US Government Contracting for New Companies: What You Need to Know Before You Start
The US federal government is the largest buyer of goods and services in the world. In fiscal year 2023, federal agencies obligated over $750 billion in contracts. Every category of product and service is purchased: IT systems, construction, professional consulting, logistics, security, healthcare, food services, office supplies, and everything in between. The opportunity is enormous, but the federal marketplace operates under rules that are fundamentally different from commercial business. Companies that understand these rules win work. Companies that do not understand them waste time and money chasing opportunities they cannot win.
The Federal Procurement Framework
Federal contracting is governed by the Federal Acquisition Regulation (FAR), a comprehensive body of rules that dictates how agencies solicit, evaluate, award, and administer contracts. The FAR runs to thousands of pages and is supplemented by agency-specific regulations (like the Defense Federal Acquisition Regulation Supplement, or DFARS, for Department of Defense contracts). Understanding even the basics of the FAR is essential for any company entering this market.
Contracts are awarded through several methods: sealed bidding (lowest price wins), competitive negotiation (best value, considering both price and technical merit), simplified acquisition procedures (for purchases below $250,000), and sole-source awards (where only one company can perform the work). Most opportunities above the simplified acquisition threshold are competed, meaning your company will be evaluated against other bidders. The evaluation criteria are published in the solicitation, and they vary by contract.
What You Need Before You Can Compete
At minimum, your company needs an active SAM.gov registration, a CAGE code, the correct NAICS codes, and a capability statement. But these are just the table stakes. To actually win contracts, you need past performance (evidence that you have successfully completed similar work), a compliant cost accounting system (particularly for cost-reimbursement contracts), and the right personnel with the required qualifications and security clearances (for classified work). Building a federal contracting practice is a multi-year effort that requires strategic planning, investment, and patience.
Small Business Set-Asides and Certifications
The federal government has a stated goal of awarding at least 23% of prime contract dollars to small businesses. To achieve this, agencies set aside contracts exclusively for small businesses, and additional set-asides exist for specific categories: 8(a) firms (socially and economically disadvantaged), HUBZone firms (located in historically underutilized business zones), service-disabled veteran-owned small businesses (SDVOSB), and women-owned small businesses (WOSB). These certifications are obtained through SAM.gov and the SBA, and they can significantly improve a company's competitiveness by reducing the number of competitors for set-aside contracts.
Determining your company's size status is critical. The SBA defines size standards by NAICS code, and they are based on either annual revenue or number of employees. A company that qualifies as small in one NAICS code may not qualify in another. Misrepresenting your size status is a federal offense that can result in debarment, civil penalties, and even criminal prosecution. Getting this right from the start is essential.
Subcontracting: The Realistic Entry Point
Most companies new to federal contracting do not win prime contracts immediately. The realistic entry point is subcontracting to established prime contractors. Large primes like Amentum, Constellis, Leidos, Booz Allen Hamilton, and others have subcontracting plans that require them to award a percentage of their contract dollars to small businesses. Positioning your company as a reliable subcontractor to one or more primes is the fastest way to build past performance, learn the federal contracting process, and establish relationships that lead to larger opportunities.
To be an effective subcontractor, you need the same foundational infrastructure: SAM registration, CAGE code, capability statement, and relevant experience. But you also need to build relationships with prime contractors, understand their teaming processes, and demonstrate that you can deliver within the government's regulatory framework. This is where having an advisor who understands both the legal requirements and the practical realities of the market makes a significant difference.
Why Professional Guidance Matters
Federal contracting is not a market you can enter casually. The regulatory burden is substantial, the competition is sophisticated, and the consequences of non-compliance are serious. Companies that invest in proper setup, correct certifications, and strategic positioning win work. Companies that try to figure it out as they go typically waste years and significant resources before seeing any return. A knowledgeable consultant or contracts manager who understands the FAR, the agency landscape, and the competitive dynamics can compress your learning curve and help you avoid the expensive mistakes that eliminate new entrants.
Understanding the Federal Procurement Landscape
The federal procurement process is governed by detailed regulations that protect both the government and contractors. The Federal Acquisition Regulation is the primary regulatory framework, running to thousands of pages. Each agency supplements the FAR with its own acquisition regulations. The Department of Defense uses the DFARS, the General Services Administration uses the GSAM, and civilian agencies have their own supplements. Understanding which regulations apply to a specific opportunity is the first step in determining whether your company should pursue it.
Contract types add another layer of complexity. Fixed-price contracts place the performance risk on the contractor: you agree to deliver the work for a set price, and if your costs exceed that price, you absorb the loss. Cost-reimbursement contracts shift more risk to the government: the government reimburses your allowable costs plus a fee. Time-and-materials contracts are used when the scope of work cannot be defined precisely. Each contract type has different accounting, reporting, and compliance requirements. Companies pursuing cost-reimbursement or time-and-materials contracts must have an adequate accounting system that complies with Cost Accounting Standards, which is a significant investment in infrastructure and expertise.
Finding and Evaluating Opportunities
Federal contracting opportunities are published on SAM.gov (formerly FedBizOpps). Solicitations above $25,000 are generally required to be posted publicly. However, many of the best opportunities are identified long before a solicitation is posted, through pre-solicitation notices, sources sought announcements, requests for information (RFIs), and industry days where agencies meet with potential contractors to discuss upcoming requirements. Companies that only respond to posted solicitations are already behind competitors who have been positioning themselves for months or years.
Evaluating whether to pursue a specific opportunity requires honest assessment. Do you have the technical capability to perform the work? Do you have past performance that demonstrates this capability? Can you price the work competitively while still maintaining a reasonable profit margin? Do you have or can you obtain the required security clearances? Is the contracting officer likely to have a preferred vendor already? Pursuing opportunities you cannot win wastes proposal resources and damages your win rate, which affects your reputation in the market. Selective, strategic pursuit of the right opportunities yields far better results than a spray-and-pray approach.
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