The government spends about $580 billion a year on contracts, with 23% of that set aside for small businesses. So how can you begin going after these opportunities? This week, we’re talking about the three main things you need to do to get started with contracting for the federal government.
Topics we cover on this episode include:
- How to prepare to start doing government contracting
- Opportunities in government contracting for small businesses
- Getting set up in the system: SAM, NAICS codes, and FAR
- Understanding the different types of contracts and how to win them
- How HUBZone and other SBA certifications can help
LINKS AND ACRONYMS
- DUNS Number (Dun & Bradstreet)
- NAICS (North American Classification System)
- SAM (System for Award Management)
- FAR (Federal Acquisition Regulations)
- DSBS (Dynamic Small Business Search)
- GSA (General Services Administration)
- SubNet (Subcontracting Network System)
- Construction Excellence Program
- FPDS (Federal Procurement Data System)
- MATOC (Multiple Award Task Order Contracts)
- IDIQ (Indefinite Delivery, Indefinite Quantity Contracts)
- RFQ (Request for Qualifications)
- 8(a) Program
- HUBZone (Historically Underutilized Business Zone)
- SBA Certification: Economically disadvantaged woman-owned
- SBA Service-Disabled Veteran program
Join the conversation on our LinkedIn page: https://www.linkedin.com/company/contractor-success-forum
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Rob Williams, Profit Strategist | IronGateESS.com
Wade Carpenter, CPA, CGMA | CarpenterCPAs.com
Stephen Brown, Bonding Expert | McWins.com
Rob Williams: Welcome to the Contractor success Forum! Today, we’re discussing how to do contracting for the federal government. Because here at the Contractor Success Forum, we discuss financial strategies for running a more profitable, successful construction business.
And to help us figure that out, we have in one corner, Stephen Brown with McDaniel-Whitley bonding and insurance agency. And in the other corner, we have Wade Carpenter, Carpenter, and Company CPAs. And in the other corner, we have Rob Williams with IronGate Entrepreneurial Support Systems. So how do we contract for the Federal government? Man, what a big step.
How to prepare to start doing government contracting
Stephen Brown: Well, it is guys. And I guess the most important thing is to get ready. And let’s talk a little bit about how you get ready to start doing government [00:01:00] contracting. What elements have to be in place? It’s not that complicated. It’s a step system. It’s about what we’ve been preaching all along and Contractor Success Forum.
It’s about getting your books set up. Do you have a good reputation? Can you do work on budget? Can you work electronically? Can you bill and receive money electronically? Do you have that solid accounting system in place? Do you have a stable workforce? Good credit, any working capital? What about your supplier relationship?
If you’ve got all those elements in place, then you’re ready to get going. And if you have all those elements in place, then you’re a profitable contractor. Right? I mean, so–
Rob Williams: We hope.
Stephen Brown: What do y’all think about that first, getting that done first?
Wade Carpenter: Well, I guess I can tell you from my experience of working with people, trying to get started for the first time, a lot of them say, well, I wanna do this federal job, but they don’t have the books in order. They don’t have the systems. And then all of a sudden they [00:02:00] want to get through the contracting it, because something’s gonna bid and I’m gonna miss out. And then they have to go down to Sam’s Club, right? So, uh, Stephen’s gonna tell us about just going down to Sam’s Club and jumping in.
But you know, there are some steps you need to take beforehand. And if you are looking for a job that you want to jump in, it doesn’t happen overnight. I will tell you that.
Opportunities in government contracting for small businesses
Stephen Brown: It doesn’t. Here’s the statistics. 580 billion with a B dollars worth of government spending on contracting and they’ve set aside 23% for small businesses. Now, if you start doing business with the federal government, odds are, you’re a smaller business. And that’s generally defined by your classification. If you’re a contractor, as a general rule, you could figure seven and a half million dollars of sales. But a small business is actually larger depending on your trade and the type of work you do. So I guess that’s one thing to think of it. You’re a small business, so [00:03:00] how do you get set up, and how do you do business?
And since 23% of all that construction spending is $140 billion worth of work that goes to small contractors. So how do you get in on that? Well, just like we said, first of all, you have all those elements in place that you can do the work.
Because nobody’s gonna hold your hand, but you’re gonna find that people that like government contracting love it. They love it. Because they know that their money’s there on a regular basis. They know how to communicate. They know how it works. And that’s it. You gotta learn how it works. So you’ve got all these elements in place.
Getting set up in the system
Stephen Brown: First thing, guys, getting set up in the system. Number one, you gotta get a DUNS number. Oh, by the way, we’re gonna have a links page that have all of these acronyms and website addresses so you can access this [00:04:00] information and get it.
