• Ric Armstrong

The Pros & Cons of Government Contracting for Small Businesses


The federal government is launching various initiatives to stimulate the economy. More and more government business contracts will be awarded. In addition to the trillion dollar bipartisan infrastructure law (Infrastructure Investment and Jobs Act), there is a foreseen $203 billion government spending for business contracts.

THE PROS

Lucrative profits

Despite the pandemic, federal government spending consistently rose. During the peak of COVID-19 in 2020, the U.S. government awarded a record-breaking $682 billion for contracting business contracts. Although this figure dipped in 2021 due to a decrease in research spending for COVID-19, their 2021 spending still ranked second highest since 2017.

Stable income stream

Business contracts awarded by the government always last for quite a while compared to other clients. A single project with them can last for 1-3 years. And they can also choose to extend the contract with you if there are still things that need to be done for the contract.

Exclusive opportunities

Set Asides or set-aside contracts, are federal contracts that limit the competition for small businesses. If established companies and smaller general contractors face off in a competitive bid, the playing field wouldn’t be even for them. To qualify for set-asides, your business must register with SBA’s contracting assistance programs. Whether you are a general contracting business owner or not, as long as you satisfy the requirements, you can bid for set-asides.


If you are managing a small construction business, you can try to see the other assistance programs available for you. Depending on your industry, you can access loans, grants, investment capital, and assistance programs.


THE CONS

Steep Learning Curve

The tangled web of paperwork you must navigate to register your business as a federal contractor is intimidating. On top of managing your company’s daily operations, you must ensure that your business complies with federal and state regulations and arrange all documentation required for your registration.

Slow profit growth

With great profits come great requirements.


If you are looking for an overnight miracle, this business path is not for you. Before you can start reaping the benefits of being a general contractor, you have to go through all the hoops–ensuring business compliance, registering in the right places, bidding for business contracts, and a whole lot more.


If you want to make it big in the federal contracting business, you need to put in the work. You must have the guts and the smarts to rise above this highly-competitive industry.

Lengthy and costly paperwork processes

The amount of paperwork you need to accomplish is a roadblock general contractors must overcome.


First, you must fulfill the requirements to ensure your company complies with federal, state, and local business regulations. As of writing, there are roughly 90,000 laws and regulations in effect. This confuses small business owners and saddles them with unnecessary cost burdens.


Second, the federal government is strict in selecting general contractors to work with. They implement a rigorous registration process and licensing requirements to ensure that only those who are committed and capable can join the industry.