Is Federal Government Contracting Worth It for Small Businesses

Eric Marquette

Welcome back, everyone, to FAR & DFARS: Procurement Power. I'm Eric Marquette, and today, we’re digging into a question a lot of small business owners have asked—sometimes a little nervously—which is: is federal government contracting actually worth all the work? Roz, Paul, good to see you again. Roz, you’ve seen this landscape from the regulatory side for decades, but before we get to the rules and hurdles, let’s talk about the scale here. The U.S. government is the world’s biggest customer—over $500 billion a year, and out of that, there’s a legal goal: 23% is supposed to go to small businesses each year. That’s not a theory, that’s a real policy.

Roz the Rulemaker

Exactly, Eric. It’s not just an aspiration—it’s codified in law, and it means agencies are actively looking to award prime contract dollars to small businesses. The Small Business Administration, or SBA, facilitates that process and even partners with agencies to promote small business participation. There’s a steady stream of set-aside contracts: some are exclusive to small businesses, and, in certain circumstances, agencies even use sole-source awards for a single small business when competition isn’t feasible. But of course, before you can chase those dollars, you have to prove your business is ready for government work.

Paul Netopski

And readiness is critical. There’s a checklist before you even get to bid, and skipping steps can keep you stuck at the starting line. First, assess whether the federal government is actually buying what you offer—resources like USAspending.gov and Agency Procurement Forecasts help you check demand. Next, you need to line up your DUNS or UEI number—there’s been a shift toward UEI—plus your North American Industry Classification System or NAICS code. That NAICS code is a huge deal—it’s how you match your offering to what agencies need. Then you confirm your business fits the right SBA size standards for a given contract, and, critically, you register in SAM.gov. If you’re not in SAM, you’re invisible to the government buyer.

Eric Marquette

Yeah, and—so, let me toss in a little real-world color. There’s a startup I mentored a while ago, a small tech shop just out of school, very scrappy. They did their homework, lined up their NAICS, got their UEI and SAM straight, but the real trick was they used the SBA’s counseling resources a ton. Instead of just spamming bids, they zeroed in on a niche set-aside opportunity—literally their first government bid, and they landed it. I mean, it didn’t make them a unicorn overnight, but that early win gave them credibility they could build on. The process seems intimidating, but the resources are out there if you approach it systematically—not just jumping into the ocean with no life vest, you know?

Roz the Rulemaker

That’s such an important point, Eric. If you try to compete on every contract, you’re setting yourself up for frustration. Focus and leveraging those SBA resources, like mentoring programs or counseling, make the difference between spinning your wheels and actually getting traction in this marketplace.

Paul Netopski

Building off that, once you’re in the running, there are some major upsides. Financially, these contracts can be game changers—they’re often larger than most commercial deals, and the government’s payment history is quite reliable. Unlike some corporate accounts, Uncle Sam’s checks usually clear on time. And the contracts are often long-term: one, two, sometimes three years—with extension options if you perform well. There’s also a level playing field built into the procurement process: public solicitations, bid debriefs, set-aside or mentor-protégé programs, you name it.

Eric Marquette

And it’s not to be underestimated—the stability piece. Even through COVID and all the market headwinds, federal spending on contracts like, what, $682 billion in 2020, actually went up! During a global health crisis! So, for small businesses looking for that “anchor client,” the federal government can literally be a lifeline but—it’s not a “get-rich-quick” situation. There’s real work upfront and, well, sometimes contracts get delayed, or you wait months to hear back, or, heaven help you, deal with a continuing resolution.

Roz the Rulemaker

That brings us to the other side—transparency and regulatory compliance. The system, by design, forces open records. Every awarded contract is public, visible right on USASpending.gov. That track record protects small businesses from being muscled out by established players, but it comes with strict demands. Rules like FAR’s procurement integrity and bid protest rights allow you to contest unfair processes, but compliance is non-negotiable. That’s why agencies disclose evaluation criteria, why you get a debrief if you lose, and why payments must meet statutory timelines. But if you miss a compliance box—whether that’s how you mark data or maintain documentation—you can be knocked out of the running fast.

Paul Netopski

And Roz, the regulatory hurdles cut both ways. Small businesses get protections—you can challenge awards, seek debriefs, or report irregularities. But if you’re not careful—say, miss a mandatory reporting deadline, or fail to update your SAM registration—you’re creating risk for yourself. It’s a learning curve, sometimes a steep one, especially in sectors with layered rules like defense, where you’re looking at both FAR and agency supplements like DFARS.

Eric Marquette

And the prep takes time. You can easily spend a year from first research to actually seeing a return. So, if you’re juggling your day job and think this is a quick side hustle, it’s—not. But the long-term payoff, and the legitimacy you gain for other clients, is huge if you stick it out and do it right.

Roz the Rulemaker

Okay, now for the tough love. Federal contracting isn’t for every business—and some hit more pitfalls than perks. First up: the bureaucracy. Bid packages can run dozens, sometimes hundreds, of pages. Compliance doesn’t stop at the award; you’ll need ongoing support—admin help, document management, updated registrations. And the biggest risk? Banking on one government contract, especially as a prime, can backfire if budgets get cut or contracts are cancelled midstream. Always diversify your book of clients where you can.

Paul Netopski

Absolutely, Roz. And the complexity ramps up based on the type of business you are. Product companies—maybe you’re offering IT hardware, or office supplies—will see different rules than, say, service providers doing consulting or facilities work. Niche suppliers, or disadvantaged business enterprises, can benefit from specific set-aside programs like the SBA 8(a), but the reporting, training, and qualification steps can add to the challenge. I’ll pull from the cybersecurity angle, because I see this a lot with DFARS contracts for defense. Those firms have not just FAR compliance, but extra hoops—cybersecurity requirements, regular reporting, NIST SP 800-171 self-assessments, and supply chain risk vetting. I’ve worked with teams who spent months preparing for a bid, only to realize their sector wasn’t a high priority for the agency at that time. So it’s critical to vet demand and regulatory fit before committing heavy resources. Honestly, talking to agency small business specialists or SBA counselors can save you months of wasted effort.

Eric Marquette

That’s the real world—sometimes you pivot based on what you learn. And if you’re a small, maybe disadvantaged or women-owned outfit, those set-aside niches are valuable, but like Roz said, you don’t want all your eggs in one basket. Consider starting as a subcontractor—get a foot in, build performance history, and learn the ropes before you try going head-to-head for a prime. The hurdles are real: paperwork, compliance, slow paybacks. But if you take a targeted approach and use the help the government actually provides—via APEX Accelerators, SBA mentors, whoever—you raise your odds dramatically.

Roz the Rulemaker

If you align your offerings, stay compliant, and commit to ongoing engagement—not just one-and-done bids—you really can grow a sustainable business here. But if you’re just chasing a windfall without preparing, the pitfalls will trip you up.

Paul Netopski

Yeah, and stay proactive: track changes in regulations, review agency forecasts, and always, always make sure your cyber and compliance posture is current—especially for defense and IT contracts. It’s a marathon, not a sprint.

Eric Marquette

Well said, Paul. That’s all we’ve got time for today—tons more to cover in future episodes, but hopefully this gives our listeners a clear-eyed sense of the landscape. Roz, Paul, thanks for sharing your expertise and, well, not sugar-coating things. Always a pleasure!

Roz the Rulemaker

Thanks, Eric. Always enjoy cutting through the red tape together. Until next time!

Paul Netopski

See you both and thanks, everyone, for tuning in. Stay vigilant—and keep your registrations up to date!