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Basic Requirements for Government Contracts

12 mins read
government contracts

Government contracts offer new opportunities to grow revenue and add diversity to your companies, especially small businesses. However, pursuing them can be intimidating if you are new to the process. Here are some basic requirements to prepare your business to compete in government contracts.

What is a requirements contract for the government?

The basic requirements for government contracts are the same as those for commercial contracts. One difference is that a commercial contract typically involves an agreement between private parties, while government contracts are made on behalf of the government by an individual or company.

In addition, the requirements contract is used in government procurements and is required by the Federal Acquisition Regulation (FAR). Before any company can be awarded a contract, it must comply with these regulations.

What is a government contractor?

Government contractors are businesses or individuals that provide products or services to a government department, agency, or branch. They are referred to as prime contractors and subcontractors.

Moreover, federal contractors are responsible for complying with local, state, and federal laws that govern business operations. The federal government requires demands contractors to comply with labor laws and environmental regulations.

How to become a government contractor?

How to become a government contractor?

Before diving into becoming a government contractor, it’s essential to understand some of the basics of federal contractor requirements.

1. Get educated

You need proper education if you are interested in becoming a contractor. The Department of Defense (DoD) requires a bachelor’s degree and at least 24 hours’ worth of business-related courses.

In fact, it was determined that about 54% of government contractors have a bachelor’s degree, and about 11% of government contractors have master’s degrees.

If you’re new to contracting, it helps to know how government agencies operate so you can navigate their processes effectively. You can also get training, job certifications, and courses on how federal contracts are awarded and how to write a proposal that can win them.

2. Establish a business

To do business with the federal government, you need an official business entity registered with the appropriate agencies. The United States government offers a contract to sole proprietorships and corporations, but they have different requirements and restrictions.

  1. Sole proprietorships are easy to establish, and there’s no tons of paperwork required. However, they’re not treated as separate legal entities where owners are personally liable for any debts or damages incurred by their businesses.
  2. Corporations offer limited liability protection but require more paperwork, including articles of incorporation that determine the structure of your business entity.

You can learn more about the advantages and disadvantages of different corporate structures from the U.S. Small Business Administration (SBA).

Determine what to sell

It is essential that you only bid on products and services within your scope of work and can provide. The Federal Procurement Data System includes information on contracts already been awarded. This data can help identify potential opportunities for your business to pursue.

Contact the small-business specialist and save selling for later

Before you start pitching, you need to do your research. Contact the federal agency in which you’re interested in doing business and ask for a meeting with the small-business specialist or equivalent. Tell them who you are and what type of products and services you sell. Ask what their needs are and who makes purchasing decisions.

At this point, don’t try to sell them anything; save it for later. You just want to get to know them better and make yourself known to the right people in the agency first. It’s all about building relationships at this stage.

Build a network

Build a network of advocates who can tip you off about available contracts and steer business your way.

3. Get registered as federal contractors

The purpose of registration is to provide federal contracting officers with information about you and your business, which will help them determine if you are qualified to be awarded a contract.

Acquire your NAICS classification and a Unique Entity ID

This number is used to identify different types of businesses eligible for contracts. For example, the NAICS code for motor vehicles and parts is 441.

On the other hand, Unique Entity ID is a unique identifying number for your business needed for registering with other government entities.

Create a SAM account

This is your portal for accessing government contracting opportunities. It’s also needed before getting rewarded a contract and receiving federal funds.

4. Get certified

There are many opportunities available to you once you are certified, but it can be confusing where to begin. Here are steps to make the process easy.

Start the soonest

It takes three months to one year to become certified as a small business. Getting certified is worth the time because it makes you eligible for set-aside contracts. The federal government awards set-aside contracts to companies that have exerted effort to adhere to the contracting requirements.

Review certification qualifications

The Small Business Administration (SBA) certifies businesses in 8(a), HUBZone, and Small Disadvantaged Business. Each designation has its own set of certification qualifications.

Evaluate set-aside rules and limits

The government has different rules for different types of businesses when it comes to bidding on contracts. For example, an area may be designated as a historically underutilized business zone (HUBZone), which means that only certain businesses that meet certain criteria can bid for contracts.

Apply for certification from the SBA

Get certified once you are sure that your business is qualified for set-aside programs. Certification can make it easier for small businesses to compete against large corporations and open up new opportunities for your business.

5. Have realistic goals

Don’t take on more than you can handle. A contract can be very time-consuming with the added regulations and reporting requirements, especially if you aren’t prepared. Take on only what you can deliver and manage on time.

What are the basic requirements in government contracts?

You may be eligible to receive government contracts if you meet the basic requirements listed below.

1. Know the size standards

The Small Business Administration (SBA) uses its size standards when determining which businesses are small or large. The SBA declares a company to be small if it is

  • With 500 employers or less
  • if the total income of a nonmanufacturing business is below 7.5 million US dollars
  • if it is independently owned and operated
  • is not dominant in its field of operation

This matters because different laws apply depending on business size.

2. Cybersecurity requirements

The defense department has issued a set of new cybersecurity standards for small businesses, part of a larger effort by the agency to make contractors more responsible for their security.

The new standards are based on the National Institute of Standards and Technology (NIST) Cybersecurity Framework, released in 2014 as a baseline security standard for any business working with sensitive information.

3. Contract compliance

You ought to comply with all regulations and laws related to your business. These regulations apply whether you work with the government directly or indirectly through a prime contractor or subcontractor. The Federal Acquisition Regulation contains rules for the federal government’s purchasing process.

4. Get the required ID numbers and registrations

There are several basic contract requirements that businesses seeking a contract must meet to consider an award, and these include:

1. A Unique Entity Identifier (UEID) s a 12-digit number assigned by Dun and Bradstreet. If you do not have one, you must apply for one and wait for it to be approved before proceeding with your SAM registration.

2. The North American Industry Classification System (NAICS) Code is a unique six-digit number maintained by The Economic Classification Policy Committee (ECPC). Its purposes are to provide

  • a uniform scheme for classifying business establishments from national to local economic activities
  • a standard way of organizing businesses and their products is to compare similar businesses

5. Register with SAM

If you want to sell anything to the U.S. government, the place to start is the System for Award Management (SAM), run by the General Services Administration (GSA). To register in SAM, provide basic information about your company and verify your identity. Registration is free, and if SAM rejects, you’ll be provided with information for the next steps.

What are the three principles of government contracting?

In the US federal government, an open and competitive market is a key principle of government contracting. The FAR is the set of rules that governs all federal procurement. It’s based on these three principles:​

1. Responsibility

The principle is based on the idea that contracting officers and program managers are ultimately responsible for ensuring that its products and services meet all contract terms and applicable requirements with their best efforts.

2. Transparency

Transparency is also required for all federal contractors, who must make records available to the public per the Freedom of Information Act (FOIA). FOIA requires that federal agencies disclose records upon request unless those records are exempt from disclosure under specific law provisions.

3. Contractual Balance

It states that contracts must contain enough, but not too much, detail to ensure that the parties understand their obligations and responsibilities.

The principle of balance applies to all contract types (fixed-price and cost-reimbursement). It also applies equally to contracting with commercial or non-commercial firms.

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