Small and medium-sized manufacturers (SMMs) can seek government contracts for stable revenue and growth opportunities. However, the government contract application process often seems overwhelming to businesses that don’t have prior experience.
While some steps can be intensive, the overall process is much more straightforward than you might think. There are also readily available resources for SMMs to utilize when bidding on their first government contract. To help, our blog breaks down everything you need to know about how to find and bid on government contracts.
What Are Government Contracts?
Government manufacturing contracts are lucrative business opportunities available to SMMs that operate much like normal business contracts, except the buyer is a government entity. As a result, there are generally more requirements and scrutiny placed on government contracts.
In practice, a government contract will establish an agreement on deliverable products and their pricing. More complex contracts may allow some fluidity (e.g., deliverable quantity and pricing), but the terms must be met to receive payment. For the length of the contract, an SMM will have the benefit of guaranteed income — making these contracts a great way to lock in scalable production and revenue.
Finding Government Manufacturing Contracts
The government relies on the North American Industrial Classification System (NAICS) - or NAICS Codes - to designate the manufacturers that are eligible to apply — and SMMs should too. So, before checking databases for open contracts, be sure to confirm your exact NAICS code to the number of digits specified for the government funding. Note that the classification system is highly specific, returning thousands of results for "manufacturing."
Once you've confirmed your NAICS code, you can use it to search for open federal contract opportunities on the System for Award Management (SAM) or state and local procurement sites. For California's SMMs, state-level government contracts are listed on Cal eProcure.
Types of Government Contract Structures
Government contracts may be structured in any manner, but they typically fall into one of three categories:
- Firm-fixed-price: As the most straightforward contract structure, firm-fixed-price opportunities involve SMMs determining their price for the requested items and submitting it as their bid. If accepted, the stated price is what the government will pay for the contract's duration. Generally, the lowest bid is most likely to win.
- Indefinite delivery, indefinite quantity (IDIQ): IDIQ contracts are similar to firm-fixed-price contracts but provide the government with greater flexibility. When a government entity knows it needs to purchase a minimum amount of the product but may order more at different times, it’ll use an IDIQ. The minimum amount is guaranteed, but the government may award the contract to multiple SMMs to better account for irregular quantities and delivery schedules. These are also generally awarded to the lowest bids.
- Large-scale projects: Large-scale project contracts can involve subcontractors, numerous variables, or unique structures. Their primary differentiation relates to application selection because the lowest bids are no longer prioritized. These contracts and their fulfillment are challenging enough that expertise and qualifications are given greater consideration and the government may be willing to spend more.
SMMs exploring their first contracting opportunities should note that many large contracts require subcontractor involvement. Partnering with a larger manufacturer to “get your foot in the door” with government contracting is a reliable way to position yourself as the primary or solo business for future opportunities. And many contracts carve out “set-aside” subcontractor opportunities for SMMs that meet specific criteria such as being majority-veteran-owned.
How to Apply for a Government Contract
SMMs applying for their first government contracts will generally follow the consistent, four-step process outlined below.
Step 1: Apply for a UEI Number and Register with SAM
Unique Entity IDs (UEI) are 12-character alphanumeric identifiers used to designate businesses or other entities within the System for Award Management — and they are mandatory for submitting government contract applications. You can think of them as your business's social security number, granted upon registering for SAM or requesting a UEI.
Before the government adopted UEIs, they relied on the Data Universal Numbering System (DUNS). However, DUNS numbers have been phased out as of April 4th, 2022, and all entities must have a UEI moving forward.
SMMs pursuing their UEI numbers and SAM registration should never pay for it or related services, as they are freely available to all businesses. And, although SMMs must renew their SAM registration annually, UEI numbers never expire.
Step 2: Search for Open Contract Opportunities
After registering with SAM and procuring your UEI number, you can browse through the myriad of open contracting opportunities on government websites. Virtually every SMM can find applicable opportunities, with SAM's listings returning roughly 50,000 results for "manufacturing" searches.
The two most important contract portals for California's SMMs to familiarize themselves with are SAM for federal opportunities and Cal eProcure for those at the state level. However, you should also check for other portals, including any run by local government entities.
The biggest challenge with these portals is learning how to use the search capabilities effectively and efficiently. Once you're comfortable with the system, you can set up automatic email notifications to inform you of any newly posted contract opportunities that match your NAICS code. Setting up these alerts is especially helpful for smaller manufacturers that can't dedicate resources to periodically browse databases.
