The federal government has plenty of employees to work on its day-to-day projects. But it also hires contractors for many of its projects. While some of these contracts go to large companies, the US federal government often contracts with small businesses across the country. If you own a small business, the government might turn out to be one of your top customers.

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The Government and Small Businesses

All other things being equal, the government often prefers to contract with small businesses. When they invest in a small business, they help local communities and ordinary individuals. They also keep the economy diverse, ensuring a few big companies don’t muscle out everyone else. For this reason, they are legally required to consider small businesses when possible. Some contracts are specifically set aside for small businesses only.

For business owners, government contracts can be a great source of profit. Government agencies tend to be stable and prompt about paying bills. However, there are also disadvantages. It will take extra work to qualify, register, and meet the necessary standards. 

How to Qualify for a Government Contract

To count as a small business by government standards, a company has to meet maximum size standards. These vary depending on industry and take into account your annual receipts, employees, and affiliates. At the same time, however, you’ll need to be established and reliable.

Before you can bid on government contracts, your business needs to register. You can do this with the System for Award Management, or SAM, at There, you will register for a Unique Entity Identifier, or UEI. This identifying number streamlines your company’s interactions with different government bodies.

After that, you can create a profile describing what your business has to offer. Some contracts may favor companies owned by marginalized individuals or located in historically disadvantaged areas. If you think you may qualify, you’ll want to make sure to include this information in your profile. 

You will need to comply with all regulations about government contractors, which can be a significant challenge. This includes cybersecurity. You may need to obtain a cybersecurity maturity model certification (CMMC), which exists in various levels.

Types of Government Contracts

Government contracts exist across all different industries and in sizes from small to vast. But here are a few types of contract it is useful to know:

Set-Aside Contracts

These are contracts which are specifically set aside for small businesses. This tends to happen automatically with contracts under $150,000. They come in two types: competitive and sole source. Competitive contracts are available for small businesses to bid on, while sole-source contracts are given directly to one business.

Prime Contracting

A prime contractor is a business that works directly for the government. The prime contractor may itself hire any number of subcontractors. In some cases, a large business engaged in a government contract may be required to subcontract with smaller businesses.


When you subcontract for the government, you take on a contract from a prime contractor and complete the part of the project they assign to your company. Since you don’t work directly for the government, you won’t find these opportunities through the System for Award Management, but through various other listings. However, you will still have to meet the standards of all government contractors.

Is It Right for Your Business?

Jumping into government contracts can be a big step for a small business. You’ll need to be highly professional and meet a number of extra requirements. But the advantages—a steady source of business, contracts you can win without competing with larger businesses—can also be great. You’ll have to examine your company as a whole to decide if you’re ready.

A business financial advisor can help you look at the metrics of your company and make plans for the future. Meet the right business financial advisor by contacting us today.

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