What Is Government Contracting? A Plain-Language Introduction

The federal government is the largest buyer in the world. In fiscal year 2024, it spent over $755 billion on contracts with private businesses. That is not a typo. Seven hundred and fifty-five billion dollars, paid to companies that sell everything from information technology (IT) services to office supplies to construction work.

And here is the part most people don’t know: the government is required by law to give small businesses a fair shot at those contracts. In fact, the government’s goal is to award at least 23% of all federal contract dollars to small businesses. In FY2024, agencies exceeded that goal, awarding 28.8% of eligible prime contracts to small businesses. That came out to $183.5 billion, a record.

Government contracting is simply the process of selling your products or services to the government. If you run a legal business and can deliver what an agency needs, you can compete for these contracts. No special degree required. No connections needed. No minimum company size.

This guide is Step 1 of our 5-STEP START HERE PATH. By the end, you will know exactly what government contracting is, whether it is right for your business, and what to do next.

Government Contracting in One Sentence

Government contracting is the process by which federal, state, and local government agencies buy products and services from private businesses. The government does not make its own office furniture, build its own websites, or fix its own buildings. It hires businesses to do that work, and it pays them through contracts.

Think of it this way: the government is a customer. A very large, very reliable customer that pays its bills and buys the same things year after year.

The difference between selling to the government and selling to a private company is the process. Government contracts follow specific rules, and those rules are written down in something called the Federal Acquisition Regulation (FAR). The FAR exists to make sure taxpayer money is spent fairly and that small businesses get a real chance to compete.

The rules can feel overwhelming at first. But they are learnable. Thousands of small businesses figure them out every year, and you can too.

The Numbers: How Big Is This Market?

The federal contracting market is enormous. Here are the numbers that matter:

Source: U.S. GAO Government-Wide Contracting FY 2024, SBA.gov

The federal government has a legal goal of awarding at least 23% of contract dollars to small businesses. In recent years, agencies have met or exceeded that goal. The Small Business Administration (SBA) tracks this and publishes a scorecard every year.

And that $755 billion is just the federal level. State and local governments spend an additional $1.5 trillion or more per year on contracts. We cover state and local contracting separately because the rules are different, but the opportunity is just as real.

What Does the Government Buy?

Everything. The government buys everything a business can sell.

Here are the biggest categories by spending:

Source: GSA Federal Schedules NAICS Report FY 2024

If you run an IT company, a janitorial service, a construction firm, a staffing agency, a consulting practice, or a manufacturing operation, there are government contracts in your space. If you sell a product the government uses, there is a contract for that too.

The government even buys simple things like printing services, landscaping, and catering. The key is finding the contracts that match what you already do.

Who Can Do This?

You might be wondering: “Is this actually for someone like me?”

Yes. Here is who can compete for government contracts:

• Any legally formed business registered in the United States. LLCs, S-corps, C-corps, sole proprietorships, partnerships.
• Any size. There is no minimum revenue, no minimum number of employees, and no minimum years in business. Sole proprietors with zero employees win government contracts.
• Any industry. If the government buys what you sell, you can compete.
• Any location. You do not need to be in Washington, D.C. Businesses in every state win federal contracts.

Over 560,000 contract actions per year go to purchases under $15,000 (as of 2025). These small purchases, called micro-purchases, are awarded to roughly 18,000 different companies. Many of these are small, local businesses. That is a real entry point.

There are also special programs designed to help specific groups compete:

• 8(a) Business Development Program: For small businesses owned by socially and economically disadvantaged individuals
• HUBZone: For businesses located in Historically Underutilized Business Zones
• WOSB/EDWOSB: Women-Owned Small Business and Economically Disadvantaged Women-Owned Small Business programs
• SDVOSB: Service-Disabled Veteran-Owned Small Business program

These programs set aside certain contracts exclusively for qualified businesses. We cover each program in detail in our Small Business Programs guides.

The 3 Things Every Contractor Needs

To compete for government contracts, you need three things. That is it. Three things.

1. A SAM.gov Registration (Free)

SAM.gov (System for Award Management) is the government’s official database of businesses that want to do business with the federal government. Registration is free and takes about an hour to complete, though validation takes 7 to 14 business days.

When you register, you get a Unique Entity Identifier (UEI) number and eventually a CAGE code (Commercial and Government Entity code). These are your government contracting ID numbers.

Important: SAM.gov registration is 100% free. If anyone tries to charge you for it, that is a scam. We walk through the entire registration process in Step 2: Register Your Business.

2. A Capability Statement

A capability statement is a one-page document that tells the government what your business does, what makes you different, and how to contact you. Think of it as your business resume for government buyers.

