Is Federal Contracting Right for Your Business?

Before investing the time and money required to enter federal contracting, you need an honest assessment of whether it fits your business. Federal contracting offers large, stable revenue streams and long-term relationships — but it also demands patience, compliance overhead, and substantial upfront effort with no guarantee of return.

Federal contracting may be a good fit if your business has at least two to three years of operating history, stable financials, the ability to wait 30 to 60 days for payment (Net-30 is standard), and products or services that align with what the government buys. It is generally not a good fit for startups with no revenue history, businesses that need immediate cash flow, or companies unwilling to invest in compliance infrastructure.

Step 1: Get Your Unique Entity Identifier (UEI)

Every entity doing business with the federal government needs a Unique Entity Identifier (UEI). As of April 2022, UEI replaced the DUNS number as the primary business identifier for federal awards. You obtain your UEI through SAM.gov during the registration process — it is assigned automatically and at no cost.

If your business previously had a DUNS number, your UEI was automatically generated during the transition. You can look up your UEI on SAM.gov using your legal business name or former DUNS number.

Step 2: Register on SAM.gov

Registration in the System for Award Management (SAM.gov) is mandatory for any entity that wants to receive federal contract awards, certain grants, or other federal financial assistance. This is a non-negotiable prerequisite — you cannot bid on or receive a federal contract without an active SAM.gov registration.

The registration process requires your Employer Identification Number (EIN), bank account and routing numbers for Electronic Funds Transfer (EFT), your NAICS codes, and information about your business size, ownership, and socioeconomic status. Plan for the registration to take two to four weeks for entity validation. See our SAM.gov Registration Walkthrough for detailed step-by-step instructions.

Step 3: Understand NAICS Codes

North American Industry Classification System (NAICS) codes categorize your business by the type of work you perform. These codes are critical because they determine which size standard applies to your business (and therefore whether you qualify as "small") and which set-aside contracts you can compete for.

You can register multiple NAICS codes on SAM.gov, and you should register every code that legitimately describes your capabilities. However, you must designate one primary NAICS code. Research what codes your competitors use and what codes appear on the solicitations you want to pursue. See our NAICS Code Selection Guide for a detailed walkthrough of how to choose the right codes.

Step 4: Find Contract Opportunities

Federal contract opportunities are posted on SAM.gov (which absorbed the former FedBizOpps / FBO system). All solicitations above the micro-purchase threshold ($10,000 for most purchases, with some exceptions) that are not otherwise exempt must be publicized here. The simplified acquisition threshold is $250,000, and solicitations above this amount receive additional scrutiny and competition requirements.

Beyond SAM.gov, monitor agency-specific procurement forecasts, which many agencies publish annually. GSA eBuy handles requirements posted to GSA Schedule holders. Subcontracting opportunities are often posted on prime contractor websites or found through networking at industry events.

Sources for Finding Opportunities

• SAM.gov Contract Opportunities — The primary source for all federal solicitations
• Agency procurement forecasts — Annual plans published by most major agencies
• GSA eBuy — For requirements directed to GSA Schedule holders
• APEX Accelerators — Free counseling and opportunity identification (formerly PTACs)
• Subcontracting directories — SBA SubNet and prime contractor outreach events

Step 5: Make Smart Bid/No-Bid Decisions

Not every opportunity is worth pursuing. Writing a federal proposal is expensive — a competitive proposal for a mid-size contract can cost $20,000 to $50,000 or more in labor alone. A disciplined bid/no-bid process is essential to conserve resources and focus on winnable work.

Factors to Evaluate

• Do you meet all mandatory requirements? If not, stop here.
• Do you have relevant past performance? Lack of past performance is the single biggest barrier for new contractors.
• Is the incumbent strong? Displacing a well-performing incumbent is extremely difficult.
• Do you understand the customer? Have you engaged with the agency before the solicitation dropped?
• Is the price realistic? Can you perform profitably at a competitive price point?
• Do you have the capacity? Can you staff and deliver if you win?

Step 6: Write Your Proposal

Federal proposals are evaluated against the criteria stated in Section M of the solicitation (or Section L for instructions). Read the solicitation cover to cover — twice — before writing a single word. The most common mistake new contractors make is failing to address every evaluation criterion explicitly.

Proposal Structure Basics

Most competitive proposals have three volumes: Technical, Past Performance, and Price/Cost. The technical volume demonstrates your understanding of the requirement and your approach to meeting it. Past performance shows you have done similar work successfully. The price volume details your pricing methodology and rates.

• Be compliant first, compelling second. Follow all formatting and content instructions exactly. Non-compliant proposals are eliminated.
• Use the evaluation criteria as your outline. Mirror the structure the government gives you.
• Be specific. Replace vague claims with concrete evidence, metrics, and examples.
• Name your staff. Identify key personnel by name with their qualifications.
• Show, don't tell. Instead of "we have extensive experience," describe a specific project with measurable outcomes.

Step 7: Build Past Performance

Past performance is often the most heavily weighted evaluation factor after technical approach. New contractors face a catch-22: you need past performance to win contracts, but you need contracts to build past performance.

