How to Get Started with Government Contracts — A Complete Guide for Small Businesses

The US federal government is the world's single largest buyer of goods and services — spending over $700 billion every year on everything from IT systems and cybersecurity to janitorial services and paper clips. Add in state and local government spending, and the number climbs past $2 trillion annually. For a small business, even a tiny slice of that market can be transformative.

Yet most small business owners find government contracting intimidating. The process involves acronyms, registrations, special certifications, and compliance requirements that look nothing like selling to private-sector customers. This guide cuts through the complexity and gives you a clear, step-by-step path to winning your first government contract.

What Are Government Contracts?

A government contract is a legally binding agreement between a government agency and a private entity (a "contractor") to provide goods or services in exchange for payment. Government contracts range from tiny micro-purchases under $10,000 — where a contracting officer can simply use a government credit card — all the way up to multi-billion-dollar IDIQ vehicles spanning multiple years.

Contracts are typically awarded through a competitive bidding process in which the government publishes a formal solicitation document (an RFP, RFQ, or IFB) describing what they need, and businesses submit proposals or quotes. The agency evaluates responses based on criteria specified in the solicitation and awards the contract to the vendor offering the best value.

Who Can Bid on Government Contracts?

Almost any legitimate US business can compete for government contracts. There is no minimum revenue requirement, no minimum years-in-business requirement for most contracts, and no size requirement (except for small business set-asides, which actually favor smaller companies).

The basic requirements to compete for federal contracts are:

• Be a legally organized business entity (LLC, corporation, sole proprietor, etc.)
• Have an Employer Identification Number (EIN) from the IRS
• Register on SAM.gov (more on this below)
• Have a unique entity identifier (UEI), which is assigned during SAM.gov registration
• Be in good standing with federal taxes (no delinquent tax debt)
• Not appear on the System for Award Management exclusions list

For state and local government contracts, requirements vary by jurisdiction, but most follow a similar pattern: business registration, tax compliance, and registration on the state's e-procurement portal.

Step 1: Register on SAM.gov

SAM.gov (the System for Award Management) is the federal government's official supplier database. You cannot receive payment from any federal agency unless you are registered and active in SAM.gov. Registration is free and must be renewed annually.

Here's what the SAM.gov registration process involves:

1. Gather your information: Legal business name and address, EIN, bank account information for direct deposit (routing and account numbers), NAICS codes that describe your business activities, and your UEI (automatically assigned when you start registration).
2. Create a login.gov account: SAM.gov uses login.gov for identity verification. You'll need to verify your identity with a government-issued ID.
3. Complete your SAM.gov entity registration: Fill in all sections including Core Data, Assertions, Representations and Certifications, and Points of Contact. The Reps & Certs section is particularly important — this is where you certify your small business status and any special designations.
4. Allow processing time: Initial registration typically takes 7-10 business days to process. Renewals usually process faster.

Step 2: Understand NAICS Codes

The North American Industry Classification System (NAICS) is a 6-digit code system used by the federal government (and throughout North American commerce) to classify businesses by the type of economic activity they perform. Every government solicitation is tagged with one or more NAICS codes, and every business entity in SAM.gov lists the NAICS codes applicable to their operations.

NAICS codes matter for government contracting in three critical ways:

• Small business size standards: The SBA defines "small business" differently for each NAICS code, either by annual revenue or employee headcount. A company that's small under one NAICS code may be large under another.
• Set-aside eligibility: When an agency reserves a contract for small businesses, the contracting officer uses the NAICS code size standard to determine who qualifies.
• Search and matching: Procurement databases, including BidsNexus, use NAICS codes to match opportunities to your business profile. Choosing the right codes is essential for AI-powered bid matching to work well.

Most businesses should register 3-7 primary NAICS codes in SAM.gov. You can add more as secondary codes. Look up your NAICS codes at census.gov/naics or use the lookup tool during SAM.gov registration.

Step 3: Identify Your Set-Aside Eligibility

Small business set-asides are one of the most powerful advantages available to smaller companies competing against large primes. When a contract is "set aside" for small businesses, large companies are not allowed to bid at all — the entire competition is among qualifying small businesses. Beyond the basic small business set-aside, there are several socioeconomic programs with even more targeted set-asides:

These certifications stack. A woman-owned, service-disabled veteran business located in a HUBZone can claim all four designations simultaneously — making them eligible for the maximum number of set-aside opportunities.

Step 4: Find and Evaluate Opportunities

With your SAM.gov registration complete and certifications in hand, it's time to start finding opportunities. There are several approaches:

Manual search: Go to sam.gov and search by NAICS code, agency, or keyword. This works but requires daily monitoring across multiple portals if you want to capture state and local opportunities alongside federal.

Use an aggregator: Platforms like BidsNexus monitor SAM.gov plus all 50 state portals, local governments, and more — delivering matching opportunities to you rather than requiring you to search manually. See how AI matching works to understand how these tools help prioritize opportunities.

When evaluating a bid opportunity, ask yourself:

• Does the scope of work align with what we actually do (not just what we can theoretically do)?
• Can we realistically meet all the technical requirements?
• Do we have relevant past performance to demonstrate capability?
• Is the contract vehicle and set-aside status one we're eligible for?
• Is the timeline for proposal preparation realistic given our current bandwidth?
• Is the estimated contract value sufficient to justify the bid and delivery costs?

Step 5: Responding to Your First Solicitation

For your first bid, start small. Target micro-purchase or simplified acquisition threshold contracts (under $250,000), which have simpler proposal requirements and faster award timelines. Look for RFQs rather than full RFPs — quotes are generally less complex to prepare than formal proposals.

When you decide to respond, read the entire solicitation carefully — particularly Section L (Instructions to Offerors) and Section M (Evaluation Criteria). The government evaluates proposals on specific criteria: past performance, technical capability, price, and sometimes small business participation. Your response must address every evaluation factor. Missing one can disqualify you immediately.

Tips for Winning Your First Contract

• Start with subcontracting: Teaming with a prime contractor as a subcontractor is an excellent way to build past performance and learn the process before competing for prime contracts yourself.
• Attend industry days: Many agencies host pre-solicitation "industry day" events. Attending and introducing yourself to contracting officers builds relationships and gives you insight into the agency's needs before the formal solicitation drops.
• Write a strong capability statement: A one-to-two page capability statement summarizing your NAICS codes, past performance, differentiators, and certifications is essential for networking with agencies and primes.
• Get on GSA Schedule: GSA Multiple Award Schedules make it easier for agencies to buy from you by pre-vetting your company and establishing pre-negotiated pricing. The application takes several months but opens a significant volume of federal buying.
• Use AI tools wisely: AI-assisted drafting tools can help structure proposals and ensure compliance, but the technical substance must come from your actual capabilities and experience. Never fabricate past performance references.

Government contracting is a long-term business development strategy, not a quick sale. Your first few bids are as much about learning the process, building relationships, and establishing past performance as they are about winning a specific contract. Stay consistent, keep submitting, and the wins will follow.