiring a professional license, do you have one and is it up-to-date? The Alaska Department of Commerce, Community, and Economic Development website provides information about professional licensing.
  • If you are in a business needing surety bonding, such as construction, this should be in place before you start accepting government contracts.

Does your company have a history of sales or other experience relating to the required work?

  • If you are trying to do business with the federal government, nearly all contracts require a contracting entity have at least two years of experience performing the work required in the contract. However, this can be based solely on the owner’s experience prior to forming the business, based on the experience of on-staff employees, or based on work the business completed in the past.

Does your business plan include government contracting?

  • A business plan is a road map to ensure you have appropriately identified the resources necessary to expand, understand the the demands of pursuing new customers – including the research and marketing necessary to find and acquire those customers, and are ready to assume the additional responsibilities associated with expanding your business.

Can you afford to do business with the government?

  • It can take longer to receive payment for services provided to the government. Usually, payment is received 30 to 45 days after an invoice is submitted, but it can take longer. There may be multiple systems used for bidding, tracking, and paying invoices and small businesses will need to follow the necessary procedures closely to make sure invoice payments can be made. Unfamiliarity with the systems can delay payment even longer.
  • Since government entities do not prepay for materials and other goods, businesses need to have a good cash flow and be able to pay for materials upfront.

Have you done the necessary market research to determine the government’s demand for your product or service?

  • Understanding which agencies need your services or product is important and will help determine whether it is feasible to add government customers. Using sites like  Federal Procurement Data System – Next Generation FPDS-NG and beta.SAM.gov can help businesses determine which agencies have used the businesses’ goods or services, how often, and the value of the contracts. Careful market research will help businesses make informed decisions about entering the government marketplace.

Do you have good computer skills and a reliable computer and internet server?

  • Working with government agencies is time and computer-work intensive and it includes registering in required government databases, submitting bid proposals, and filing invoices and progress reports. Since many businesses are moving to cloud-based systems, it may be an easy transition but for other businesses, it may be difficult to work in an impersonal, centralized environment. Being prepared will make submitting information and receiving payment a much smoother process.

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If a business has the capability, skills, and experience to provide products and services to government agencies, it can be a long-term, positive, and rewarding relationship and has the potential to be an important additional source of work.