Rob Williams: And they would get there by, you can-
Stephen Brown: you click on the link.
Rob Williams: ContractorSuccessForum.com. But probably at this point, it’s on LinkedIn and our LinkedIn page. But you can get there easily if you don’t know how to get there, by going to ContractorSuccessForum.com and then we have the links. If you are used to LinkedIn, you can go straight there and ask these questions and get information.
Stephen Brown: Right. SBA.gov has a lot of information as well. But nevertheless, we’ll provide that as well. So you get your DUNS number, that’s Dun & Bradstreet. They’re a credit rating bureau. You don’t have to have any credit at all to get a DUNS number, but you probably already have one, this next thing is you’ve got to get a NAICS number.
I might stop for a second and tell you that in government contracting there’s acronyms for everything. It’s like the military. So it’ll blow your mind. DUNS, Dun & Bradstreet. NAICS stands for North American Classification System. And guys that [00:05:00] lets the government know your primary classification of what you do.
And then you can have a secondary NAICS number. You can have multiple NAICS numbers, but you’ve got to have a primary number that describes what you do. General Contractor, electrical, plumber. That is the number one thing that they use for searching to find you within their system.
Rob Williams: On getting those, some people that’s intimidating for, but if they’re doing it themselves, you can find it. You can search it. I remember going through this and getting these things and I was able to figure it out, even back then, on the internet. But what I should have done is had my controller, or if you have an outside CPA or somebody, Wade, those people can usually do that for you, can’t they?
Wade Carpenter: Some of them can, some of them have experience. The first two steps are easy. I think what Stephen’s about to get into is not as easy as they make it sound.
Rob Williams: Yeah. So those first two, don’t let that intimidate you. Somebody can do it for you.
Stephen Brown: We’ll give you the link. SBA.gov will give you the [00:06:00] link.
Rob Williams: Yeah.
Stephen Brown: There’s a link you can click on that will help you figure that out. You can search all that and you can figure it out. But first of all, you figure out what it is that you do best. Number one, what do I do best? That’s your number one primary NAICS code.
You put that in. The next thing you do is you gotta figure out the size standards of work that you can do within the federal government and still be a small business. So again, there’s a link for that where you can click on it and you put NAICS primary code number in, and it tells you the size standards that you would be considered as a small business. Guys, that’s huge. I mean, this takes nothing to figure that out.
Get registered with the System for Award Management (SAM)
Stephen Brown: So once you figured out your size standard, the next thing is you gotta register, this freaks everybody out because they say it’s so difficult I need to take classes. You register with Sam. Sam is the System for Award–
Rob Williams: I love Sams, man. They’ve got these great deals down–
Stephen Brown: Yeah no, you don’t. You don’t have a, have to have a Sam’s card.
Rob Williams: They’ve [00:07:00] got foot-long hot dogs!
Stephen Brown: This is a government con– Rob, this is a government contracting–
Rob Williams: Oh.
Stephen Brown: –website. And this is the number one system that allows them to find you, and for you to find work that’s out there bid based on your NAICS, and based on the territory you operate. So guys, getting registered for SAMs. I’m not speaking to the choir here. I’ve done it myself. I figured it out. I’m no rocket scientist. So I’m registered for SAMs, but you can too.
It’s the number one way. It’s new. It’s a couple years old. It’s scary. It’s frightening. It’s all this kind of stuff it can do. But to get registered, you don’t have to be a rocket scientist. Put some time in learning the system. And if you don’t, like I said, there’s SBA, Small Business Administration and commercial market reps classes, procurement tech centers, that help teach you how to master the art of SAM. Okay?
Rob Williams: All right now, what does SAM stand for [00:08:00] again? It’s not part of Walmart, right?
Stephen Brown: No. System for Award Management. SAM. It’s the number one website that you have to know about to do federal contracting work.
Get familiar with Federal Acquisition Regulations
Stephen Brown: Okay. So you’re registered. The next thing is you’ve got to understand that all government work is based and ruled by FAR regulations. FAR regulations are Federal Acquisition Regulations.
They spell out how the acquisition process works for federal construction projects. So you have to maintain some compliance with the FAR regulations. So you need to familiarize yourself with them a little bit, and then there’s a link that shows you how to check on these FAR regulations, how to familiarize yourself with them a little bit.
I can tell you that lawyers, bonding claims people are experts that work with federal contractors on FAR regulations. They know ’em backwards, [00:09:00] forwards, inside and out. It spells out how you do business. It’s the rule book. It’s the playbook. If you bought a new game, when you opened up, there’d be a set of instructions.
