Government Contracting

The short version

Government contracting means your business sells products or services to federal, state, or local governments. This can be a huge market, but it comes with specific rules and requirements. Understanding these rules helps you find opportunities and avoid problems when working with the government.

The law this is built on

Every point below comes from the authority named next to it. Verify the current text before relying on it.

State business corporation & LLC acts
These laws dictate how your business is legally formed and operated within a state. They cover things like naming your business, appointing officers, and filing annual reports.
Why it matters: To contract with the government, your business must be legally formed and in good standing according to the laws of its state.
15 U.S.C. § 1 (Sherman Act)
This federal law makes it illegal for businesses to make agreements that unreasonably limit competition. This includes things like price-fixing, bid-rigging, or dividing up customers.
Why it matters: When bidding on government contracts, you must compete fairly and independently; coordinating with competitors can lead to severe penalties.

Words you need to know

Bid-Rigging: This is an illegal agreement among competitors where they secretly decide who will win a contract and at what price. It violates federal antitrust laws like the Sherman Act (15 U.S.C. § 1).
Sole Proprietorship: A business structure where one individual owns and operates the business. There is no legal distinction between the owner and the business.
Limited Liability Company (LLC): A business structure that provides owners with limited personal liability, meaning their personal assets are generally protected from business debts or lawsuits. This structure is created under state law.
Corporation: A legal entity separate from its owners (shareholders). Corporations offer limited liability and are formed under state law.
Small Business Set-Aside: Certain government contracts are reserved exclusively for small businesses to help them compete. These are often managed by federal agencies like the Small Business Administration (SBA).
GSA Schedule: A long-term, government-wide contract that allows federal agencies to purchase commonly used goods and services directly from pre-approved vendors at pre-negotiated prices.

Your rights

✓You have the right to compete fairly for government contracts.
✓Your business must be legally recognized by state law to participate in contracts.
✓You have the right to challenge certain contract award decisions, though specific processes apply.
✓You are generally entitled to payment for services rendered or goods delivered as specified in a government contract.
✓You have a right to understand the terms and conditions before entering a government contract.

How the process actually works

1
Form your business
Before seeking contracts
Before you can contract with the government, you need to legally establish your business. This involves choosing a structure like a sole proprietorship, LLC, or corporation, and registering it with the appropriate state authorities as required by state law.
2
Get registered
Before submitting proposals
For federal contracts, you'll need to register your business in systems like the System for Award Management (SAM.gov). State and local governments often have their own vendor registration portals.
3
Find opportunities
Ongoing
Search for available contracts. Federal opportunities are often posted on SAM.gov, while state and local governments use their own procurement websites or bid portals.
4
Prepare your bid
During the solicitation period
Carefully review the solicitation documents, understand all requirements, and prepare a thorough proposal or bid. Ensure your pricing is competitive and that you comply with all legal obligations.
5
Submit and compete
By the specified deadline
Submit your bid or proposal by the deadline. Remember that agreements with competitors to fix prices or rig bids are illegal under the Sherman Act (15 U.S.C. § 1).
6
Contract award and performance
After contract award
If your bid is selected, you will be awarded the contract. You then perform the work or deliver the goods as outlined in the contract, adhering to all terms and conditions.

Deadlines that can end your case

State business registration updates
Varies by state (often annually)
Failing to update your registration or file annual reports can lead to your business losing its 'good standing' status, making it unable to legally contract.
Federal System for Award Management (SAM.gov) registration renewal
Annually
If your SAM.gov registration lapses, you will not be able to bid on or receive federal contracts.
Bid/Proposal submission
Stated in each solicitation
Late submissions are almost always rejected, meaning your bid will not be considered.

Costly mistakes

✕Not properly registering your business with the state, which is required by state business corporation and LLC acts, can prevent you from legally entering contracts.
✕Failing to register in federal (like SAM.gov) or state/local government procurement systems, blocking access to opportunities.
✕Not thoroughly reading and understanding the solicitation documents, leading to non-compliant bids.
✕Engaging in illegal activities like bid-rigging or price-fixing, which violate the Sherman Act (15 U.S.C. § 1) and carry severe penalties.
✕Underestimating the complexity or administrative burden of government contracts.
✕Missing crucial deadlines for bid submission or required renewals.

Your checklist

Ensure your business is legally formed and in good standing with your state, as required by state business corporation or LLC acts.
Register your business in federal (e.g., SAM.gov) and relevant state/local procurement systems.
Identify certifications your business might qualify for (e.g., small business, woman-owned, veteran-owned) and complete the application process.
Regularly search for government contract opportunities that match your business's capabilities.
Carefully read and understand all parts of a Request for Proposal (RFP) or Invitation for Bid (IFB).
Prepare a competitive and compliant proposal, avoiding any actions that could be seen as bid-rigging or price-fixing, which are illegal under 15 U.S.C. § 1.
Submit your proposal by the stated deadline.
Maintain accurate records of all communications, submissions, and contract performance.

Common questions

Do I need a special business structure to contract with the government?

No, you don't need a 'special' structure, but your business must be legally established. This means you must operate as a sole proprietorship, LLC, corporation, or partnership, in accordance with state business corporation and LLC acts, and be properly registered.

What is SAM.gov and why do I need it?

SAM.gov is the System for Award Management, the primary database for businesses wishing to do business with the federal government. You need to be registered there to bid on and receive federal contracts. Your registration must be kept current.

Can I work with other companies on a government contract?

Yes, you can often work as a subcontractor or form a joint venture. However, you must ensure that any such collaboration does not involve illegal activities like bid-rigging or price-fixing, which are prohibited by the Sherman Act (15 U.S.C. § 1).

Are there different rules for state versus federal contracts?

Yes, while federal contracts have a largely uniform set of rules, each state, and often individual local governments, will have their own specific procurement laws, regulations, and processes. It's crucial to understand the rules for the specific government entity you're working with.

What if I miss a deadline for submitting a bid?

Missing a bid submission deadline almost always means your proposal will be automatically rejected. Governments strictly adhere to these deadlines, and late submissions are rarely, if ever, accepted.

How this changes by state

Rules for forming and maintaining your business, including naming, registration, and annual filings, vary significantly from state to state. Your state's business corporation and LLC acts dictate these requirements. For example, the fees, forms, and reporting schedule for an LLC might be different in California than in Texas. To find your state's specific rules, you should check the website of your state's Secretary of State or equivalent business registration agency. This is crucial for ensuring your business is legally recognized and in good standing, which is a prerequisite for contracting with any government entity.

When you need a lawyer

You should consider consulting a lawyer if you are forming a complex business entity for contracting purposes, if you face a contract dispute, if you believe you've been unfairly denied a contract, or if you are accused of violating antitrust laws like the Sherman Act (15 U.S.C. § 1) through bid-rigging. A lawyer specializing in government contracts can also help you understand complex solicitations or navigate protest procedures.

Do this today

→Visit your state's Secretary of State website to ensure your business is properly registered and in good standing.
→Register your business on SAM.gov if you plan to pursue federal contracts.
→Identify key procurement websites for your target state and local governments.
→Start researching past contract awards and upcoming opportunities relevant to your business.

This lesson is legal information for educational purposes only, based on State business corporation & LLC acts; 15 U.S.C. § 1 (Sherman Act). It is not legal advice and does not create an attorney-client relationship.