Many Small-to-Medium Businesses (SMB) are unaware of the benefits of federal business opportunities. If you’re able to win a contract, these contracts often bring an increase in workforce, additional resources, and new doors to gain more business.


Anyone with a history in federal contracts and servicing agreements with federal agencies can tell you just how lucrative these contract can be. The hiring of additional employees, access to resources, and the potential for future contracts make these federal business opportunities very enticing to small businesses. However, not every business is suited for handling federal contracts.

Federal business opportunities can be range in defense contracts, Department of State contracts, the U.S. Department of Health & Human Services, almost all government agencies bid out contract work that small businesses can apply for. Typically Requests for Proposals (RFP) can include contracts for services, specific goods, and sources for long-term purchasing.


Types of Contracts


Generally, contracts awarded consist of the following structures:


  • Fixed-Price Contracts – The most common contract type, means what is the fixed price it would cost for a product or service. This means that the contractor is held responsible for the cost performance of the award (and profit). Typically the Contractor submits invoices to the contracting agency for payment – relieving some financial burden from the contractor.
  • Cost-Reimbursement Contracts – These contracts allow for a contractor to be reimbursed for costs associated with the award or contract. However this type of contract requires that the contractor pay costs upfront related to the award or contract. This contract type provides the least possible risk to the contractor’s profit given the contracting agency is responsible for reimbursing all costs incurred by the award or scope of work.
  • Time-and-Materials and Labor-Hour Contracts – These contracts typically are independent variations of Cost-Reimbursement Contracts, but usually involve a more narrow or specific scope of work. Usually, these contracts carry the same risks as Cost-Reimbursement Contracts.

The type of contract is typically a result of negotiation and strategy. The goal for the type of is to mitigate the contractor’s risk while providing incentive for timely completion and performance.


The Good


There are a number of positives for bidding and winning federal business opportunities:


  • Consistent Monthly Income – Your profit from projects is consistent, and sometimes quite lucrative. Contracts and schedules are typically long-term for services.
  • Increased Company Value/Public Image – Federal contracts or business can be great from a public relations standpoint, especially if it is related to a popular issue being discussed in the news or pop culture.
  • Access to Resources – As a contracted supplier, you may have access to better pricing and a new level of product or materials based on your contracting agency. Some contracting agencies may ask you to provide a service or product with predetermined materials, which can lead to new partnerships outside of the contract.
  • Potential of Future Contracts – If you perform well and within your schedule, your business may find itself on a short list for consideration in future bids or awards.


The Bad


There are some negatives to consider when thinking about federal contracts:


  • Contract Type – Some companies do not have the financial resources to operate under a Cost-Reimbursement contract.
  • Reporting and Accountability – Reporting is paramount. You need to control and track spending thoroughly and be able to report on project costs. Consider a strong accounting or bookkeeping software or service to aid in the process.
  • Post-Award – Most projects and programs have a contract term. If a project or program is renewed, there’s no guarantee that you will win the business back. Your performance and delivery will dictate whether you will be considered again.
  • Negative Performance Hurts – If you perform poorly, it can impact business outside of the contract. If you apply for other contracts or have a network of clients that also deal in a similar space as your contract, you may see an effect on your business level.


How to Find Them


The primary exchange for these contracts can be found at the Federal Business Opportunity site. This site allows for you to search almost every contract seeking bids for federal and some reginal-level agencies.


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