Pros and Cons of Becoming a Government Contractor

becoming a government contractorEach year, the government spends roughly $500 billion on federal contracts. They buy everything, from construction projects to buying musical instruments.

If you or your business can meet the government’s demands, you could end up with a healthy revenue stream. But good things aren’t given out for free. As with any venture, becoming a government contractor has its pros and cons.

We’ll lay both out in this article, giving you a clear picture of government contracting. Let’s get started.

The Pros

Pay

Let’s start with what’s on everyone’s mind: the money. As of 2016, the average federal employee salary was around $88,000. Contractor salaries were around $97,000.

Those rates vary based on agency and your role. On average though, an individual federal contractor makes more than his government counterpart. However, federal employees get better benefits.

For small businesses, government contracting provides a steady income stream. It may take some time to receive the first payment, as much as 30 or 60 days, but the next ones will come in like clockwork. It’s money in the bank.

Flexibility

Because you’re outside the system, government contracting gives you more wiggle room. Businesses can try their hand at government work. If they don’t like it, they can opt not to renew once the contract has finished.

Individuals also have greater agility. They can change jobs as needed instead of jumping through hoops.

Easy to Get

Easy isn’t the first word most would associate with the federal government. Indeed, getting the contract requires lengthy amounts of paperwork. But it’s easier than applying for a government job. Contracting officials also select who gets the contract quickly.

Small businesses can even take advantage of set-asides, contracts reserved exclusively for them. You’d have to register with the SBA. Your company would also have to qualify under at least one of these categories:

  • Women-Owned Small Business
  • Service-Disabled-Veteran Owned
  • Historically Under-Utilized Business Zone (HUB)
  • 8(a) Business Development

Set-asides let small businesses compete against themselves rather than the big guys. It also helps disadvantaged companies develop and grow.

The Cons

Steep Competition

Most businesses gain a steady profit from government work. Individuals can take advantage of an excellent salary. As a result of these perks, and the high demand, everyone wants a piece of the market.

Small businesses have to compete with major companies, often losing out due to lack of resources. Finding your niche may help you land contracts suited to your specialty.

Strict Regulations

The government isn’t the government without rules. All federal contractors must follow the Code of Federal Regulations and various labor standards. There are also specific limits on subcontracting.

Just to bid on a contract requires registry with the SBA and the System for Awards Management. Plus, you have to have a DUNS code and a NAICS code.

After that, you also have to write up an RFQ (potentially two) and an RFP. It’s a lot of acronyms and rules you have to learn alongside running your business.

Is Becoming a Government Contractor Right for You?

That answer depends on your business. Becoming a government contractor has its risks and rewards. Many companies find stability and gain opportunities to grow. However, competition is fierce and the paperwork lengthy.

Research the ins and outs of the contracting market. Evaluate your business and see what you can offer the government. After that, make a decision.

Should you decide to be a government contractor or you need a place to start researching, check out our website. If you want to use our services, check out our pricing page or get in touch today.

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