Do This Before Pursuing Federal Contracts as an Independent Consultant

By MBO Partners | October 3, 2023

Share
mediensturmer-aWf7mjwwJJo-unsplash (1)

Key Points

Federal government contracts can be a great option for growing your business.

Before you decide to seek federal contracts, make sure you understand what’s involved.

If you decide to qualify for federal contracts, get expert support during this process.

Federal government contracts are a great option for many independent professionals looking to grow their businesses. Federal government contracts are a form of procurement for the government to obtain services for their direct use.  

Winning these contracts requires quite a bit of preparation and a different proposal process from commercial businesses. These contracts have strict terms and conditions and are subject to frequent reporting. However, they can be a great financial opportunity to get on an even playing field with larger businesses. 

There are specific opportunities available for women-owned business, veteran-owned businesses, and small business owners. Contracts tend to be fairly well managed with a well-defined scope and deliverables. The government also tends to be very aware of worker misclassification issues and treats independent contractors accordingly. 

What is Involved in Seeking a Federal Contract? 

Before you decide to seek federal contracts, make sure you understand what’s involved. The number of hours and resources required to pursue and manage a government contract can be quite high. For example, part of the process to apply for federal contracts involves completing Representations and Certifications. These provisions require you to represent and certify to a variety of statements ranging from environmental rules and compliance to entity size. 

Here are some additional points to consider: 

  • Legal assistance: In addition to taking a great deal of time to complete paperwork, there are legal implications. If you’re going through this process on your own, it’s a good strategy to obtain a legal review.
  • Liability Insurance: Liability insurance is a common feature of federal government contracts. Even if you already have liability insurance, you may need to increase or add to your policy so that you can qualify.
  • Invoicing Requirements: There may be special invoicing requirements. Government contracting requires you to keep track of your funding and notify the government when you’ve reached 75% of your funding limit. Failure to do so may carry a penalty. It’s therefore important to read contracts very carefully to ensure that you understand your responsibilities as a contractor.
  • Payment Terms: Payment terms may differ from standard business contracts. It’s common for government contracts to be monthly, net-60, which means you may not receive payment for 90 days. Any mistakes can lead to a delay in payment for several months.

How do You Pursue a Federal Contract? 

If you decide that you want to pursue federal contracting opportunities, you need to make sure that you have what you need to register your business in the System for Award Management (SAM). SAM is an official website of the U.S. government that houses a database of companies interested in government contracts. You’ll need to create an account and complete your profile to become searchable. 

Here are the tasks you need to complete to register in SAM: 

  1. Obtain an Employer Identification Number (EIN): While some small businesses prefer to operate off of the owner’s social security number, the government does require its contractors or vendors to have an employer identification number (EIN). If you need to obtain an EIN, you may do so for free through the IRS.  Think of this number as a social security number for your business.
  2. Establish a Physical Address: The government does not allow you to register a P.O. Box in SAM, so you will need to obtain a physical address. If renting office space is not right for you, there are options to utilize a virtual office space or a registered agent to meet this requirement.
  3. Obtain a D-U-N-S Number: To be eligible to win government contracts, you will first need to obtain a D-U-N-S number—a unique 9-digit number for each physical location of your business. Dun & Bradstreet (D&B) provides this number within one business day at no cost to you.
  4. Determine Your NAICS Code: The North American Industry Classification System (NAICS) classifies businesses to collect data related to the U.S. economy. You’ll need a NAICS code to register your business and to apply for certain federal contracts. For more information about NAICS codes, check out guidance from the Small Business Administration (SBA).
  5. Establish a Contractor and Government Entity (CAGE) Code: A CAGE code is another unique identifier for your business that is designed to be publicly available and has been required to do business with the federal government since 2014. These codes allow the government visibility into company ownership and contracting activity through various payment systems. If you are not yet a government contractor and need to apply for a CAGE code, you may do so through the Defense Logistics Agency’s website.

When you have completed all these tasks, you can complete your SAM registration. From there you can begin looking for opportunities, either on your own or as independent talent engaged by an established government contractor. Getting some expert support if this is your first time applying for a government contract can be very helpful. There are a lot of regulations, rules, and laws that pertain to being a federal contractor, and you want to make sure you are completing everything correctly to put yourself in an optimal position to win a contract. 

CTA-Marketplace

Related Posts
Trending
Tags

Learn more about the MBO Platform

FOR INDEPENDENT
PROFESSIONALS

Start, run, and grow

your independent business with MBO

FOR
ENTERPRISES

Engage, scale, and optimize

your independent workforce