Government contracting can be an especially lucrative area for business owners to work in. Federal and local governments can provide high-paying, consistent contract work to those contractors that build working relationships and provide the level of service these entities need. But breaking into government contracting isn’t always easy. Keep reading to get some important information on becoming a government contractor.

Understanding Types of Government Contracting

For new and aspiring government contractors, it’s important to note that there are two very broad categories of contracting for the government. The first is the most obvious, and involves applying for and winning contracts directly from government agencies. These companies are referred to as “prime contractors.” However, this is also arguably the more difficult option for newcomers to the government contracting arena.

The second option is to work a subcontractor and join prime contractors’ teams to provide a specific service in relation to fulfilling a government contract. Often, subcontracting for a prime contractor can be a great way for newer businesses to ease their way into government contracting. You don’t have to worry about the government’s bidding processes, and the majority of your communications will be to another contracting company, which can be less intimidating than working directly with a government agency. However, you’ll still get hands-on experience working on government contracts, giving you essential knowledge to break into the field of prime contracting later.

Qualifying and Registering as a Contractor

In order to be considered for either prime contracting or subcontracting positions with the government, you’ll need to legally qualify as a small business, as well as registering as a government contractor. Those seeking subcontracting positions often overlook this second requirement, since they don’t view themselves as contracting directly for the federal government. However, even subcontractors must be registered as a government contractor if they hope to be considered for a prime contractor’s team.

To register as a government contractor, you’ll need to register with the federal government’s System for Award Management, or SAM. This database is used by all government agencies to find contractors. When you register, you’ll receive a Unique Entity Identifier (UEI), which you’ll use when applying for any future contracts. You’ll also need a North American Industry Classification System (NAICS) code, which you can find at the U.S. Census Bureau, based on what products or services your business provides.

Giving Small and Disadvantaged Businesses a Leg Up

If you’re a small business, there’s good news when it comes to government contracting; the federal government tries to award a significant portion of their contracting dollars to small businesses specifically. To qualify for these reserved funds, you must meet certain size standards, which can vary based on your NAICS code. If you meet the size requirements, you have a higher chance of winning those federal contracts reserved for small businesses.

Additionally, the government tries to award a certain percentage of contracts to businesses that are owned by women, minorities, service-disabled veterans, and HUBZone program participants. If your business falls into any of these categories, you should be able to specify this when registering through the SAM database, increasing your chances of receiving those government contracts.

Complying with Federal Contracting Rules

One of the more difficult elements of contracting for the government is the sheer number of regulations and requirements that contractors must adhere to. There are numerous sets of rules that you may or may not have to follow based on the type of contract, but the most widely applied ones are the Federal Acquisition Regulation (FAR) and Defense Federal Acquisition Regulation Supplement (DFARS) standards, which apply to most federal agencies. Individual organizations within the government may have their own rules as well.

Ensuring that you remain compliant with all pertinent federal contracting rules can be difficult, as they’ll examine almost every aspect of your business operations, from time keeping to accounting practices and more. You’ll also likely need to agree to a nondisclosure agreement regarding the work you’ll be doing for the government. If you’re not willing or able to put the time in to learn and adhere to federal regulations, then government contracting likely isn’t the right choice for your business.

However, you can seek help in maintaining compliance by working with an accountant that is familiar with FAR and DCAA requirements for compliant accounting practices. If you’re looking to break into government contracting but need help getting your accounting practices up to federal standards—and keeping them compliant in the future—contact Peter Witts CPA. We specialize in working with government contractors and can help you ensure you’re ready to start accepting those lucrative government contracts.