A full work schedule keeps your business humming along, employees happy, and sustains a positive cash flow. But how do you keep work coming? One way to grow your construction business is to become a government contractor.
According to a 2020 Bloomberg Government report, Federal contract spending in the fiscal year 2019 amounted to $597 billion. Facilities and construction (with a spending of $118 billion) was forecasted as the top market for 2020.
Additionally, Indeed reported the average annual salary for a government construction contractor is $85,230. Examples of hourly rates include painter ($28.87), pipefitter ($29.30), and equipment operator ($25.97).
In this post, you’ll learn how to bid for lucrative construction jobs and find tips to land profit-making jobs. There is also information on construction bonds and whether undocumented business owners can compete for government contracts.
Requirements to become a government contractor
To start bidding for government contracts, obtain this information first.
Apply for an EIN
Without this 9-digit tax identification number, the government won’t identify you as a business to award government contracts to, and you won’t be able to apply for a DUNS number.
Find detailed steps to obtain an employer identification number in the article, How to Get an EIN.
Obtain a DUNS number
You must register your business with Dun & Bradstreet so potential business partners and government agencies can review your profile and make informed decisions about your business.
You can obtain this free number online and usually receive it in one business day.
Register with SAM
The System for Award Management is necessary if you want to bid on federal contracts and get paid. If you want to find profitable jobs, this is the right place, as government agencies must use it to advertise contracts over $25,000.
The registry is valid for one year after you complete the registration. You will need to supply your NAICS industry code to complete the registration. Make sure that the category matches your business specialty. Within three to five business days, you should receive an email confirming your registration.
Use this website to register your business as a government contractor with SAM.
It’s no longer necessary to register with FBO (Federal Business Opportunities) as that website was moved to beta.SAM.gov and is listed as “contract opportunities.”
Make sure your small business is actually small
The Federal government allocates 23% (as a minimum) of its total spending for government contracts specifically to small businesses. As such, government agencies may need to know your business’s size to evaluate your business.
Use the SBA’s size standards tool to see if your business qualifies for government contracting.
Become a General Services Administration vendor
It’s a great idea to register with the GSA to compete for contracts.
As a member, you can investigate Federal opportunities, learn about GSA’s business models, and fulfill requirements to sell to the Federal government.
By registering as an GSA vendor, you can receive training to respond to online contract solicitations successfully.
This isn’t a requirement, but registering with the Census Bureau introduces your business to the public and especially to agencies searching for government contractors for construction projects.
What are construction bonds, and why I might need them?
When bidding for government contracts, most often than not, you will need construction bonds.
Bonds: Essentially, a bond is similar to an insurance policy. Business owners purchase construction bonds to protect all parties involved.
Types of bonds
This type of bond is issued for a percentage of the total bid. If the government contractor doesn’t honor the contract terms, the government can file a claim for losses up to the bid bond amount.
In most contracts, the government requires a bid bond for 20% of the total bid. For example, the bid bond amount for a $100,000 contract is $20,000.
Considered a type of surety bond, it guarantees the government that the contractor will complete the work outlined in the contract.
Surety bond: A surety bond is a contract that ensures that you will follow the established terms.
Per the Miller Act, payment bonds protect payment rights to subcontractors and suppliers providing labor and materials for a construction project.
If there are any payment violations, a subcontractor can submit a payment bond claim by serving a notice on the government contractor.
How to bid for government construction contracts
Once you complete the above requirements, you’re ready to start bidding for government construction contracts.
1. Become familiar with RFP, RFQ, and IFB.
RFP: A Federal agency issues a Request for Proposal when they want more than a price. An RFP includes information on how the government contractor will complete the work and other details. In some cases, the agency may not choose the lowest bid, but the contractor they believe can do the best job.
RFQ: An agency uses a Request for Quote to get competitive bids from several contractors for basic, one-time services.
IFB: An Invitation for Bid is used when the contract details are clearly defined, and the agency sends them to specific contractors.
2. Make sure you review all bidding sites
In addition to the SAM website, the Small Business Administration maintains the DSBS (Dynamic Small Business Search) database, which lists government agencies looking for small business contractors. Also, access information on usa.gov for links to agencies offering Federal contracting opportunities.
On most websites, you can filter information by using keywords, publish date, response date, type of notice, zip code, and other parameters.
3. Understand the request before bidding
Before placing a bid, it’s absolutely essential that you read the contract’s specifications and requirements carefully. If there’s an aspect of the contract your business can’t handle, you shouldn’t bid on that request for services.
4. Bid for the contract
If the contract is a fit with your business, you should start preparing a proposal.
Remember, the government agency that created the bid will carefully review your proposal, so you need to make sure it’s professional, complete, and competitive.
Submission reviews can take anywhere from 30 to 120 days.
Tips to become a successful government contractor
- Before you decide to become a government contractor, weigh the pros and cons. Your business must comply with labor laws such as those relating to safety and work hours and adhere to the government’s procurement process.
- You’ll need sufficient operating capital to complete a government contract that’s in addition to your normal business operating expenses. Don’t be afraid to get commercial construction loans if necessary.
- Don’t limit your contract search to SAM and other websites. Stay up to date on local projects such as the construction of new government buildings.
- Be innovative when bidding on government contracts and offer solutions to problems, so you stand out among competitors. Point out the expertise and skills that someone else may not have when you submit your proposal.
- Be a stickler for details. Answer every question, fill in every blank, and follow directions to the letter. If you use graphics, they should be crisp.
- Check and double-check your bid for errors such as misspelled words or incorrect grammar usages.
- Having a minority business certification or a WOSB (Women-Owned Small Business) certification improves your chances of being eligible for certain contracts. Minority and women-owned certifications aren’t required but definitely recommended, and you might find bids exclusive for certification-holders.
- Talk to an existing government contractor and ask for tips and ideas on how they secured contracts.
- Do your due diligence and research how to calculate pricing. Use our downloadable, free construction quote template, which has editable fields. The form helps you create a professional-looking quote and provides spaces to include material/labor costs, miscellaneous charges, and a description of work, as well as other information.
- Be realistic. Start on small projects first to gain the experience you need with contract bidding and completion. Only after that should you take on larger ones.
What if I have an ITIN?
If you’re an undocumented business owner or simply don’t have citizenship, you don’t qualify for an SSN (which some bids might require).
Can you still apply?
Yes, because even though some bids require an SSN, most of them will ask for an EIN. And if you’re operating your businesses using an ITIN (Individual Taxpayer Identification Number), you can use it to apply for an EIN.
Once you obtain the EIN, you can use the number to apply for a DUNS number and register your business on SAM. After completing those steps, you’re qualified to bid on government contracts.
If you already have an ITIN, the IRS doesn’t share your private information with government agencies unless there’s an ongoing criminal investigation tied to the taxpayer number. You can safely bid on government contracts and grow your business without it affecting your immigration status.
Bid on government contracts to grow your construction business
A business that appears strong and more professional increases its chance to win bids. By registering your business with SAM, obtaining tax ID numbers, investing in construction bonds, and following proven tips, government agencies will see your business as a viable contender.
To find more information on how to grow your construction business, keep reading:
Additionally, Camino Financial can be your financial bridge to grow your construction business as a government contractor. We offer microloans and small business loans to match your business’s specific financial needs and help you meet your goals and challenges. And, we do this consistently by honoring our motto, “No Business Left Behind,” because we’re passionate about making your financial dreams come true.