Now I know Rob, you would read the instructions of that game thoroughly and play it with obsessive detail. But, but, you don’t have to be intimidated by FAR regulations. Just understand a little bit. What are they, what do they say? Hey, they’re easy to read. Again, I can read them. I can understand them. And I’m no rocket scientist.
Rob Williams: And for all you pilots out there, this is not the Federal Aviation Regulations, right? The big book that we had to study by FAA to get our–
Stephen Brown: This is not nearly as intimidating, guys. I like to say it’s fun. It’s fun to read. Let’s just tell our listeners, FAR Regulations, SAM, FAR, it’s fun stuff. It’s great stuff. Alright.
Get SBA Certified
Stephen Brown: Next thing is you have to get SBA certified. You should get SBA certified. So we have a link to how to get SBA certified next. [00:10:00] Why SBA certified? Because SBA certification has all these set aside programs that you might get approved for. And we’re gonna talk about that in a second. Get SBA certified and you can check our link and get that website.
How to win federal government contracts
Stephen Brown: Okay. So that’s the first part. Getting ready, getting set up. The second part, guys, is winning contracts. How do you get these contracts? Well, they’ll tell you on the website– and Wade, we were talking about this. It takes time and money before you get your first federal contract. Well, it takes time to study everything. It takes money away from you while you’re studying all this. You might pay experts, you might attend classes. But it said you might spend 80 to a hundred thousand dollars of your own money before you get into government contracting. I don’t know. I know it costs money, but I don’t know where they got that number from.
Rob Williams: I don’t know Wade [00:11:00] I.
Wade Carpenter: Honestly don’t either, but you know…
Stephen Brown: Okay. Well look–
Rob Williams: Most of my clients that I’ve seen, they actually got in, like by acquiring a business or partnering, or took something. So they didn’t have to do it originally.
Stephen Brown: And there’s a lot of big businesses, a lot of big businesses that don’t do federal contracting that are just starting to get into it.
Rob Williams: I got into it a little bit because I was a subcontractor for my friends that had federal jobs, but then they would have something that would be in wood construction or something that they didn’t know how to do. So they’d bring me in to help them do some of those things and bid on a lot of jobs.
Stephen Brown: All my federal contractors guys, they’ll say stuff like you get a contract to hang a thousand doors and you get 50 bucks a door is what you’re allowed to get on that. And you’ve gotta figure out how to hang those doors for less than your cost and add profit into it. And that’s the key.
Rob Williams: Winning and understanding those. Because I did go through these processes years ago, especially when I had [00:12:00] the truss plant. They had some things in there and we had some crazy jobs that we did, which one of ’em we had, we, you know, the plane that just got blown up in Ukraine. We actually got a bid to charter that big airplane. It was the largest one in the world. We were gonna put houses’ components inside that and fly it over to Iraq. And we bid that. We got in the top three, but we didn’t– we kept getting in the top three or four out of a thousand people. But I never won any of those dad gum jobs that I kept getting the top three or four. So there’s part of that winning thing. I’m kind of–
Stephen Brown: Maybe there was some politics involved.
Rob Williams: Yeah, I was about to say is the relationships. And one of them, this particular company I was dealing with, the older guy was going up there. And then finally, I think in his older age, he got a little bit more aggressive with them and they basically told the other partner, don’t send him up here anymore.
You need to come up here. Cause you know, they’re not getting the jobs. And when the other partner started going up there, boy, [00:13:00] they started winning all the jobs. He was real friendly and real nice. And so I don’t know exactly, because a lot of these jobs were not spec. You had to come up with a solution.
Stephen Brown: Well, that’s–
Rob Williams: –a lot of schmoozing going on.
Stephen Brown: That’s exactly what I’m talking about, winning contracts. Just like anything, you gotta develop your relationships. For example, core engineer contracting, the contracting officers are readily accessible. You can make appointments with them, you can visit with them. You can let them know, hey, this is what our expertise are. Do you have any projects coming out? Oh, really? Well, we did this job. You know, they need to know you and you need to know them.
Whatever it is contracting, whether it’s on a military base or whether it’s for the core of engineers or for it’s any other government project, including Center for Disease Control, anything, there’s construction.
You’re gonna find something that you know how to do that the government acquires.
Rob Williams: I was really surprised that [00:14:00] most of the jobs that I was looking at, you weren’t just following a set of specs. Like so much of it, when I got into commercial contracting, we would just go down to the plan rooms and build those plans. But when this contractor started working with me and asking me to do things, I was shocked that, it’s a proposal. They just have an idea and they want you to finish that idea out. I thought that was fascinating that you’re not bidding a set of specs. They don’t know how to do it. They just know what they need to get done sometimes.
