Home Top 10 challenges faced by businesses in government contracting

Top 10 challenges faced by businesses in government contracting

Government contracting challenges

In today’s day and age identifying large buyers can be a challenge for businesses. In such a scenario becoming a government contractor is a lucrative revenue stream. The U.S. federal government is the world’s largest buyer of products and services and the overall government contracting marketplace is worth between $350 to $500 billion.Ideally, the government could be your perfect client but becoming a government contractor is a lengthy and daunting process. Here are the top 10 challenges a business might face, while working with the government:

  1. Barriers to Entry
Barriers to entry in government contracting

Once you’ve decided to take the big step to get into government contracting there are still quite a few steps before you can actually qualify to do so. To become an applicable vendor for a government contractor you need to register with the System for Award Management (SAM).

To register with SAM you need to obtain a Dun & Bradstreet DUNS number for each physical business location; most businesses also require a North American Classification System (NAICS) code. This tells the government your industry and economic sector. Additionally, to classify as a small business you need to qualify according to the Small Business Administration’s size standards. That’s a lot of hoops to jump through.

  1. Navigating a closed and complicated marketplace

While there have been several calls for more competition in government contracting the results seem far from encouraging. As an example in 2017, only 30% of small business contracts were awarded without competition. The rest were sole-source contracts essentially locking away the rest of the market. The system isn’t encouraging for new businesses.

The second challenge is even if you do get a foot in, navigating the procurement channels and platforms can be tricky for first-timers. There are several terms and jargon you must be familiar with including RFQs, RFPs, IFBs, and the uniform contract form. There are also several different ways in which the process works: online through platforms like SAM, FedBizOpps, and offline through Procurement Contracting Officers (PCOs).

  1. Making the right connections
Make right connections for government contracting

One of the major reasons why companies hesitate to enter into the government contracting space is because they feel they lack the right connections. The government at all levels can be a very cautious customer, hesitant to take chances with new vendors. They really want to get to know who it is they’re buying from. Developing strong relationships is still key to cracking the market.

It’s not just buyer-seller relationships that are key, sometimes teaming up with your competition or a bigger player can be the best way to ensure you get a slice of the contract. Whether you’re a prime or a subcontractor, sometimes the best way forward is finding the right partner. It’s here where the right market intelligence plays a crucial role. Using intelligence platforms like BidFortune can give you insights about who you’re up against, the big players in the same NAICS code, in short, your new potential teammates.

  1. There are no guarantees

Bid protests are a double-edged sword. Even after winning a contract a rival bidder has the option of filing a protest against your win. When this does happen it leads to lengthy delays in the execution of the contract while the protest is being resolved and adds costs to defend your win.

It is well within the rights of the government as a sovereign entity to unilaterally revise the contract which means changes in quantity, packaging and even shipping. It could also cancel the contract with a mere reimbursement for costs.

  1. Wait for it

In 2017 a major government agency announced they cut the time for major IT acquisitions from 4 to 2 years. Despite the massive time reduction, imagine waiting for 2 years for an order that might not even come through.

There are genuine time and money costs to pursuing government contracts that have lengthy sales cycles. Businesses need to hire specialised personnel that have expertise in capturing and managing proposals and given DC labor market costs, it can be an extravagant affair.

  1. Managing Pipelines

Given the scope of possible opportunities presented, managing the platform can be challenging. Gauging which contracts to bid for? The ones with the most odds of converting? These questions require quality market intelligence and analysis.

Tracking multiple bids can also become very complicated very quickly. Too many bids mean you have less time and attention to pay to each of them and their timelines. Fortunately, there are intelligence companies like BidFortune that can help. They offer search features for bids and calendars that can help you keep track of your pipelines. They also provide market data and competitor evaluations to help businesses succeed in government contracting.

  1. Compliance Issues
Compliance issues in government contracting

The government is a multi-headed beast with agencies that execute specific roles, and have their own specific rules when it comes to contracting. Rules that can have state and local requirements and are confusing due to jargon and convoluted language. Among others, to work with the government you need to adhere to:

  • Defense Contract Audit Agency regulations (DCAA)
  • The Federal Acquisition Regulation (FAR)
    • The Defense Federal Acquisition Regulation Supplement (DFARS)
    • The General Services Acquisition Regulation Supplement (GSARS)
    • The National Aeronautics Space Administration FAR Supplement (NASFARS)
  • The Cybersecurity Maturity Model Certification Program (CMMC)
  • The Service Contract Act (SCA)
  1. Absolute Accountability

If you are a vendor to the government your vendor’s non-compliance could cost you. The government does not distinguish between you and your vendor; their noncompliance is equivalent to yours. Third-party risk management is slowly becoming one of the most expensive challenges for contractors as due diligence is a constant process.

  1. Contract discrimination in small businesses
Challenges in government contracting

If you are a minority or a woman owned small business the odds are stacked against you. Both at the state and the federal level minority owned small businesses are given a disproportionately smaller percentage of funds set aside for small businesses. There is discrimination not only in awarding contracts but also in access to financing options.

The Department of Defense in 2019, spent only $27 billion, or about 8.6%, on businesses from disadvantaged communities, compared to about $75 billion, or 24%, on small businesses in general.

  1. Covid-19 Impact
Covid Impact on government contracting

While early reports suggest that government contractors will be facing delayed payments, loss of payments seems unlikely. The lockdown has led to a shutdown of several government functions and money redirected towards critical functions. The SBA has stopped processing new loan applications which has left several small business contractors in the lurch.