Government Contracting 101: What Small Businesses Should Know Before They Bid

Shavon Smith • September 23, 2025

Government contracts can represent tremendous opportunities for small businesses, steady revenue, prestige, and potential growth. But bidding on government work isn’t like doing business in the private sector. The rules are stricter, expectations are higher, and missteps can cost you the bid or even lead to legal trouble. Before you put pen to paper (or cursor to form), here are key legal considerations every small business needs to address.


Register With the Proper Authorities & Get Your Identifiers in Place

You can’t bid unless you’re properly registered. For federal contracts, that often means registering on SAM.gov (System for Award Management). There you’ll obtain your Unique Entity Identifier (UEI), a 12-character alphanumeric code that uniquely identifies your entity. Without this, your bid may be disqualified up front.

Determine your NAICS codes (North American Industry Classification System). These tell agencies what you do and how big your business can be (in terms of revenue or employees) for it to count as small. These registrations and codes are foundational.


Understand Small Business Certifications & Set Aside Programs

Because of programs run by the SBA (Small Business Administration), many government contracts are set aside exclusively for small businesses. There are also special programs like 8(a) (for socioeconomically disadvantaged businesses), HUBZone (businesses in historically under utilized zones), Women-Owned Small Business (WOSB), and service disabled veteran business status. If you qualify, getting certified under one or more programs can give you a competitive edge.


Know What Types of Contracts You’ll Encounter

Government contracts aren’t completely universal. Some of the common types include:

  • Fixed Price Contracts: You agree to a price ahead of time, and regardless of actual costs, you deliver for that price.
  • Cost Reimbursement Contracts: You can be reimbursed for allowable costs and then typically add a fee or profit. These carry much more risk but also more potential benefit.
  • Indefinite Delivery / Indefinite Quantity (IDIQ), Time & Materials (T&M), and others, each have unique risk/benefit profiles. Understanding which your business is best suited for (or is asked to bid on) matters for pricing, compliance, and accounting.


Comply with Federal Acquisition Rules & Relevant Regulations

The FAR (Federal Acquisition Regulation) system is what governs the federal contract bidding process. It contains rules on everything from how you must represent your business size, how you must treat subcontracting, to labor laws, small business programs, and more. Violating FAR regulations, even unintentionally, can lead to disqualification or worse.

Also, stay current with procurement regulations and labor laws for the jurisdictions where the contract will be performed. If you do work in Washington D.C., Maryland, or Virginia (for example), you’ll need to cross check state and local procurement rules.


Build a Strong Bid or Proposal

Your technical proposal, pricing, deliverables, and compliance with RFP (Request for Proposal) instructions each matter heavily. A winning bid usually includes:

  • A clean, well organized statement of qualifications
  • References or past performance documentation showing you can deliver
  • Realistic pricing that accounts for compliance costs, labor, insurance, and required overheads
  • Proof that you meet all required certifications, registrations, and bonding or insurance mandates

Skipping any required document or misunderstanding the RFP instructions is one of the fastest ways to have your bid rejected.

In addition, small businesses should be ready to demonstrate financial responsibility, which often includes providing proof of how they handle payroll and vendor payments. Simple tools like business checks can help keep transactions professional, traceable, and aligned with the government’s preference for clear financial records.


Stay Prepared After You Win

Winning the contract is only half the battle. After the contract is won, there are legal obligations: performance standards, audit rights, submitting invoices properly, following security or data protection mandates, and ensuring any subcontractors follow required rules too. Contract non performance or regulatory non compliance can risk losing the contract or facing penalties.


Government contracting can be a game changer for small businesses, but only if you come in prepared. Register properly, understand which programs and certifications apply to you, know the types of contracts, make sure your proposal is thorough and compliant, and be ready to meet all ongoing obligations if you win. When you approach the process with the right legal groundwork, the 101 stage becomes your solid foundation for success.


Written by the staff writing team at HappyWriters.co

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