If you are looking to expand your business, government contracting bids present a massive opportunity, with billions of dollars up for grabs.
Doing business with the government through contracting can be a game-changer in terms of credibility and prospects. However, the road to success is far from easy, as only less than 5% of U.S. businesses engage with the government.
Table of Contents
A government contract bid is like a job application for a specific project or to provide goods and services for the government.
The bid is a public request from the government—a competitive process public entities use to procure goods and services from private suppliers. To make a bid, you must follow a reasonable price based on the government’s regulations.
While some new companies offer lower prices to get started with government contracting, the government actually looks beyond the price; it prefers those who can guarantee good quality work on time and within budget.
Here are some of the most effective formal methods of competitive bidding.
A request for information is a formal process to get information from potential suppliers. It starts with a table of contents that outlines what the buyer needs. The RFI is typically used early in the buying process to learn about supplier capabilities and gather data for future decisions.
For example, the Department of Defense used an RFI to ask for ideas on sharing spectrum for better 5G deployment.
A request for proposal is a comprehensive document that asks potential suppliers to submit their ideas and prices for a project. It’s used across public and private sectors to find the best solutions at the best prices.
RFPs are often used for construction, where subcontractors, materials, machinery, and project timelines need to be specified. They include a section explaining the scope of work and deadlines.
For example, the State Department used an RFP to find IT services for a $10 billion project, EVOLVE .
A request for quote is the first step in getting a price quote for a project. It’s similar to an RFP but focuses more on getting a comprehensive pricing quote. RFQs are often used for standard products where the quantity is known, while RFPs are for niche projects where details aren’t as clear.
For example, the General Services Administration used an RFQ to get price quotes for janitorial and sanitation supplies to support federal agencies.
Companies new to contracting can easily become confused during the bidding process. Here are detailed steps to help beginners successfully bid on government contracts.
Businesses must complete several foundational requirements to establish credibility and eligibility before starting with government contracting bids.
The first thing to obtain is the Unique Entity ID . It is an identifier that standardizes entities conducting business with the federal government. The UEID is unique to the business and is used for all transactions with the federal government. It does not expire but must be renewed on SAM.gov annually.
The second requirement is to update SAM registration . The business must renew and validate its registration every 12 months. To avoid inconvenience, start the renewal process at least 60 days before your registration expires.
The third is to look for the business’ NAICS codes . The North American Industry Classification System codes analyze industries, follow regulations, and find potential suppliers in the procurement process. Each NAICS code is a six-digit number that describes a business’s main industry based on its products or services. If the business is involved in multiple types of work, use more than one NAICS code.
Contractors should conduct market research to understand the federal government. Knowing the needs of government agencies can help businesses tailor their offerings to meet these needs effectively.
Market research also helps develop competitive strategies and reduce risks. Contractors can study their competition, find gaps in the market, and create unique selling points to stand out in the government contracting bidding process.
There are several websites and tools that contractors can use for market research.
A common mistake for beginner contractors is bidding on every contract opportunity, spreading their resources too thin and resulting in subpar proposals. Only bid on projects that align with your company’s core competencies and meet the necessary resources to execute the projects effectively.
Another mistake is underestimating the competition, leading to unrealistic bids. Contractors should pay attention to their past performance to determine their strengths and expertise, which can impact their chances of winning new contracts.
For example, if a company excels in environmental engineering, its proposal for a government project should focus on environmental restoration and should be backed by its previous successful projects and portfolio.
Lastly, forming strategic subcontracting partnerships with industry-specific firms can enhance a proposal’s attractiveness, especially when dealing with specialized knowledge or capabilities that primary contractors lack.
Preparing a winning proposal requires attention to detail, strategic planning, and a deep understanding of the government’s needs. Some of the key elements your proposal must include are:
Submit your proposal on time and in the required format. Engage in follow-up communications to clarify doubts and demonstrate your commitment to the project.
Before setting prices for a government contract, conduct a thorough cost analysis for all direct and indirect costs associated with the contract, such as labor, materials, overhead, and petty cash.
Perform market research to determine the pricing range for similar contracts. Analyze past contracts awarded by the government agency and prices offered by competitors. The Federal Procurement Data System and online government contracting news sources can provide insights into current market rates and competitive pricing strategies.
Consider value-based pricing , where the price is set based on the perceived or estimated value of the services to the government. It is applicable to highly valued government services, such as advanced cybersecurity measures or innovative, eco-friendly materials for construction projects.
Lastly, leverage economies of scale to reduce per-unit costs. It is achievable by bidding on multiple or larger contracts where the cost of production decreases as the quantity increases.
Here are the four stages of the bidding process, from preparation to contract awarding.
This planning and preparation stage occurs when the federal buyer creates a detailed Project Procurement Management Plan (PPMP) based on the project’s budget. It outlines the procurement needs and schedules, ensuring all activities align with the project’s goals.
For example, the Department of Defense uses a Capability Development Document (CDD) to outline requirements. If the DOD decides to procure a new aircraft system, this stage assesses the current fleet’s capabilities, identifies gaps, and determines how the new system can address these gaps.
After the planning phase, the federal agency releases a document asking for bids or proposals. This document outlines all the project details, including specifications, terms and conditions, and evaluation criteria.
Bidders need to understand this document to ensure their bids meet requirements. They can also ask questions in the Q&A section of the procurement website for clarifications on specific requirements.
During this stage, vendors submit their bids based on the rules in the bid request. They detail proposals on how to fulfill the requirements, how long it takes, how much it costs, and how to ensure overall compliance.
Here are a few important things to consider when preparing a bid:
Most importantly, vendors must follow the submission guidelines carefully:
In the final stage of the bidding process, bids are evaluated based on the criteria in the bid request. The contract is awarded to the bidder who best meets the criteria and provides the best value.
The evaluation focuses on specific criteria:
The government may conduct a pre-award survey to ensure the proposed award winner meets the solicitation requirements. Upon completion of the evaluation, the contract is awarded to the bidder who best meets the evaluation criteria.
