If you’re running a small construction business, getting construction government contracts can be a game changer. Census data shows that federal, state, and local governments spend as much as $350 billion annually on construction.
In particular, the federal government is required to spend 23% of its federal contracting dollars on small businesses. For an individual construction firm, winning a government contract can mean a lucrative source of income.
There are other benefits: government agencies tend to be reliable buyers that pay good prices and often prefer to hire construction contractors they’ve worked with before. However, compared to bidding with a private company, construction government contracts are more regulated, but the process is usually more transparent.
So how do you break in? To bid on government construction contracts and win, you have to learn how to navigate a new system. For the sake of simplicity, this guide focuses on federal government contracts — but many of these principles apply to state and local levels too. Here are some tips on how to succeed.
Be prepared to bid on construction government contracts
The best government contracts are the ones you’re actually qualified for. Before you start, it’s important to have a realistic understanding of your construction business’s capabilities, strengths and weaknesses.
The federal government keeps track of its construction contractors’ performance; if you deliver low-quality or late work, it could seriously jeopardize your future contracts.
Government agencies are bound by many regulations when hiring construction firms, so they work strictly by the book. Make sure that you have the required licenses, permits, certifications and contractor’s insurance.
Build a strong profile on SAM.gov
To bid on federal construction contracts, you must apply for a profile on the System for Award Management (SAM). Once you’ve registered for this centralized online portal at SAM.gov, you can use its search function to find federal construction bidding projects.
When registering for SAM, you’ll have to include a capabilities statement, which is very important. This is like a resume for your construction firm that government purchasers will use when deciding whether to hire you.
When writing your capabilities statement, describe your construction company’s strengths memorably. Tout your previous projects, especially if you’ve had prominent clients. List any relevant construction certifications you have. Mention whether your business qualifies as owned by a designated “special interest groups” like women, disabled veterans, disadvantaged people, or people in historically under-utilized areas. Qualifying as one of these groups can be a significant advantage in bidding.
Your capabilities statement should list your North American Industry Classification System (NAICS) codes, which classify your business based on what it offers. Construction-related NAICS codes start with “23” and cover nearly every kind of construction contractor. Different NAICS codes have different standards for what size business qualifies as a “small business.” Check these using the Small Business Administration’s size standards tool.
Know the types of government construction contracts
Federal government contracts come in many types. These may work a little differently from what you’re used to in the private sector, so it’s a good idea to familiarize yourself with them. You can check out our in-depth guide to government contracts here, but these are two of the most common:
- Fixed-price contract: The agency sets a price in advance, and the scope of work is clear from the beginning.
- Cost-reimbursement contract: The agency pays the construction costs as they are incurred. The scope of work may be more open-ended.
You should also understand the difference between different project delivery methods, which refer to how a project is organized. Examples include:
- Design-bid-build: The government agency selects the architect or engineer to design a project, which contractors then bid on.
- Design-build: The agency solicits proposals from contractors to design and build the project.
- Indefinite delivery, indefinite quantity (IDIQ): The agency signs a contract with a contractor without knowing the exact timing and amount of services it needs.
With a strong enough track record, you could become a GSA schedule contractor, also known as a “multiple award schedule” contractor, a type of long-term IDIQ arrangement with the federal government. Once designated a GSA schedule contractor, you can be easily hired by any agency, including many state and local agencies.
Recognize different types of government solicitations
When the federal government is interested in hiring a construction contractor, it will put out a solicitation. The main types of solicitations are:
- Invitation for bid (IFB): When a government purchaser knows what they need and wants to find the best price. An IFB uses a “sealed-bid” process: all parties submit bids without seeing others’ bids. The agency selects the winner, who receives a fixed-price construction contract.
- Request for quotation (RFQ): When the government asks for quotations but is not obligated to make an offer. A government agency may use an RFQ when it’s still trying to figure out its needs and budget for a purchase.
- Request for proposal (RFP): When an agency is looking for a solution to its problem. With an RFP, an agency isn’t always looking for the lowest price but wants a detailed proposal that can address their needs. To win an RFP, you must be prepared to answer the agency’s questions and negotiate.
Submit a strong proposal
If you’re trying to win an IFB, the process is relatively straightforward. Carefully review the solicitation’s requirements and make sure your construction firm can build what’s asked. Research the market so you can offer a fair but competitive price — then submit your bid.
If you’re submitting a proposal for an RFP, then the process can be much more complicated.
Start by reading the government solicitation carefully. The federal government typically writes RFPs using a format called Uniform Form Contract (UCF). Still, each solicitation may have different instructions, requirements, or regulations you must be aware of.
When writing the proposal, follow all the instructions and carefully answer each question in the solicitation. Your proposal should show that you understand what the agency is looking for and demonstrate how you can provide it through a construction scope of work. Keep in mind that the purchasing agency will also want to see evidence of your past construction work.
Double-check your proposal for errors, attach all requested documentation and submit it on time.
If the agency is interested, you may be given a pre-award survey to confirm that you handle the job. At this stage, you will typically have to meet with the agency, answer more questions and provide evidence that you’re ready.
What happens if you don't win a government construction contract bid?
If you don’t get the bid, you may be able to apply for a Certificate of Competency (COC). Under this program, the Small Business Administration may review the purchasing agency’s decision and determine whether your small business can handle the contract.
If the SBA determines that your business has the necessary capability, it can issue a COC, which awards the contract to your business. The purchasing agency can appeal this decision if the contract is over $100,000. If the contract is not worth more than $100,000, the SBA’s decision is final.
When you submit a bid for a federal contract, you will likely need to post a bid bond, which shows that you’ll follow through with the agreement if selected.
Once selected, you may need a performance bond, ensuring you’ll complete the project according to the requirements.
Remember that a bond is different from contractor’s insurance. Bonds make sure that a contractor does a project as promised. By contrast, insurance covers you and others financially in case something unexpected goes wrong on the job. You need both to protect your business and win government contracts.
Learn the difference between bonds and insurance.
Not ready to bid? Try subcontracting
Subcontracting for a construction firm contracting with the federal government (what the government calls a “prime contractor”) is a great way to dip your toes into the contracting world without going all in. You can find subcontracting opportunities through a web portal called SubNet, which provides job listings and resources for federal subcontractors.
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