Solutions include subcontracting under an established prime contractor, pursuing small-dollar contracts and purchase orders, performing work on GSA Schedule task orders, and documenting commercial work that is relevant to the government requirement. The FAR states that a lack of past performance shall be evaluated neutrally — not as a weakness — but in practice, competitors with strong past performance have a significant advantage. See our Past Performance Guide for detailed strategies.

Understanding Contract Vehicles

Much of federal contracting flows through pre-established contract vehicles rather than standalone, full-and-open competitions. Understanding these vehicles is essential to accessing a large portion of federal spending.

GSA Multiple Award Schedules (MAS)

The GSA Schedule (now called the Multiple Award Schedule or MAS) is an indefinite-delivery, indefinite-quantity (IDIQ) contract between GSA and commercial firms. Once you hold a Schedule contract, any federal agency can place orders against it. This gives you access to a vast pool of buyers without competing for each individual award from scratch. The application process through GSA's eOffer system takes three to six months.

Government-Wide Acquisition Contracts (GWACs)

GWACs are multi-agency contracts for IT products and services. Major GWACs include Alliant 2, 8(a) STARS III, VETS 2, and CIO-SP4 (when awarded). Holding a GWAC position gives you access to task orders across the entire federal government. Competition for GWAC positions is intense, and these vehicles are generally not accessible to brand-new contractors.

Blanket Purchase Agreements (BPAs)

BPAs are simplified methods of filling anticipated repetitive needs for supplies or services. An agency establishes a BPA with one or more vendors for a particular category of purchases, then issues individual orders against the BPA as needs arise. BPAs are governed by FAR Subpart 13.303.

Indefinite-Delivery/Indefinite-Quantity (IDIQ) Contracts

IDIQ contracts provide for an indefinite quantity of services or supplies during a fixed period. They establish a ceiling value and a minimum order guarantee. Individual task orders or delivery orders are competed among IDIQ holders. IDIQs are covered in FAR Part 16, Subpart 16.5. See our Contract Types Guide for a full breakdown.

Small Business Advantages

If your business qualifies as small under SBA size standards, you have access to set-aside contracts, sole-source opportunities, and evaluation preferences that substantially reduce competition. The government is required to award at least 23% of prime contract dollars to small businesses, with sub-goals for specific socioeconomic categories.

Certifications such as 8(a) Business Development, HUBZone, Women-Owned Small Business (WOSB), and Service-Disabled Veteran-Owned Small Business (SDVOSB) each unlock additional set-aside pools. See our Small Business Certifications Guide for eligibility requirements and application processes.

Common Mistakes to Avoid

• Waiting for SAM.gov registration to expire. Renew at least 30 days before expiration.
• Bidding on everything. Focus on opportunities where you have a realistic chance of winning.
• Ignoring pre-solicitation engagement. Build relationships with agency customers before the RFP drops.
• Underpricing to win. A contract you cannot perform profitably is worse than no contract at all.
• Neglecting compliance. FAR compliance is non-negotiable. One missed clause can torpedo a proposal or trigger a contract termination.
• Going it alone. Leverage APEX Accelerators, SBA resources, and mentor-protege relationships.

• How long does it take to get a government contract?

  From initial SAM.gov registration to first contract award, most businesses should expect 12 to 18 months at minimum. The timeline depends on your industry, small business status, existing past performance, and the contract vehicles available to you. Some businesses win small purchase orders within months; others spend years building the relationships and credentials needed for larger awards.

• Do I need a DUNS number to get government contracts?

  No. The DUNS number was replaced by the Unique Entity Identifier (UEI) in April 2022. Your UEI is assigned automatically when you register on SAM.gov. If you had a DUNS number previously, your UEI was generated during the transition.

• How much does it cost to register for government contracting?

  SAM.gov registration is free. Be wary of third-party companies that charge hundreds or thousands of dollars to register on your behalf. While some businesses hire consultants for assistance, the registration itself costs nothing. If someone contacts you demanding payment for SAM registration, it is likely a scam.

• Can a small business really compete against large defense contractors?

  Yes, but not head-to-head on unrestricted contracts. Small businesses compete primarily through set-aside contracts reserved exclusively for small businesses under FAR Part 19. The government is required to award at least 23% of prime contract dollars to small businesses, and many agencies exceed this goal. Certifications like 8(a), HUBZone, and SDVOSB further reduce competition.

• What is the easiest way to start getting government contracts?

  The lowest barrier to entry is through micro-purchases (under $10,000) and simplified acquisitions (under $250,000), which have streamlined competition requirements. Subcontracting under an established prime contractor is another effective entry point. Getting on a GSA Schedule also opens doors to a large volume of task order opportunities.

• Do I need a GSA Schedule to get government contracts?

  No. A GSA Schedule is one contract vehicle among many, and plenty of federal work is awarded through full-and-open competition, set-asides, and other vehicles. However, a GSA Schedule makes it significantly easier for agencies to buy from you by pre-negotiating your rates and terms. For many businesses, it is a worthwhile investment once they have some federal experience.