Government contracts can be incredibly lucrative for commercial construction contractors. From public schools to county courthouses, to airports and interstates, there is a constant stream of well-paying contracts up for grabs with a near-guarantee of payment for your work.
Once a company taps into the $270-billion public realm, subsequent public bids are much easier to secure. But breaking into the public sector is tough. Here are some tips to help strengthen your bid.
Start with the paperwork.
There is a lot of red-tape paperwork involved in bidding on a public sector project. This first step can trip up a lot of contractors. Get in front of the paperwork requirement by creating a list and tackling one item at a time.
The government has set out steps for the documents and certifications needed to apply for public projects. They include:
- • Identify your NAIC S Code, which will put your company into a particular industry classification.
- • Determine the size of your company using the SBA website’s size standard tool. A quarter of all government contracts must be awarded to small businesses, so if you qualify as one, that can give you an edge.
- • Register with Dun & Bradstreet to obtain a DUNS number, which allows you to submit bids for public contracts in your area.
- • Sign up with the Central Contractor Registration (SAM) database, in order to register and track those government jobs.
- • Join FedBizOpps.com, which delivers new relevant RFPs and contracts available for bid.
- • Look for subcontracting opportunities on government projects using the SBA’s SubNet database.
- • Connect with a Procurement Technical Assistance Center (APTAC) where you can sign up for classes, work with a counselor and attend networking events.
- • If your business is women- or minority-owned, be sure to register with the National Association of Women Business Owners or the National Minority Supplier Development Council.
Don’t underestimate the power of the internet.
Make sure you are well-represented online and that your website is current, with language specifically geared to government agencies. This is key, since beyond the information you submit, decision makers will frequently vet a company by looking at their online presence.
If your company has worked on other public projects, be sure those are visible on your site and link to a case study with details that back up your bid if possible. If you don’t have any public projects to showcase, look for projects similar to the one you are bidding on.
Keep an eye on your competition.
Keep your finger on the competition’s pulse by tracking contractors, contracts and future projects online. A little bit of sleuthing can give you a better idea of what your competitors are up to and help you gain an edge in positioning your company. Some of the free government-run websites worth checking out are:
Focus on your reputation and past performance.
Proving that you are an established business and financially stable is essential to securing a bid. Make sure you are cashflow positive and that your financials in order. An outside consultant or a CPA can be invaluable if you are unsure of your standing. Ultimately, the company that offers the most competitive bid with a strong track record of finishing jobs on time and with exceptional quality will secure the bid.
Failing to deliver on your first government bid because you took on a project that was too large or too challenging will make it unlikely for you to secure another public bid in the future. Your first public project should be well within your business’s comfort level.
Triple-check your bid amounts.
It can be tempting to lower your bid amount in order to beat out your competition and win the job. Remember that public entities will scrutinize your bid, and most will weed out bids that are unrealistically low.
Even if you were to get it past them, dropping your multiplier or dropping your profit margin puts the job at risk when a weather delay or unforeseen setback occurs, again preventing you from being able to do the job properly. It’s better to wait until the right bid goes through at a price that is appropriate to the job.
Be sure to have adequate funding in place.
One of the most challenging parts of securing a bid is proving that you have the money to do it right. Lacking the cash and mobilization capital to cover expenses like permitting and bond surety premiums can be a big hit on a company’s bottom line before the project has even started.
Over the last several years, many commercial contractors have scraped by with whatever cash they have until they submit their first pay app. Then, they seek out factoring or cash advance loans, a strategy that often results in difficulty making payroll or paying vendors for a few weeks before they receive the money and can put them in a cycle of debt.
Recently, commercial contractors have found a way out of that cycle by securing funding upfront to cover early expenses or to serve as a cushion before that first payment is received. That strategy also allows contractors to build the cost of the capital into their bid rather than have it come out of their profit margin later on. Companies that secure a loan in advance can bolster their bid by providing the property owner with a pre-approval letter.