Winning contracts from the government can be intimidating. This may especially be the case when you own a small business. There are programs and opportunities to help you win bids on government contracts. Below you will find data and resources to help guide you to win bids on government contracts.
Federal Contract Budget
In 2019, the U.S. government spent $4.45 trillion with most of it, 18.2%, allocated to national defense. In the fiscal year 2018, federal agencies obligated more than $550 billion to federal contracts. This was more than all the other government agencies combined. Of the $30 billion spent, 41% accounted for services, 51% for goods, and 8% for research and development. The rest of the federal government spent 71% of its budget on services. The DOD relies on contractors to provide the U.S. military with goods and services that include weapons, vehicles, food, uniforms, and operational support.
Set-asides are the portion of federal contracts that must be awarded to small businesses. The federal government allocates 23 percent of its contract work to small businesses. Women-owned businesses (WOBs) are small businesses with at least 51% of it owned, controlled, and managed by one or more women who are U.S. citizens. The federal government sets aside 5 percent of its federal contract awards to WOBs. The allocation to small businesses also includes the 8(a) Business Development Program which sets aside 5 percent of the U.S. federal government contract budget to businesses owned by members of economically or disadvantaged groups. This program is intended to help organizations owned by members of minority groups to be competitive in the government contracting market. Service-disabled veteran-owned small businesses (SDVOSB) are businesses whereby service-disabled veterans or a caregiver own and control 51% or more of a business. They receive 3% of the federal contracting budget. Historically Underutilized Business Zone Small Businesses (HUBZone) provides contracting assistance to small businesses in economically distressed communities. The HUBZone program was implemented to “promote job growth, capital investment and economic development in these areas, including Indian reservations.” HUBZone-certified businesses receive a 10 percent price evaluation preference in contact competitions. The U.S. government has the goal of awarding 3 percent of its federal prime contracts to HUBZone-certified companies.
The federal government has gradually increased its contracts awards to small businesses. The 2018 fiscal year was the first-time small businesses were awarded more than $100 billion in government contracts. The 2019 fiscal year was the sixth consecutive year the federal government exceeded its small business federal contracting goal. A federal study conducted by the Minority Business Development Agency in in 2017 indicated the government awarded $25.4 billion in federal contracts to WOSBs. It is only five percent of the budget allotted to federal contracts, but it has gradually increased since 2008 when it was only $17.6 billion.
Invest to Prepare for Government Contracts
Contractors have increased spending to secure government contracts over time. In 2012, small -business contractors spent an average of $128,6238 in 2012. This was a 40 percent increase from what contractors spent in 2009. WOSBs spent an average of $112,000 to prepare for government contracts, while those owned by men invested more with an average of $137,000. Winning a government contract takes a lot of work, but it is an investment that will help you sustain your business when you win that big contract
Small businesses that contract with the government generate 19% of their revenue from the federal government. A smaller percentage, 14%, comes from state and local contracts. Experts suggest diversifying clients so contractors will not be as severely impacted when one of the agencies makes budget cuts.
Small business contractors have reported they had to submit an average of 4.4 bids before they won their first federal contract. Two-thirds of small business contractors have worked on more than one federal contract. It took them an average of 11 ½ months after their first contract award to win their second. The lesson from this data is to not be discouraged. It takes time and patience to succeed in government contracting.
To find out the type of opportunities available to your company, visit https://www.usaspending.gov/#/explorer. The site provides information on budget, government spending, and spending grouped by the types of items and services purchased by the federal government. For more help and information on government contracts, contact Whitcomb Selinsky PC.