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How to Become a Government Contractor

When the economy goes down, doing business with the Government starts to look more attractive. But figuring out how become a "Government Contractor" can seem difficult, even intimidating. Relax, if you follow the right steps you can become a Government Contractor. Even though are a ton of rules and regulations, most cover a whole range of circumstances that won't apply to you, at least not all at one time. These rules are contained in the Federal Acquisition Regulation (FAR), a phonebook-sized document with more than 1,000 pages divided into 53 parts that spell out the rules for Government contracting. Luckily, you don't have to memorize it to get started in Government contracting. In fact, depending on the type of business that you do, it may not even apply at all.

Most of the rules apply to services businesses. If you deal in off-the-shelf products or commodities, doing business with the Government can be as easy as processing a normal customer's credit card. There are also thresholds to consider. Below a certain amount,the Government can pay with a purchase card (credit card), above a certain amount and they must issue a Request for Quote or a Request for Proposal and get competing bids. It is above these thresholds, which can vary by agency, where things can get complicated. If you are selling services things tends to get more complicated, more quickly.

The reason things get complicated has less to do with the process of how you sell to the Government than it does with pricing. In Government Contracting, you often have to show and account for your costs as well as your price. The rules are there so that the evaluators can compare apples to apples and to try to keep corruption from sneaking in.

One of the hardest parts of the transition to becoming a Government Contractor is that you may need a completely different kind of accounting system, one that provides pricing in the right formats, with sufficient justification for Government Contracting. The next hardest part is that the process is based on contracts. Service contracts between businesses are hard enough, but the Government has to comply with a myriad of laws and rules that have been created over decades to counter every possible scandal and corruption. Most Government Contractors employ specialists in both contract and finance who understand the language and the rules.

Doing the work on the contract can be fairly straightforward. But first you have to get a contract with the Government. This is not as hard as it sounds. For most purchases above $25,000, the Government publicizes what they are going to purchase, and nearly anyone can bid. The reality is that many procurements require specialized capabilities and expertise, greatly limiting the number of companies who can respond. However, it is easy to go to http://www.fedbizopps.gov and look for opportunities that you might be able to bid.

Before you actually bid, you will probably have to register. Registering will require a DUNS number provided by Dun & Bradstreet, Inc.

Another major consideration before you get started is how you want to be classified. For example, there are special programs for small businesses, and even special programs for small businesses that are considered economically "disadvantaged." Getting started as a Government Contract will be significantly easier if you are a small business or small disadvantaged business. Among the rules that apply to Government Contracting are requirements that are certain percentage of procurements go to small businesses. There are also Mentor Protege programs in which a large company is incentivized by the Government to help a small business get started in Government contracting.

You will also be categorized according to the capabilities and offerings of your business. In order to be able to code and classify businesses, the Government uses the North American Industry Classification System (NAICS). The forms you fill out will require you to supply the NAICS codes that you qualify for.

Once you have registered and start looking for contracting opportunities, you may find so many opportunities exist, that it's hard to find the opportunities that apply to you. And when you do find an opportunity that applies to you, you may find it hard to respond in time. You will also find it hard to achieve success without customer and competitive intelligence, but you've got to start somewhere. When you do try to bid, you're going to have a tough time meeting "Past Performance" requirements if you've never done business with the Government before.

One way to get started is subcontracting. You can do part of the work on a Government contract as a subcontractor. And along the way you gain experience. All you need is a good relationship with a prime contractor (usually a larger, more established Government contractor), a business opportunity/RFP, and a reason why the prime-contractor should include you rather than do the work themselves.

As you gain experience you will find that it is easier to succeed when you stake out a territory, whether it's a particular agency, a capability, or a region. It is far easier to learn who to contact, who the competition is, and to monitor business opportunities when you narrow it down to something more manageable. It is also easier to gain the customer and competitive intelligence needed to win.

Does all that sound complicated enough? Let me summarize. If you stay under the thresholds ($2500) for purchase cards, doing business with the Government is just like doing business with a customer who pays by credit card. If you stay under $25,000 you won't have to deal with RFPs and most of the FAR requirements, but opportunities won't be advertised. If you go above $25,000 you're on your way to becoming a Government Contractor. You'll need to register. If you're going to stay a Government Contractor, you'll need the to develop the right accounting and contracts management capabilities. If you're going to succeed as a Government Contractor, you'll need to learn the ins-and-outs of business development in the Federal marketplace.


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By Carl Dickson, Founder of CapturePlanning.com



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