What Is Government Contracting?
Government contracting (or "GovCon") is the process by which federal agencies purchase goods and services from private businesses. Every year, the U.S. government awards more than $700 billionin contracts — making Uncle Sam the largest buyer on Earth.
Unlike selling to other businesses, the federal government follows strict procurement rules governed by the Federal Acquisition Regulation (FAR). These rules are designed to ensure fair competition, transparency, and value for taxpayers.
The good news? Congress mandates that at least 23% of all federal contractsgo to small businesses. In practice, that number is often closer to 26%. That's roughly $180 billion per year reserved specifically for companies like yours.
$700B+
Annual federal contract spend
26%
Awarded to small businesses
300K+
Active contractors on SAM.gov
Agencies buy everything — from janitorial services and IT modernization to construction, cybersecurity, medical supplies, and consulting. If your business provides a product or service, there is almost certainly a federal buyer for it.
Did You Know?
Who Can Bid on Government Contracts?
Almost any business registered in the United States can bid on government contracts. You don't need special connections, political relationships, or a massive company. You do need:
A Legally Formed Business
LLC, Corporation, Sole Proprietorship, Partnership — any legal business entity in the U.S. can participate.
SAM.gov Registration
Every contractor must register on SAM.gov (System for Award Management). It's free, but required before you can bid or receive payment.
A Unique Entity ID (UEI)
Replaces the old DUNS number. You get this automatically when you register on SAM.gov.
NAICS Code(s)
North American Industry Classification System codes identify what your business does. You'll select these during SAM registration.
Compliance & Good Standing
No debarments, no tax liens, no fraud convictions. The government checks.
You do not need prior government experience to get your first contract. Many programs specifically target new entrants. The key is starting with the right size opportunities and building your past performance from there.
Quick Check
Key Terms You Must Know
Government contracting has its own language. Master these terms before you do anything else:
NAICS Code
North American Industry Classification System
A 6-digit code classifying your business type. Used by agencies to categorize opportunities and determine small business size standards. Most businesses have 3-8 relevant codes.
PSC
Product Service Code
A 4-character code describing the specific product or service being purchased. While NAICS describes your business, PSC describes what the government is buying in a specific contract.
Set-Aside
Small Business Set-Aside
Contracts reserved exclusively for specific business categories: small businesses, veteran-owned, women-owned, 8(a), HUBZone. Dramatically reduces competition.
SAM.gov
System for Award Management
The government's official contractor registration database. You must be registered to bid on any federal contract. It's also where opportunities are posted.
CAGE Code
Commercial and Government Entity Code
A 5-character ID assigned to companies doing business with the government. You get this during SAM registration. Required on many contract documents.
UEI
Unique Entity Identifier
A 12-character alphanumeric ID that replaced the DUNS number in April 2022. Generated automatically when you register on SAM.gov.
CO
Contracting Officer
The government official authorized to award contracts. They are the only person who can legally bind the government to a contract. Build relationships with COs.
FAR
Federal Acquisition Regulation
The rulebook governing all federal procurement. Contains the rules agencies must follow when buying goods and services. It's dense, but key sections matter.
Solicitation
Request for Proposal (RFP) / Request for Quote (RFQ)
The formal document inviting businesses to bid on a contract. Contains requirements, evaluation criteria, and submission instructions. This is what you respond to.
Don't Get Overwhelmed
Contract Types Explained
Not all government contracts work the same way. Understanding these four types will help you decide which opportunities to pursue:
Firm Fixed Price (FFP)
The government pays a set price regardless of your actual costs. You bear the risk — if you underestimate costs, you eat the difference. Most common type, especially for well-defined requirements.
Time & Materials (T&M)
You bill hourly labor rates plus materials costs. Good for undefined scope where exact hours can't be predicted. The government sets ceiling prices to cap total spend.
Indefinite Delivery / Indefinite Quantity (IDIQ)
A master contract with a range of quantities over a period. The government issues task orders as needs arise. Guarantees a minimum but can go up to a maximum ceiling value.
Government-Wide Acquisition Contract (GWAC)
Pre-competed contracts that multiple agencies can order from. Examples: SEWP V, Alliant 2, OASIS+. Getting on a GWAC is competitive but gives you a pipeline of task orders.
