Government contracting offers construction companies the opportunity to grow their business and participate in impactful projects. However, entering this market requires preparation, including registering with the System for Award Management (SAM.gov), understanding Federal Acquisition Regulation (FAR) clauses, and meeting compliance requirements.
While potentially lucrative, government contracting is complex and requires careful consideration. For businesses willing to navigate the unique requirements of government contracts, the rewards can be significant: stable revenue streams, high-profile projects, and long-term growth potential.
Following is a beginner’s road map for construction companies looking to break into the government contracting market. From registration to compliance, we’ll cover the essentials to help you evaluate this opportunity and set your business up for success.
Why consider government contracts?
Government contracts come with unique benefits that make them an appealing option for many construction companies.
Stable Revenue and Large Projects. Government contracts are often well-funded, providing a consistent revenue source during economic downturns. They also frequently involve large-scale projects such as highways, bridges, and public facilities that can boost a company’s portfolio.
Market Expansion. Working with the government can open doors to new geographic markets and project types, from military installations to municipal projects.
Prestige and Credibility. Winning a government contract demonstrates your firm’s ability to meet stringent standards, enhancing your reputation in the private sector as well.
Diversity in Contract Types. The government offers various contract types — fixed-price, cost-plus, and time-and-materials — allowing contractors to find projects that align with their expertise and risk tolerance.
However, the benefits come with challenges, such as strict compliance requirements, complex bidding processes, and significant upfront preparation. Explore how to get started below.
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Before your company can bid on government contracts, there are critical registration and prequalification steps you must complete.
SAM.gov registration
SAM.gov is the central registration system for businesses seeking federal contracts, serving as a crucial gateway for accessing government opportunities. Registration is mandatory for bidding on federal contracts and is essential for receiving grant funding and other federal assistance.
Steps to register
Obtain a Unique Entity ID (UEI). Visit SAM.gov and use the automated lookup tool to check if your business already has a UEI. If not, you can request one by providing basic company details, such as legal name, physical address, and tax identification number. Verification may take some time as the system ensures all information is accurate and up to date.
Provide Required Business Information. Enter details about your company, including its structure, size, and North American Industry Classification System (NAICS) codes that classify the services or products you offer.
Submit Banking and Contact Information. Provide banking details for electronic payments and designate key points of contact within your organization.
Complete Representations and Certifications. These confirm your business' compliance with federal regulations and its eligibility to compete for government contracts.
By completing these steps, your company will be fully registered on SAM.gov and ready to pursue federal contracting and funding opportunities.
Identify your NAICS codes
NAICS codes classify your company’s industry and capabilities. Use these codes to ensure your company aligns with the project requirements.
Obtain certifications
If applicable, pursue certifications such as Small Business, Woman-Owned Small Business (WOSB), or Service-Disabled Veteran-Owned Small Business (SDVOSB). These certifications may give you access to set-aside contracts that are reserved for certain types of businesses.
Prequalification with bonding
Government contracts often require contractors to provide surety bonds to guarantee performance and payment. Work with a bonding agent to determine your bonding capacity and secure the required bonds for projects you intend to pursue.
By completing these steps, your company will be better prepared and well-equipped to successfully pursue government contract opportunities.
Understanding FAR
The FAR form the backbone of federal contracting — outlining rules, guidelines, and standards that contractors must follow. Understanding FAR clauses is critical to navigate the contracting process.
What is FAR?
FAR is the primary set of rules governing the federal procurement process. It establishes uniform policies and procedures for acquiring goods and services, ensuring transparency, efficiency, and fairness in government contracts. FAR covers everything from solicitation and bidding to performance and compliance. Some FAR clauses commonly relevant to construction contracts include:
FAR 52.236-2: Differing Site Conditions. Addresses unforeseen site conditions that may impact costs or timelines.
FAR 52.232-5: Payments Under Fixed-Price Construction Contracts. Outlines the invoicing and payment process.
FAR 52.222-6: Davis-Bacon Act. Requires contractors to pay prevailing wages to laborers and mechanics.
Stay current on FAR updates
FAR is updated periodically to reflect legislative changes. Contractors must stay informed about updates that may affect their projects.
Understanding FAR requirements ensures you can bid confidently and meet performance expectations, minimizing potential disputes or penalties.
Compliance and reporting basics for construction contractors
Government contracts come with stringent compliance requirements that are critical to maintaining eligibility and reputation. These requirements are constantly in flux due to pending legislative changes and require careful monitoring.
Labor laws and wage compliance
Government contracts often require adherence to federal labor laws, including:
The Davis-Bacon Act. Ensures fair wages for construction workers.
Equal Opportunity Employment (EOE) Regulations. Prohibits discrimination in hiring and employment practices.
Reporting and documentation
Construction contractors must maintain detailed records for audit and reporting purposes. Common reports include:
Certified Payroll Reports. Document wages paid to employees.
Contractor Performance Assessments. Evaluated by government agencies to measure project performance.
Environmental and safety standards
Compliance with environmental laws, such as the Clean Water Act, and safety regulations, such as OSHA standards, is essential. Noncompliance can result in significant penalties and reputational harm.
Subcontractor oversight
Prime contractors are responsible for ensuring their subcontractors comply with all contract terms and regulations. Proper vetting and oversight are critical.
Implementing robust compliance processes will help your company avoid legal and financial risks, ensuring successful project delivery.
Common pitfalls and how to avoid them
Entering the government contracting space comes with challenges that construction companies must navigate carefully. Below are some common pitfalls and strategies to avoid them.
Incomplete or inaccurate bids
Mistakes in bid submissions, such as omitting required documents or miscalculating costs, can disqualify your company.
Solution: Develop a thorough checklist for each bid and review it meticulously before submission.
Underestimating project complexity
While contractors are accustomed to unique requirements, government projects frequently involve more stringent project constraints, such as significant layers of approval and oversight, secured sites, and coordination with multiple stakeholders.
Solution: Research each project’s scope and requirements thoroughly before bidding and engage experienced project managers.
Failure to meet compliance standards
Compliance violations, such as improper payroll practices or missed reporting deadlines, can jeopardize your eligibility for future contracts.
Solution: Invest in training for your team on compliance requirements and use effective software tools to streamline documentation and reporting.
Overextending your resources
Taking on too many government contracts at once can strain your financial and operational capacity.
Solution: Start with smaller projects to build your expertise and scale up as your capacity grows.
By avoiding common mistakes, you can approach government contracting strategically and increase your chances of success.
