Basic Government Contract Requirements
Fundamental Qualifications Every Business Must Meet
Oct 12, 2009
Government contracts are not as unattainable as the paperwork makes them seem. Once a business completes the checklist of requirements, government contracts can be an excellent source of revenue - even in tough economic times when revenue is harder to come by.
The key to winning a government contract at any level (federal, state, or municipal) is knowing the system- the specific system that an agency requires you to follow. The red tape may seem daunting at first, but the rewards can end up far outweighing the effort involved.
Government Contracts vs. Private Contracting
Projects for the government are covered by strict statutes and regulations to protect the public and reassure taxpayers that their money is being spent properly.
Government contracts are different from private contracting in several ways. To begin with, most public works jobs require that employees be paid the prevailing wage rate. Public works as opposed to private work is also highly competitive. And there's a trade-off between the contractor's higher mark-up in private contracting, and the lower mark-up and higher mandatory wages (which is often made up for by a higher volume of work). Overall, it requires a different mindset and approach than most business owners are accustomed to.
Another factor is more oversight in the form of outside agency inspection. The paperwork is also typically more extensive: tech submittals, payroll, and legal (lien) documentation, just to name a few areas. For expanded info and examples of what's involved, see the U.S. government's online primer on government contracts.
It's also very important that businesses comply with all employment laws for federal contractors when doing business with the U.S. government. Each state and municipality also has its own rules, which must be followed to the letter.
Because of these requirements, many businesses never enter the market. So what's in it for those who do? Is it worth it?
Good Opportunity for Stable Businesses
Doing business with the government won't bring instantly wealth. But it can certainly work to a company's financial advantage. For one thing, it can help level out the economic peaks and valleys during the business year. If profits from government contracts are applied to paying for overhead, a business can be more selective with other contracts that involve higher margins.
One of the good things about contracting with the government is that when the economy is tough, Congress pours dollars into public agencies to help jump-start the economy. When the work is properly done, for the most part companies know they will get paid.
Getting a Business Ready for Contracting with the Government
The first thing to make sure of is that the business is financially solid enough to complete the job term. If it has money troubles, a government contract isn't going to save it.
In fact, if the company can't fulfill its requirements (which include financially sustaining the business throughout the contract term), it could result in shutting the business down. It's absolutely essential to already have enough capital and the right people and resources to do the job before committing to it.
Also, the government does not typically finance contracts before the work is performed. Companies may be able to receive incremental payments if the contract's value and duration are substantial enough. But there must be a good reason, not just the fact that a company needs money to keep operating.
And the paperwork, while somewhat daunting, must be completed accurately and on time at every stage. Best advice: read everything thoroughly, then read it again.
The learning curve is the hardest part of contracting with the government, but it's worth the effort. Once a company builds its relationship with government contracting agencies, it will be positioned for many more successful contracts for years to come.
 |
