Businesses in a variety of industries know that earning a government contract can have a big upside. What they often don’t know, however, is whether their business is capable of managing the details of working within the complex framework of the contract.
Unfortunately, providing the best product or service on the market isn’t necessarily enough under a government contract. There are a number of intricate rules, regulations, paperwork and more that need to be considered and understood.
If you’re not sure if your business is ready for a government contract, here are a few criteria that will help you answer that question, and do any preparation that might be needed.
Are you high risk?
Contracting officers are looking to avoid risk at all costs.
There are several types of businesses that officers will typically shy away from working with:
- Small businesses with a limited performance record
- Businesses that owe taxes to the IRS
- Businesses with any past or current legal issues with the government
- Businesses with no checking account
- Businesses listed in the System for Award Management’s excluded parties list
- Businesses who do not meet the basic requirements for government contracting
If your business has these prerequisites covered, then you’re off to a good start. But there’s still much more to consider.
Preparation and next steps
Once it’s determined that your business is legally and legitimately capable of a government contract, you can begin looking at additional prerequisites that fall outside the scope of government regulation.
- These unstated requirements include:
- Performance history
- Year-over-year success
- Access to line of credit or capital
- Strategic relationships with other professional businesses
- Structure and organization
Relevant and positive past performance are key standards for businesses that want to be chosen for a government contract. Positive cash flow and clear, year-over-year financial success also play an important role. Officials will also look at your access to capital to help determine how ready your business is for government contracting.
And the more strategic partnerships your business has the better, too. Maintaining strong relationships with other complimentary businesses can help you prepare for what to expect with a government contract down the road.
In addition, the orderliness of your business on an administrative level is a great indicator of how ready you are to handle a government contract. If your office is efficient and organized internally, then you’ll have a greater chance of performing effectively as government contractor.
Complying with the Davis-Bacon Act
If your construction company or public works project wins a government contract worth over $2,000, then compliance with the Davis-Bacon Act (DBA) will apply. These contracts carry additional rules and requirements, including certified payroll requirements. Certified payroll jobs must pay employees weekly with clear documentation showing the employee’s correct name, address, job classification, pay rate, hours worked and amount actually paid.
Violating Davis-Bacon requirements can result in serious penalties—but compliance can be complicated for first-time business owners.
The good news is, it all starts with having accurate time and attendance tracking, which our employee time tracking app provides. And when it comes time to report, ExakTime’s certified payroll reporting software makes it easy to fill out Form WH-347.
Understanding what’s required and expected of potential government contractors will help you immensely in determining if your business is ready to take on the challenges of a government contract.
For more business efficiency suggestions, contact us today!