So that was really interesting.
Wade Carpenter: Yeah.
One point I wanted to jump back on was what you said about the cost to get in. I don’t know where they came to that number,
Rob Williams: What was the number? I forgot. We–
Wade Carpenter: What’d you say, 80 to a hundred thousand dollars to get in or something? But–
Stephen Brown: That’s what it says on the SBA website.
Wade Carpenter: I mean,
Stephen Brown: And why did they say that without explaining it? Just to scare everybody?
Wade Carpenter: Well, I don’t know, but the one thing I would think about that I’ve seen that people are trying to get into federal contracting, you talked about they pay like clockwork, but typically it’s not 30 days. It’s 45, 60 days when you get paid. So you [00:15:00] do have to have some capital to get just started on a job, get rolling.
And once you get rolling into that, it can be very nice, as long as you do it properly. But you know, it does take a little bit of working capital to get rolling in it.
Stephen Brown: Well, sure. And it takes a little bit of working capital and and net worth in your company to be able to be in business. So just like you’re gonna spend money to go bid projects, commercial projects for your local municipality, you live in a certain city, you do work for that city. You learn their system.
Well, the federal government is the same way, but it’s even more structured. There’s absolutely definitely ways that you do business with them and that you learn. So that’s a good point, Wade.
So the first thing you do is there’s two sources. You can check the databases to see what works out there in your bailiwick, in your NAICS code, what you wanna do.
And that’s a dynamic [00:16:00] small business search. DSBS. And again, we have a link to that. And then the System for Award Management, SAM, we talked about SAM, not Sam’s Club, Rob. We talked about SAM, System for Award Management. And all contracts, guys, over $25,000 have to be in Sam. That’s the rules.
Rob Williams: Ah.
Stephen Brown: So there you go.
Okay. So that’s for federal government contract. Next thing you might wanna consider doing is trying to secure some work with the GSA. That’s the General Services Administration. We have a link for that, but there’s a Construction Excellence Program, design, build, and other project management work.
We were talking about the design work of these construction projects for the federal government. They come through the GSA. And of course, the core of engineers are engineers, so they do their own design work. But like you said, sometimes it’s just a conceptual project, so they might bid it as a design [00:17:00] build project.
Next thing is go in there and look at the GSA website and play around with that a little bit. You can get a job doing work for the GSA. So check that out. Next thing. SubNet is another website. It’s for subcontracting opportunities with the federal government. Subnet allows you to get together with large contractors who are looking for subs with your specialty. You do have to be all signed up with SAMs and do all these things ahead of time to get on SubNet. So don’t forget those steps. DUNS number, NAICS number, register for SAMs.
Alright. Next thing is you’ve got to find the government contacts. We were just talking about that. Who are the government contracts that are putting this work out for bid? Find them introduce yourselves. You can find them through the Federal Procurement Data System. And there’s also website called USASpending.gov, which tracks [00:18:00] each federal contract that’s awarded.
Rob Williams: You said find the government contacts, not contracts, right?
Stephen Brown: Contacts. Yes.
Rob Williams: Contacts.
Stephen Brown: Contacts. Who are the individuals that you need to meet and get to know? And I can tell you that, you go on, the Core Engineer website, all government entities have new contractor days where they invite you over, meet and greet. They talk about how to do business and they have a show telling you what projects are coming up in the next year. What they have funded.
So you’ve got to attend that stuff and get to know them. You also meet other contractors that do that type of work, who knows. That’s probably where you’re gonna find a good joint venture partner or a mentor protege partner, which is another podcast coming up. So that’s how to win contracts.
Understanding the different types of contracts
Stephen Brown: And then to finish everything out, the third thing is understanding the different types of contracts. There are set-aside contracts for small businesses. We talked about that. There’s set-aside for government [00:19:00] contracting programs and there’s joint ventures. So most of these type of contracts are competitive bid contracts, guys. Some of them are sole source contracts. So if you are the only contractor that can do that type of work, they might sole source it to you.
Rob Williams: The narrower you’ve got it–
Stephen Brown: That’s right. The better your chances are of getting work. They set up things called Multiple Area Task Order Contracts and IDIQs, and it’s specifically for small set-aside contractors. They want to do a percent of their contracting work, Say a certain Navy base or air base, certain amount has to go to small business.
And one way they do that is they do a technical RFQ, Request For Qualifications, to learn about your qualifications and they study you and they check on your bonding capacity and the work that you’ve done in the past. And if they like you then you might be awarded one of five contractors to get [00:20:00] divvied up all this MATOC or IDIQ work. So that’s fantastic thing you gotta know.
