Government Contracting Go/No-Go Decision Guide for Small Businesses

Jan 30, 2024

Government contracting presents significant opportunities for small businesses, but it takes a planned approach to meet the necessary criteria to enter this market. The U.S. Small Business Administration (SBA) provides a structured path to help you determine if government contracting aligns with your business capabilities and goals.

Follow this step-by-step guide inspired by SBA guidelines to be able to make an informed decision. It offers a clear pathway for small businesses to evaluate their readiness for government contracting. Following these steps will help you to identify any areas that need attention and prepare thoroughly for the application process.

Step 1: Assess Product or Service Demand
The government is a vast network of entities with diverse needs, from office supplies to construction services. Understanding the government’s purchasing habits is crucial. SAM.gov is a valuable resource for researching past and current contracts, which can offer insights into what the government is buying.

Question: Does the government buy the product or service that you sell?

  • If Yes, proceed to Step 2.
  • If No, government contracting may not be suitable for your business.
  • If Maybe, identify at least three federal agencies that might need your products or services.

Step 2: Evaluate Your Capability to Perform
Government contracts may require significant resources and the ability to meet tight deadlines. Assessing your company’s operational capacity is vital. The SBA provides tools and training to help businesses scale up operations to meet the demands of government contracts.

Question: Can you fulfill a government contract in terms of time, staffing, and materials?

  • If Yes, move to Step 3.
  • If No, consider improving your capabilities before proceeding.
  • If Maybe, seek guidance from your local SBA District Office.

Step 3: Verify Your Eligibility
Eligibility criteria are in place to ensure that government contracts are awarded to legitimate, capable businesses. Factors such as citizenship and business location are non-negotiable. It’s important to ensure all your business documentation and certifications are in order.

Question: Confirm your answer to all of the following:

  • Is the majority owner(s) a U.S. citizen?
  • Does your company have a place of business in the U.S.?
  • Is your business organized for profit?
  • Does your business generate revenue?
  • If Yes to all, go to Step 4.
  • If No to any, you may not be eligible for government contracting programs.

Step 4: Check Your Credit Worthiness
Your creditworthiness reflects your business’s financial health and stability, which is of paramount importance when the government evaluates potential contractors. Maintaining a good credit score and understanding financial management can strengthen your contract bid.

Question: Are you creditworthy?

  • If Yes, continue to Step 5.
  • If No, seek assistance to repair your credit.
  • If Maybe, talk to an SBA Lender about how to build credit.

Step 5: Ensure Proper Accounting System
Government contracts require meticulous financial reporting. An adequate accounting system is not just about compliance; it’s about financial transparency and accountability. Investing in a reliable system or software that can handle government accounting standards is essential.

Question: Do you have an accounting system that produces financial statements, such as profit and loss statements, balance sheets, and cash flow projections?

  • If Yes, proceed to Step 6.
  • If No, ensure your accounting system is compatible with government requirements before moving forward.

Step 6: Assess Your Financial Readiness
Liquidity is critical in government contracting. You may need to cover upfront costs before receiving payment. Understanding the typical payment schedules of government contracts and ensuring you have the necessary working capital is crucial.

Question: Do you have cash on hand to purchase working inventory, if needed?

  • If Yes, advance to Step 7.
  • If No, speak to an SBA Lender about getting a line of credit or a loan.

Step 7: Evaluate Government Contracting Experience
Previous experience with government contracts can give you a competitive edge. If you’re new to government contracting, consider starting with smaller contracts or subcontracting opportunities to build your portfolio.

Question: Do you already have federal/state/local government contracting experience?

  • If Yes, continue to Step 8.
  • If No, ensure you understand the requirements and benefits of programs such as the SBA’s 8(a) Business Development Program.

Step 8: Identify Contract Opportunities
Knowing where to look for contracts is as important as being qualified to fulfill them. The SAM.gov website is the official source for finding federal contracting opportunities. Staying informed and proactive in searching for opportunities is key.

Question: Do you know where to find government contracting opportunities?

  • If Yes, move to the final step.
  • If No, ask an SBA Business Opportunity Specialist for help.

Step 9: Compliance with Registration and Codes
Registration with SAM and understanding your industry-specific NAICS codes are fundamental. These codes classify your business for contracting and grant opportunities. Ensuring you meet these administrative requirements is the final step in confirming your readiness.

Question: Do you have the following:

  • The NAICS codes and size standards for your industry?
  • System for Award Management (SAM) registration?
  • If Yes, you are ready to consider government contracting.
  • If No, these are mandatory for participation in government contracting programs.

By following this structured assessment, you can reach a Go/No-Go decision on whether government contracting is a suitable and viable option for your small business. If you’ve answered “Yes” at every step, your business may be a good fit for government contracting. For more guidance and to begin the process, visit your local SBA District Office or check out sba.gov/contracting. Additionally, if you would like to learn more about iQuasar’s specialized consulting services for new and aspiring government contractors, feel free to reach out to us. We specialize in helping aspiring government contractors assess and register their businesses. Contact us today to learn more.

 

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