If you’re wondering how to apply for government construction contracts, we’re here to help. Bidding on government contracts is more complicated than bidding on a private contract. Typically, there are more regulations and requirements you need to fulfill. But don’t let a little extra work scare you from the opportunity to grow your business.
In 2020, the U.S. government spent an estimated $351.1 billion on construction projects at the federal, state, and local levels. The government can be a lucrative addition to your client base, no matter what size of construction company you run.
Follow these 7 steps to applying for a government construction contract and you’ll soon be getting an award.
Step 1: Get your ducks in a row
For small construction businesses, it’s a wise move to meet with the Office of Government Contracting at the Small Business Association (SBA). They offer counseling and training that can help you to determine if your company is ready for government contracting, complete all necessary registrations and certifications, and compile your bid. This process will also help you determine which contracts your company should pursue.
You’ll also need to pay attention to prerequisites and required registrations for the specific contract you’re bidding on before submitting since these can take some time to process — and you don’t want to miss your bid date. You will need to have your accounting in order and have a strong grasp of your finances to ensure you can handle the payroll, materials, and cashflow needed to complete a project. If you need more tips on how to grow and strengthen your business before applying, check out our article on 7 ways to grow your construction business.
Step 2: Register with SAM
The next thing you’ll need to do when you’re looking to bid on government construction contracts is register with the System for Award Management (SAM), formerly called Central Contractor Registration. SAM is the federal government contract awards database. Government agencies must post contracts over $25,000 on SAM, so it’s the perfect place to start looking for bid opportunities.
To register for SAM, you’ll need a:
- North American Industry Classification System code, which tells the government what type of business your company is classified under
- Tax identification number
- Registered Data Universal Numbering System code, which is required to work with the federal government
Why register with SAM?
You’ll use SAM’s database to search for federal contracting opportunities. Once you register, you’ll receive a Commercial & Government Entity (CAGE) code. Your company must have a CAGE code before the government can pay you for your work.
Step 3: Find a government construction contract to bid on
Next comes finding a contract that you would like to pursue.
While SAM is a great resource for federal full and open competition contract listings, don’t forget about state and local construction contracts. Look at your state’s website to find where more localized opportunities exist. For example, Maryland runs the eMaryland Marketplace Advantage (eMMA) site that connects contractors to more local opportunities.
Two types of government procurement to know
You’ll likely run into two ways that agencies procure bids on contracts: invitations to bid and requests for proposals.
Invitations to bid
Invitations to bid stops the contracting agency from influencing the process. These bids are posted with sufficient time to submit bids. The bids are then sealed and collected, then made public, and one is chosen based on the best price.
Requests for proposals
Governments typically use requests for proposals. A request is published that outlines all the specifications of a contract. It evaluates the value of each bid based at least partially on factors other than cost. Interested contractors may be required to attend a pre-bid meeting, and can enter into detailed negotiations with the contracting agency before submitting their final offer.
Step 4: Look for specialized construction contracts
Government agencies set aside a certain percentage of contracts for companies that are disadvantaged in some way, like small businesses or minority-owned companies. If you qualify, bidding on these contracts decreases the competition pool and increases your company’s chances of winning the contract.
Search for government programs that target bidders like:
- Small Businesses
Step 5: Go to the pre-bid meeting or site visit
If the contract you decide to pursue requires you to attend a meeting or site visit before submitting a bid, mark it on your calendar and don’t forget. If you miss a mandatory meeting, you can no longer bid on a project.
Even if the meeting isn’t mandatory, consider attending. You can ask questions about the project and get a better idea about its requirements, therefore tailoring your bid to the project better.
Step 6: Purchase the necessary bonds
When you bid on a government contract, you typically must submit bonds that act as insurance in case the project goes awry. The government agency can withdraw funds from these bonds in case the contractor doesn’t perform certain aspects of the job.
The three construction bonds you’ll run into most often are:
- Bid bonds: These bonds guarantee that the information in your bid is correct, and that your company plans to fulfill the obligations outlined in the bid if you are selected. You must submit a bid bond with your bid or it won’t be opened. They usually cover 5% of the bid total.
- Performance bonds: These bonds ensure that the company performs the construction work described in the bid. They generally cover the entire cost of the bid.
- Payment bonds: These bonds certify that the contractor pays all the subcontractors and material costs of the project. They typically cover the entire cost of the bid.
Many contracts require performance bonds and payment bonds for projects over $100,000. If you’re not sure how you’ll be able to afford these bonds, the SBA helps small businesses secure funding.
Step 7: Submit your bid
Double check that you have fulfilled all requirements of the agency before turning in your bid — and then all that’s left for you to do is submit. If you’re selected, you’ll likely receive the award within 60 days.