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Federal contracts

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The SmallBusiness.com WIKI Guide to Federal contracts is a collaborative project created by users of the SmallBusiness.com WIKI. It provides an overview of basics related to this topic. Find more guides at The SmallBusiness.com WIKI Guides Hub.

The U.S. Government purchases more goods and services than any other entity in the world. To make certain that small businesses can join in that marketplace, several special programs have been created by law.

How the Government Buys

The U.S. government buys many of the products and services it needs from suppliers who meet certain qualifications.[1] It applies standardized procedures by which to purchase goods and services. That is, the government does not purchase items or services in the way an individual household might. Instead, government contracting officials use procedures that conform to the Federal Acquisition Regulation (FAR), the principal set of rules in the Federal Acquisition Regulation System.[2]

The FAR is a standardized set of regulations used by all federal agencies in making purchases. It provides procedures for every step in the procurement process, from the time someone in the government discovers a need for a product or service to the time the purchase is complete.

Simplified Procedures

The Federal Acquisition Streamlining Act (FASA) of 1994 was intended to simplify government buying procedures. It removed many competition restrictions on government purchases of less than $100,000. Instead of full and open competition, agencies can now use simplified procedures for soliciting and evaluating bids up to $100,000. Government agencies, however, are still required to advertise all planned purchases over $25,000 in www.FedBizOpps.gov.

Simplified procedures require fewer administrative details, lower approval levels, and less documentation. New procurement reform legislation requires all federal purchases above $2,500 but under $100,000 to be reserved for small businesses, unless the contracting officer cannot obtain offers from two or more small businesses that are competitive on price, quality and delivery.

Government purchases of up to $2,500 in individual items or multiple items whose aggregate amount does not exceed $2,500 are now classified as "micro-purchases" and can be made without obtaining competitive quotes. However, these purchases are no longer reserved for small businesses. Agencies can make micro-purchases using a Government Purchase Card (typical credit card).

Sealed Bidding

Sealed bidding is how the government contracts competitively when its requirements are clear, accurate and complete. An Invitation For Bid (IFB) is the method used for the sealed bid process. Typically, an IFB includes a description of the product or service to be acquired, instructions for preparing a bid, the conditions for purchase, packaging, delivery, shipping and payment, contract clauses to be included and the deadline for submitting bids. Each sealed bid is opened in public at the purchasing office at the time designated in the invitation. All bids are read aloud and recorded. A contract is then awarded by the agency to the low bidder who is determined to be responsive to the government's needs. Government-wide IFBs are available daily for review at www.FedBizOpps.gov. This electronic government service also provides a direct link to the invitation.

Contracting officials search the SBA's Procurement and Marketing Access Network (PRO-Net) to identify qualified small business contractors. Therefore, any small business that wants to sell to the government should be registered on SBA's PRO-Net.

Contract Negotiation

In certain cases, when the value of a government contract exceeds $100,000 and when it necessitates a highly technical product or service, the government may issue a request for proposal (RFP). In a typical RFP, the government will request a product or service it needs, and solicit proposals from prospective contractors on how they intend to carry out that request, and at what price. Proposals in response to an RFP can be subject to negotiation after they have been submitted.

When the government is merely checking into the possibility of acquiring a product or service, it may issue a request for quotation (RFQ). A response to an RFQ by a prospective contractor is not considered an offer, and consequently, cannot be accepted by the government to form a binding contract. The order is an offer by the government to the supplier to buy certain supplies or services upon specified terms and conditions. A contract is established when a supplier accepts the offer.

Government-wide RFPs and RFQs are available daily for review at www.FedBizOpps.gov.This electronic government service also provides a direct link to the request. In most instances, the government uses oral solicitations for purchases less than $25,000, written solicitations for purchases over $25,000, and purchase cards to obtain micro-purchases less than $2,500.

One of the most significant changes government acquisition reform is the increased importance of "best value." Best value means that, rather than making awards to the lowest bidder as it generally did in the past, the government can now make awards for the item that best satisfies its needs at a slightly higher price. If purchasers are going to make an award based on best value, they must state their intent in the solicitation document and include a description of the evaluation criteria, award factors, and factors other than the price that will be considered in making a contract award.

Contracting officials search the SBA's Procurement and Marketing Access Network (PRO-Net) to identify qualified small business contractors. Therefore, any small business that wants to sell to the government should be registered on SBA's PRO-Net.

Consolidated Purchasing Programs

Most government agencies have common purchasing needs -- carpeting, furniture, office machine maintenance, petroleum products and perishable food supplies are just a few examples. Sometimes the government can realize economies of scale by centralizing the purchasing of certain types of products or services.

Acquisition Vehicles - Procurement reform has ushered numerous new and/or modified acquisition vehicles - multiple award contracts -- such as multi-agency contracts and government-wide acquisition contracts (GWACs). These vehicles encourage long-term vendor agreements with fewer vendors.

