Many businesses make it their goal to gain government contracts. These contracts can help some businesses stay afloat even through hard economic times. And while it can be a good strategy, there are some important things to consider before you go chasing down these opportunities.
Let’s look at what it takes to navigate the regulations and challenges that come with government contracts, and how to end up on top.
IMAGE: UNSPLASH
How Do You Land A Government Contract Without Losing Your Sanity?
Winning a government contract takes more than just sending a proposal and crossing your fingers. The process is structured, competitive, and, at times, tedious. But for businesses willing to navigate the system, the rewards can be worth the effort.
First, you’ll need to get your business registered in the appropriate databases. The government typically requires companies to be listed in platforms designed for contract bidding. Once that’s done, you’ll need to identify the right opportunities.
Not every government contract will be a good fit, so filtering through the available options to find contracts tailored to your industry is essential.
Next comes the proposal phase. A strong bid isn’t just about price—it’s about demonstrating your company’s reliability, expertise, and ability to meet government standards. This is where clear, well-documented proof of your past performance and financial stability can give you an edge.
Businesses that understand the process and have the right strategy in place are the ones most likely to secure these contracts.
Dealing With Government Regulations
If you think red tape is just a minor inconvenience, think again. The regulatory side of government contracts can be a dealbreaker for companies that don’t stay ahead of the rules. One of the biggest factors to be aware of is compliance with GASB 87.
For businesses that deal with leasing, this accounting standard changes how lease agreements are recorded and reported. Instead of treating leases as off-the-books expenses, GASB 87 requires them to be accounted for as liabilities, similar to loans.
That might not sound like a big deal at first, but for businesses that rely on leasing equipment, office space, or vehicles, this change can impact financial statements in a major way.
Understanding how GASB 87 applies to your business isn’t just about compliance—it’s about financial transparency. When dealing with government contracts, clear financial reporting is non-negotiable. Companies that fail to meet these important requirements risk losing out on future contracts or facing penalties.
Government Contracts Impact Your Bottom Line
A government contract can mean a steady stream of revenue, but it also comes with expectations. Unlike private sector deals, where flexibility can be negotiated, government contracts are often rigid.
Payment schedules, pricing structures, and delivery timelines are locked in, which means there’s little room for adjustments if costs change unexpectedly.
For some businesses, this predictability is a good thing. Knowing exactly when and how much you’ll get paid makes financial planning easier. On the flip side, businesses that underestimate costs can find themselves stuck in a long-term contract with little profit to show for it.
Another factor to consider is the time it takes to actually get paid. While the government is a reliable payer, payments can sometimes take longer than in the private sector. Businesses that aren’t prepared for these delays could run into cash flow issues.
Businesses That Benefit The Most From Government Contracts
Not every business is cut out for government contracting, but for the right industries, it can be a game-changer. Construction firms, technology providers, security companies, and suppliers of essential goods and services often find the most lucrative opportunities.
Small businesses also have a unique advantage. Government agencies frequently set aside contracts specifically for small businesses, minority-owned businesses, and veteran-owned businesses. These opportunities can give smaller companies a chance to compete against larger firms that might otherwise dominate the space.
Service-based businesses can also thrive in government contracting, from IT consulting to janitorial services. The key is understanding the demand and aligning your business with government needs. If your industry aligns with government spending priorities, there’s a good chance you can find contract opportunities that fit.
Risks Of Government Contracting
While the financial stability of government contracts is appealing, there are risks that businesses need to consider before diving in. One of the biggest challenges is compliance. Unlike private contracts, where minor issues might be overlooked, government contracts often come with strict oversight.
A failure to meet requirements can result in fines, contract termination, or even being banned from bidding on future projects.
Another risk is the bureaucracy. Getting a government contract takes time, and the approval process can be slow. For businesses that need quick revenue, the wait can be frustrating.
Then there’s the issue of contract renewals. Just because you get a government contract once, doesn’t mean you always will. Many of these contracts have expiration dates. This means that businesses need to compete to renew them again.
Businesses can sometimes find themselves replaced by a competitor for no apparent reason.
IMAGE: UNSPLASH
If you are interested in even more business-related articles and information from us here at Bit Rebels, then we have a lot to choose from.