Step 3: Identify Opportunities That Your Company Qualifies For
Identifying the right government contracts for your company first involves checking the specified NAICS code and then evaluating the available opportunities (as you would with any business contract). It’s important to ensure that the production quantities and deliverable schedules are a good fit and can be met reliably throughout the contract's duration before continuing the time-intensive application process.
It’s also important to check the open contract opportunities for “set-aside” requirements. These stipulate that the contract (or subcontract) must be awarded to businesses holding stated certifications, meeting ownership criteria, or operating in specific locations. With government contracting being hypercompetitive, every advantage you can use counts — and set-aside opportunities increase your chances of winning by considerably narrowing the eligibility pool.
Set-aside opportunities include dedicated awards for:
- Majority-veteran-owned businesses: These set-asides may further specify that the contract must be awarded to businesses owned by veterans, prioritizing service-disabled veterans, followed by veterans who are not service-disabled.
- Majority-women-owned businesses: Per the U.S. Small Business Administration (SBA), the federal government has stated that it strives to award at least 5% of all contracting dollars to majority-women-owned businesses operating as prime contractors or subcontractors.
- Minority-owned businesses: These set-aside opportunities include those like SBA’s 8(a) program for socially and economically disadvantaged businesses. You can determine your eligibility for the 8(a) program by consulting 13 CFR 124.
- HUBZone opportunities: Unlike the above opportunities, contracts set aside for HUBZone aren’t awarded based on ownership demographics. Instead, they are set aside for SMMs located in “historically underutilized business zones,” acting as an economic stimulus for areas with higher-than-average unemployment and lower-than-average income levels.
SMMs should note that applying for set-aside contracts will require proof that your business meets the eligibility requirements.
Step 4: Submit the Required Application
Once you’ve determined which government contract opportunities to pursue, the application process begins. This will be the most time-consuming step, requiring SMMs to provide all of the requested information.
Government contract applications generally fall into two categories:
- RFBs or RFQs: “Requests for Bids” or “Requests for Quotes” are the most straightforward applications, typically focusing on the product you’ll provide and its price. Most often, RFBs and RFQs are awarded to the lowest submitted bid.
- RFPs: “Requests for Proposals” are much more involved applications used to award larger contracts. RFPs will not only include information on products and pricing but they will also cover how the contract will be fulfilled. The submitted proposal may even include information such as the specific employees working on the contract. Although these applications are much more complex, the government will often provide evaluation and ranking criteria to help you determine what information must be included and how to structure it.
Step 5: Be Persistent
Especially when first submitting government contracting applications, it’s crucial for SMMs to remain persistent. You won’t always win your first opportunity — or even your first few. While the process is straightforward overall, there can be a learning curve, such as figuring out the proper way to frame information or leveraging networking events.
But, the more you stick with government contracting opportunities and the more applications you submit, the more familiar the process becomes. Eventually, you will identify the right opportunity, provide the correct information, and secure your first contract.
Government Contract Resources for SMMs
Most importantly, SMMs should remember that they aren’t alone when pursuing their first government contract. It’s easy to learn how to get a government contract with the right partner, and by utilizing the business resources that are readily available, including:
- Procurement Technical Assistance Centers (PTACs): These organizations provide educational resources and direct help to SMMs in the stated counties that are first learning the processes of selling their goods and services to government entities at all levels.
- Small Business Development Centers (SBDCs): These centers located throughout California will provide financial education resources for SMMs, like organizing your books and preparing funding applications. They’ll help those seeking more capital, whether it’s government contracts, loans, or grants.
- Economic Development Centers/Corporations (EDCs): An EDC focuses on helping grown regional or local economies within their designated area. You can approach them to learn more about the funding opportunities available to businesses in their location, including government contracts.
And, in California specifically, CMTC helps to connect SMMs with consultants and partners that can help with the application process.
Contact us today to learn how we can help your company bid and win government contracts.
About the Author
Gregg Profozich is a manufacturing, operations and technology executive who believes that manufacturing is the key creator of wealth in the economy and that a strong manufacturing sector is critical to our nation’s prosperity and security now, and for future generations. Across his 20-year plus career in manufacturing, operations and technology consulting, Mr. Profozich helped manufacturing companies from the Fortune 500 to the small, independents significantly improve their productivity and competitiveness.