The use of these contract vehicles, including expanded use of GSA schedules has increased significantly during the last few years. These popular vehicles allow government buyers to quickly fill requirements by issuing orders against existing contracts or schedules without starting a new procurement action from scratch. Further, agencies can competitively award several or multiple task order contracts to different firms for the same products and services. This practice allows federal buyers to issue orders to any one or combination of several firms with relative ease.

The three largest interagency consolidated purchasing programs are administered by the General Services Administration, the Defense Logistics Agency, and the Department of Veterans Affairs.

The General Services Administration

The General Services Administration (GSA) is the agency of the government that oversees the procurement of goods and services for the government. As part of its responsibilities, the agency is mandated by law to encourage the participation of small, small disadvantaged, women-owned small, HUBZone small, veteran-owned small and service-disabled veteran-owned small businesses in its procurement programs. The responsibility for helping to meet this goal is centered in the Office of Small Business Utilization, its Regional Small Business Utilization Centers (SBUCs) and the Small Business Technical Advisors (SBTAs).

Office of Small Business Utilization

The Office of Small Business Utilization (OSBU) is located in Washington, DC, and has nationwide responsibility for GSA's small business programs. The OSBU also has Regional Small Business Utilization Center (SBUC) representatives in 12 key locations around the country. The mission of the OSBU is to "Engage in activities, which contribute to an environment that provides access to opportunities for small, minority-owned, women-owned, HUBZone, veteran-owned and service-disabled veteran-owned small business owners in GSA contracting nationwide, as mandated by law. According to its website, the OSBU's vision is "Building Small Business Capacity for procedures and opportunities." The OSBU also provides liaison services on small business matters between GSA, Congress, the Small Business Administration and other Federal agencies. You may find information on upcoming procurement events, networking sessions and other offerings through the OSBU’s homepage.[3]

Contact information:

  • Office of Small Business Utilization
1800 F Street, NW., Room 6029
Washington , DC 20405
Phone: (202) 501-1021
Fax: (202) 208-5938
E-mail: [email protected]
Web: www.gsa.gov/smallbusiness

Small Business Technical Advisors

GSA has three major buying activities:

  • Federal Supply Service (FSS)
  • Federal Technology Service (FTS)
  • Public Buildings Service (PBS)

Each major buying activity has a designated Small Business Technical Advisor (SBTA). These experts provide Business Technical Advisor (SBTA). These experts provide counseling and guidance on contracting procedures and procurement opportunities within their Service specialties.

GSA Small Business Procurement Programs

GSA, like all Federal agencies, has established goals for awarding contracts to small, minority-owned, women-owned, HUBZone, veteran-owned and service-disabled veteran- owned small business owners. To meet these goals, GSA uses “small business programs"?. These programs include contact with the small business community, both to inform them about what GSA has to offer, and to help in locating and working with GSA procurement offices. Some small business programs also have “set-asides"? under which certain contracts are reserved for competition among small businesses. Information concerning small business programs may be found in the Federal Acquisition Regulation (FAR), which is available electronically on the Acquisition Network.[4]

The small business programs, which are described in the following sections, are among the ways of increasing the number of Government contracts awarded to small businesses. In addition to the information provided below, you may contact GSA’s Office of Small Business Utilization or the Regional Small Business Utilization Center for additional information.

Procurement Equity Program - Goaling

Consistent with the need to measure performance, the annual goaling program, established by Congress and administered through the Small Business Administration, sets forth targets for Federal small business procurement dollars. Prime contract goals are expressed as the percentage of the agency’s total prime contract dollars. Subcontract goals are expressed as the percentage of total dollars subcontracted by prime contractors.

Small Business Set Aside Program

Under this program, except for acquisitions set aside for very small businesses, each acquisition of supplies services that has an anticipated dollar value of over $2,500, but not over $100,000, is automatically reserved exclusively for small businesses. The acquisition will be set aside for small business unless the contracting officer determines there is not a reasonable expectation of obtaining offers from two or more responsible small businesses who are competitive in terms of market prices, quality and delivery. Also, the contracting officer shall set aside any acquisition over $100,000 for small business participation when there is a reasonable expectation that: (1) offers will be obtained from at least two responsible small businesses offering the products of different small business concerns and (2) awards will be made at fair market prices.

Small Disadvantaged Business Program

To give small disadvantaged businesses (SDBs) an opportunity to participate in Federal procurement activities, eligible SDBs may receive price evaluation adjustments when competing for certain requirements. The U.S. Department of Commerce determines the price adjustments available for use in Federal procurements and identifies the industries that are eligible for price evaluation adjustments. On a case-by- case basis, SBA is authorized to determine whether a firm is owned and controlled by specified individuals claiming to be disadvantaged.

Women-Owned Small Business Program

GSA establishes goals for the award of contracts to women-owned small businesses each year. The OSBU makes a special effort to advise women on contracting opportunities within GSA and to encourage their participation in competitive procurement programs.[5]

Historically Underutilized Business Zone

The HUBZone Empowerment Contracting Program was enacted into law as part of the Small Business Reauthorization Act of 1997. The HUBZone Program provides Federal contracting opportunities for certain qualified small businesses located in eligible historically underutilized business zones. Eligible areas cover more than 7,000 urban census tracts, 900 rural areas and every Federally recognized Native American reservation. This helps promote private-sector investments and employment opportunities in urban and rural communities.