For first-time contractors, Firm Fixed Price (FFP)contracts are the most straightforward. You know exactly what you'll get paid, and the evaluation criteria are usually clearest. Start there and expand to other types as you gain experience.
Pro Tip
Set-Aside Programs
Set-aside programs are your biggest advantage as a small business. They limit competition to businesses that meet specific criteria, dramatically increasing your probability of winning:
8(a) Business Development
Sole source up to $4.5MFor socially and economically disadvantaged businesses. 9-year program with SBA. Can receive sole-source contracts — no competition required.
Service-Disabled Veteran-Owned (SDVOSB)
Sole source up to $5MFor businesses owned by veterans with service-connected disabilities. One of the strongest set-asides with significant government spending goals.
Veteran-Owned Small Business (VOSB)
Set-aside eligibleFor veteran-owned businesses. While less powerful than SDVOSB, still provides competitive advantages and access to veteran-focused opportunities.
Women-Owned Small Business (WOSB)
Sole source up to $5MFor businesses at least 51% owned by women. Covers specific NAICS codes where women are underrepresented in federal contracting.
Economically Disadvantaged WOSB (EDWOSB)
Sole source up to $5MA subset of WOSB for women whose personal net worth is below $750K. Eligible for additional NAICS codes beyond standard WOSB.
HUBZone
Sole source up to $5MFor businesses in Historically Underutilized Business Zones. You must have your principal office and 35% of employees in a HUBZone.
Small Disadvantaged Business (SDB)
Price evaluation preferenceBusinesses owned by socially and economically disadvantaged individuals. Receives up to a 10% price evaluation preference on certain contracts.
Learn more about each program in our complete guide to set-aside programs.
How to Get Started (6 Steps)
Here's the exact path from "I want to sell to the government" to "I'm ready to bid":
Identify Your NAICS Codes
Determine the 6-digit codes that describe your business. Your NAICS codes define which opportunities you can compete for and your small business size standard. Use our Quick Checker to find yours instantly.
NAICS Codes ExplainedRegister on SAM.gov
Create your SAM.gov profile. This is free but takes 2-4 weeks to process. You'll get your UEI and CAGE code during registration. You must renew annually.
SAM.gov Registration GuideGet Certified
If you qualify for any set-aside programs (8(a), SDVOSB, WOSB, HUBZone), apply for certification through the SBA. Certification opens doors to sole-source contracts worth millions.
Set-Aside Programs GuideWrite Your Capability Statement
Create a one-page document summarizing your competencies, past performance, certifications, and contact info. This is your marketing document for government buyers.
Capability Statement GuideFind Matching Opportunities
Start searching for contracts that match your NAICS codes, certifications, and capabilities. Focus on Sources Sought and Pre-Solicitations first — they're the earliest signals.
Submit Your First Proposal
Respond to a solicitation by following the instructions exactly. Answer every evaluation criterion. Include compliance checklists. Submit early — never at the last minute.
Proposal Writing TipsSkip the Manual Work
Common Mistakes New Contractors Make
We've seen thousands of businesses enter GovCon. These are the mistakes that cost them contracts (and sometimes their business):
Bidding on everything instead of targeting. Focus on 3-5 NAICS codes where you're strongest. Quality bids beat quantity every time.
Not registering on SAM.gov early enough. Registration takes 2-4 weeks. Start now, even if you're not ready to bid yet.
Ignoring Sources Sought and RFIs. These are early signals, 6-18 months before the actual solicitation. Respond to them to get on the agency's radar.
Underbidding to win, then losing money on the contract. Price to win, not price to lose. A contract you can't perform profitably is worse than no contract.
Submitting proposals that don't follow instructions. Read the solicitation three times. Follow every formatting requirement. Missing page limits or font sizes gets you eliminated.
Not having past performance (and not building it). Start with subcontracting, micro-purchases, or state/local contracts to build a track record.
Skipping certifications you qualify for. If you're veteran-owned, women-owned, or in a HUBZone, get certified. It's free competitive advantage.
Giving up after the first loss. The average small business loses 7-10 bids before their first win. Each loss teaches you something. Debrief every time.
One More Thing
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