What You Need to Know About Federal Procurement

What is procurement?

Procurement is the buying of goods and services as well as the process to buy those goods and services. Most small business owners are involved in procurement, even if they don't realize it. For example, a mechanic works hard to procure the best auto parts at the lowest price.

What does the government buy? 

Everything! Both state and federal government agencies purchases services for everything from IT to consulting, cleaning, and party planning services. The government buys everything too, from pens and paper to flowers and even sardines. Whatever goods or services your small business sells, the government probably needs it.

How big is the market? 

The federal government spends around $500 billion in contracts every year and the law requires that 23% of these dollars be awarded to small businesses. Now imagine how much your state, town or city spends—it’s a huge market. Roughly 30% of U.S. GDP is made of public spending. 

Why should I be interested?  

With such a large market, the government represents a real opportunity for small businesses. The government knows this and at the federal, and often state level, there are programs to help small and small woman-owned, disadvantaged minority-owned and veteran-owned businesses.

Before jumping into the federal procurement space there are some important things to consider:

Pros: 

  • Consistent payment from government clients, usually within 30 days
  • Contracts can last 3-5 years
  • Large market size
  • Transparency in process 
  • Can grow your business significantly
  • Assistance from SBA, PTAC and other resources to get started 
  • Programs to support small businesses especially: women, disadvantaged minorities and veterans, as well as those located in a HUBZone   

Cons: 

  • Lots of paperwork - both to get registered and to stay compliant
  • Must comply with a unique accounting system
  • Minimum profit - contractors often compete on price 
  • Cash-flow can be tight at first. It can take 30 days (more if subcontractor) to get paid.
  • Responding to Requests for Proposals (RFPs) is costly in time and resources, and you might not win.
  • Areas of contracts can change with changing politics.

Still interested? Great! Read: “How Do I Register as a Federal Contractor?

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Procurement