It includes your core competencies, past work experience (even commercial experience counts when you are starting out), your North American Industry Classification System (NAICS) codes, and your certifications if you have any.

You do not need a designer to make one. A clean, professional one-pager works. We show you exactly how to build yours in Step 3: Build Your Capability Statement.

3. The Ability to Find Opportunities

Government contracts are posted publicly on SAM.gov under “Contract Opportunities.” Anyone can search them for free. You can filter by your industry code (NAICS code), by agency, by location, and by contract size.

The trick is knowing how to search effectively and how to read a solicitation (the government’s term for a contract posting). We cover this in Step 4: Find Opportunities.

That is it. Registration, capability statement, and the ability to find opportunities. Everything else, including proposals, pricing, and compliance, builds on this foundation.

5 Myths That Stop People from Starting

Most people who could succeed in government contracting never try because of bad information. Let’s clear that up.

What to Expect (Honestly)

Government contracting is a real opportunity. It is also real work. Here is what to expect as a beginner:

The learning curve is real. There are acronyms, processes, and rules to learn. It takes most people a few weeks of study before they feel comfortable. That is normal. You are learning a new market, and every new market takes time.

Your first contract will take time. Most small businesses take 6 to 12 months from registration to their first contract win. Some move faster (especially with micro-purchases), and some take longer (especially for larger, more competitive contracts). Do not expect overnight results.

You probably won’t win your first bid. The average win rate for experienced government contractors is roughly 30% to 40%. For first-time bidders, it is lower. That is okay. Every bid teaches you something. Every loss can include a debrief where the government tells you exactly why you didn’t win and how to improve.

Free help is everywhere. You do not need to figure this out alone:

• APEX Accelerators (formerly Procurement Technical Assistance Centers): 300+ local offices nationwide that provide free, one-on-one counseling on government contracting. Find yours at aptac-us.org.
• Small Business Development Centers (SBDCs): Nearly 1,000 locations offering free business advising, including government contracting guidance. Find yours at americassbdc.org.
• SBA District Offices: The Small Business Administration has offices in every state with procurement specialists. Visit sba.gov/local-assistance.
• SCORE: Free mentoring from experienced business professionals. Visit score.org.

Call your local APEX Accelerator first. They specialize in government contracting and will walk you through the process for free. That single phone call can save you months of confusion.

Is Government Contracting Right for Your Business?

Government contracting works well for businesses that:

• Sell a product or service the government already buys
• Can deliver consistent quality on time
• Are willing to learn new processes and follow rules
• Have the patience to invest 6 to 12 months before seeing results
• Want a reliable, long-term revenue stream (the government buys the same things year after year)

Government contracting may not be the best fit if:

• You need revenue immediately (the sales cycle is longer than commercial sales)
• You sell something highly customized with no standard specifications
• You are uncomfortable with transparency (government contracts are public record)

If you are on the fence, here is a simple test: can you describe what your business sells in one sentence? If yes, there is probably a government agency that buys it.

Frequently Asked Questions

How much does it cost to start government contracting?

SAM.gov registration is free. A capability statement costs nothing if you make it yourself (we provide a free template). Your main investment is time: learning the process and finding opportunities. APEX Accelerators provide free counseling. The only costs are your normal business expenses.

Can a one-person business get a government contract?

Yes. Sole proprietors and single-member LLCs win government contracts regularly. Micro-purchases (under $15,000 as of 2025) are awarded to thousands of small companies each year. There is no minimum number of employees.

Do I need a security clearance?

Most government contracts do not require a security clearance. Clearances are only needed for contracts involving classified information, which is a small portion of all contracts. If a contract requires a clearance, the solicitation will say so clearly.

How long does it take to win a first contract?

Most small businesses take 6 to 12 months from registration to their first win. Starting with micro-purchases or responding to Sources Sought notices can speed up the timeline. Subcontracting under an experienced prime contractor is another way to get started faster.

Is the government a reliable customer?

Yes. The federal government pays its bills. Payment terms are typically Net 30, and the Prompt Payment Act requires the government to pay interest on late payments. Government contracts also tend to be multi-year, providing stable, predictable revenue.

Your Next Step

You now know what government contracting is, how big the market is, and that your business can compete. That is Step 1 complete.

Step 2 is registering your business on SAM.gov. It is free, it takes about an hour, and it is the single action that makes you visible to every federal buyer in the country.

Continue to Step 2: Register Your Business →

This article is for informational purposes only. It is not legal, financial, or regulatory advice. Consult with qualified professionals for guidance specific to your business.