Government Contracts

By Entrepreneur Staff

Pencil

Government Contracts Definition:

Agreements that outline business transactions between companies and government entities

Each year, the U.S. federal government and its various agencies procure more than $300 billion of everything in more than 4,000 categories, ranging from airplanes to zippers. For many products and services, the U.S. government is the biggest buyer on the planet. Uncle Sam is also an attractive customer for a few other reasons:
  • The government makes its needs publicly known through such media as the Commerce Business Daily, a publication listing numerous government contracting opportunities. (You can find this publication at many large public libraries.) This is quite different from most markets, which you have to thoroughly research to identify their needs.
  • Government sales are conducted in an open environment where there are many rules to ensure that the process is fair.
  • The government frequently buys in very large volumes and over a long period of time. That kind of customer can provide a solid foundation for growing your company.
  • Laws set aside all or part of many contracts for women-owned businesses, small businesses, minority-owned businesses, and other firms the government wants to support.

Having the U.S. government as a customer gives your business a stamp of approval. If you can meet the government's standards for quality, price and service, odds are good you can meet other customers' requirements as well.

But there are downsides to selling to the government. It can be hard to find the proper purchasing agent among the thousands employed by various branches and agencies of the federal government. In addition, the rules and paperwork are daunting. The good news is that there are many sources of help. The SBA's website is one good place to start looking for help selling to the government. Agencies like the U.S. Postal Service, the Department of Interior and the Army, as well as many others, send out solicitations to businesses that are on their mailing lists. To find out how to get on the lists, contact the agency you're interested in.

And don't restrict yourself to selling to the federal government. State and local governmental entities, including cities, counties, school districts and others, actually purchase more goods and services than the federal government. There are more of them and they are smaller, but these government customers can provide alternative tracks to growth that are just as viable as the opportunities in Washington, DC.

You can sidestep many of the hassles of winning a government contract if you subcontract with the main or prime contractor. Prime contractors, ranging from large defense contractors to companies that may be smaller than yours, do most of the work to land the government job. Then they may hire you to fulfill all or part of it. Find prime contractors by perusing many of the same resources you would to sell directly to the government.

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