Small businesses eligible to participate in the HUBZone Program may seek certification by submitting an application and other required information to the U.S. Small Business Administration (SBA).[6]

Veteran-Owned Small Business Program

Public Law 106-50, the Veterans Entrepreneurship and Small Business Development Act of 1999, amended the Small Business Act. It added small businesses owned and controlled by service-disabled veterans to the categories of small businesses for which the Federal agencies develop prime and subcontracting goals. Federal agencies also establish goals and collect data regarding subcontracts awarded by prime contractors to veteran-owned small businesses.[7]

Subcontracting Program

Firms with large Government contracts are required by law to establish goals for awarding subcontracts to qualified small, small disadvantaged, women-owned small, HUBZone small, veteran-owned small and service disabled veteran-owned small businesses. Each prime contract of $500,000 or more ($1 million for construction) with subcontracting possibilities must include subcontracting goals and a plan for meeting those goals. This subcontracting requirement, however, does not apply to contractors who qualify as small businesses.

One avenue to assist small businesses seeking subcontracting opportunities with GSA’s contractors is through the Subcontracting Directory. The Subcontracting Directory lists prime contractors alphabetically by GSA region, products and services, addresses, points of contact and telephone numbers. You may access the Subcontracting Directoryfrom the Office of Small Business Utilization (OSBU) homepage at http://www.gsa.gov/smallbusiness by clicking on Subcontracting Directory.

Very Small Business Program

On September 2, 1998, SBA issued a final rule establishing a Very Small Business Set-Aside Pilot Program. Public Law 106-554, enacted in December 2000, extends this pilot program through September 30, 2003. The program is piloted in 10 locations and targets businesses that have historically experienced limited participation in the Federal marketplace. It permits set-asides between $2,500 and $50,000. Under the program, a very small business (VSB) is defined as a small business whose headquarters is located within the geographic area served by a designated SBA district, and together with its affiliates, has not more than 15 employees and has average annual receipts that do not exceed $1 million. The program improves access to Federal contracting opportunities for businesses that are substantially below SBA’s size standards by reserving certain procurements forcompetition among such VSBs. The program permits VSBs to receive loan application support and assistance.

Mandatory Source Programs

The Federal Government must purchase certain products and services from non-profit agencies designated by the Committee for Purchase from People Who Are Blind or Severely Disabled and from the Federal Prison Industries (FPI, also known as UNICOR). For information on how to participate in these programs, contact the Regional Small Business Utilization Center in your area.

Minority Bank Deposit Program

GSA supports the Minority Bank Deposit Program by using minority banks for business transactions.

Competitiveness Demonstration Program

The Small Business Competitiveness Demonstration Program consists of two parts:

  1. Unrestricted competition in four designated industry groups
  2. Enhanced small business participation in 10 agency targeted industry categories.

The goals of the Program are to assess the ability of small businesses in certain designated industry groups to retain a fair proportion of procurement awards in unrestricted competition in those industry groups, and to expand small business participation in 10 targeted industry categories through continued use of set-aside procedures.[8]

SBA Programs

The Small Business Administration (SBA) has many programs to help small businesses, ranging from free publications to technical assistance. Local field offices at major cities throughout the country provide SBA services. To find SBA offices in your state, see the SmallBusiness.com Local Hub.


  1. How the Government Buys, SBA.gov
  2. Acquisition.gov
  3. http://www.gsa.gov/smallbusiness
  4. http://www.arnet.gov/
  5. For additional information on the Women-Owned Small Business Program, visit www.womenbiz.gov. You can contact the U.S. Small Business Administration's (SBA's) Office of Federal Contract Assistance for Women Business Owners (CAWBO) on (202) 205-7797, or call SBA's Office of Women's Business Ownership on (202) 205-6673, or visit their website.
  6. For additional information on the HUBZone Program, to see if your business is located in a HUBZone, and for more on the HUBZone Rules, visit the SBA website, email [email protected] or call (202) 205-8885.
  7. For more information on the veteran-owned small or service-disabled veteran-owned small business programs, contact the SBA's Office of Veterans Business Development at (202) 205-6773, or visit SBA's website at www.sba.gov/vets.
  8. For more information, see http://www.arnet.gov/GSAM/gsam.html.

See also

  • Federal grants
  • Directories link policy - Please add helpful, accurate links to this directory. If this is your first time adding a link to a SmallBusiness.com directory, please read this. (Includes how-to instructions.)

External links

  • FedBizOpps.gov is the single government point-of-entry for U.S. federal government procurement opportunities over $25,000. Government buyers are able to publicize their business opportunities by posting information directly to FedBizOpps. Through one portal, small business owners can search, monitor and retrieve opportunities solicited by the entire federal contracting community.
  • Selling the Government: the Basics (SBA)
  • Federal Acquisition Regulation (FAR))

Sb cc 50x20.jpg Creative Commons attribution: This entry includes content from the following Business.gov source: "Doing Business With GSA" (PDF)