Certifications that can help
Stephen Brown: And then the next thing are the certifications. So there’s two types of certifications. The small Business Administration certifies you as an 8(a) Contractor. There’s certain set-aside work for the 8(a) Program. A HUBZone Contractor that stands for Historically Underutilized Business zone. HUB. I’ve got a contractor downtown who’s a HUBZone contractor.
Again, there’s a website where you can find out if you’re located in a HUBZone or you might want to move your business to a HUBZone. That’s the whole idea. For you to work in an area or place that’s economically underutilized. They’re gonna award you set-aside business for being HUBZone.
And then there’s woman-owned, economically disadvantaged woman-owned business. So that’s the SBA certification.
And then there’s self certification for service disabled veteran. If [00:21:00] you are a veteran and you want to do contracting, there’s a disabled veteran designation that is set aside.
So in a nutshell, of this 133 billion dollars worth of work set aside for small contractors, they have already set up that 5% of that work has to go to service disabled businesses, 5% to economically distressed woman-owned business. 3% has to go to small businesses and 3% has to go to HUBZone contractors.
So see automatically, if you understand the different types of contracts that are out there, you might be eligible to take advantage of that set-aside. And it’s real. It helps you compete. That’s the whole idea. The federal government realizes that the backbone of America is small business and that’s why they put so much effort into this.
So guys I’m finished. Do y’all have any questions? Did I put you to sleep?
Wade Carpenter: No, I’ll just, I’m trying to figure out all the [00:22:00] alphabet soup we’ve had on this.
Rob Williams: One of the points on that, one of Wade I’s friends that wrote Profit First for minority enterprises in her book, she talks a lot about this and how the government, there are great margins in there, but then there are some that are not. So those ones that don’t take much qualification, it was sort of a warning that, in her case it was minority enterprises, and she qualified for them, and then she found out there were so many people qualifying for them that they bid them all down that they couldn’t make any profit on them.
So, the qualifications on certain job types and stuff are really important. And I still wonder talking to my clients, Out of the thousand people that bid those jobs, how did they come up with, there were only four that qualify for it? And that made their margins really good, to do that. So if you can get into a small group, a niche of something, boy, that can really help your margins on getting those bids and stuff. If you’re out there, just don’t think because it’s government, you’re gonna make a lot of money. Because some of those really open [00:23:00] bids that everybody qualifies for, watch out for those margins. Know your cost and don’t just think that you are gonna make a lot of money, because it’s a government job because some of those margins can actually be thin if you don’t know which ones are good and which ones are bad.
Stephen Brown: Yeah. And after you bid the job, you find out what the government estimate is at the day of the bid. That doesn’t necessarily mean anything to you, but it’s just a ballpark of what the government thinks the job’s gonna go for. And if the government estimate is $5 million and the job goes for 15 million dollars they may not award it.
Rob Williams: Hmm.
Stephen Brown: At the same time, guys, the understanding that there’s lots of work that you might be the only bidder, and you can get in and get a real good margin on it. So I think the whole key is tuning in to what is your main classification code of the type of business you want the government to know that you do best? [00:24:00] That’s my take on it. And then look for those opportunities. And then why not throw out a bid? Why not?
Wade Carpenter: Well, just to piggyback off of what Rob said. I mean, I’ve seen a lot of government contracts where exactly what he said, some of them, they are very thin margins and it’s unfortunate that, we talk about it all the time on this podcast is like they get mesmerized by this big number, big top line number, and think that magically, they’re gonna make it on the bottom line. So know your overhead, know what it’s gonna cost. And, I preach that all the time. So.
Stephen Brown: Right. Have all those elements in place before you start doing federal contracting, or any contracting, we would say. Right, Wade?
Wade Carpenter: Absolutely. It’s been great information, Stephen. Thank you.
Rob Williams: Yep. All right. This is great. All right, well, this is great at the contract– we just woke up everybody. So at the Contractor Success Forum. I am Rob Williams, IronGate Entrepreneurial Support Systems. We have Wade [00:25:00] Carpenter, Carpenter and Company CPAs, and Stephen Brown with McDaniel, Wiley bonding and insurance agency.
And now this one just we’ll definitely mention because there are a lot of resources that they need to go to our website. Well, you can go to ContractorSuccessForum.Com or find Contractor success Forum on LinkedIn and find that now. So what resources again, remind them in general.
Stephen Brown: You can check sba.gov or check on our link at each one of those steps, we’ll list out for you with the link.
Rob Williams: Okay. That’s great.
Stephen Brown: You can just click on it.
Rob Williams: Lots and lots of valuable information there. So. All right guys. Well I enjoyed it, and check out the next Contractor Success Forum.
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