Transitioning from Commercial to Government Contracting
The federal government is the world's largest buyer, spending over $700 billion annually on contracts. For commercial companies, this represents a massive market opportunity — but one that operates by fundamentally different rules than the commercial world.
Companies that succeed in government contracting are those that invest time in understanding the regulatory environment, build the right relationships, and approach the market with patience and strategy. This guide covers everything you need to know to make the transition.
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Key Differences: Commercial vs. Government
Sales Process
Commercial: Relationship-driven, flexible negotiations, demos and trials, direct sales cycle.
Government: Regulation-driven, formal solicitation and proposal process, evaluation criteria published in advance, limited communication during evaluation.
Pricing
Commercial: Market-based, value pricing, flexible discounting, bundled offerings.
Government: Cost-based or price competitive, price reasonableness requirements, disclosure of commercial pricing, potential DCAA audit of cost proposals.
Compliance
Commercial: Industry standards, voluntary certifications, customer-driven requirements.
Government: FAR/DFARS mandatory clauses, cybersecurity requirements (CMMC), Section 508 accessibility, Buy American Act, labor law compliance (SCA, DBA), and dozens of other regulatory requirements.
Payment Terms
Commercial: Net 30, credit cards, flexible payment terms, upfront deposits.
Government: Prompt Payment Act (30 days), no advance payment (typically), progress payments available for large contracts, government purchase cards for small purchases.
SAM.gov Registration Steps
Registration in the System for Award Management (SAM.gov) is mandatory before receiving any federal contract or grant. The process is free — never pay a third party to register you in SAM.gov. Here are the key steps.
1. Obtain a Unique Entity ID (UEI)
SAM.gov assigns a Unique Entity ID when you start your registration. The UEI replaced the DUNS number in April 2022. You'll need your legal business name, physical address, and basic company information.
2. Determine Your NAICS Codes
North American Industry Classification System (NAICS) codes identify your primary business activities. Select codes that match the type of work you want to pursue with the government. You can list multiple codes. Each code has an associated small business size standard (revenue or employee count).
3. Complete Your Entity Registration
Provide detailed company information including your legal structure, ownership, banking information for electronic funds transfer (EFT), points of contact, and socioeconomic status (small business, veteran-owned, etc.). The registration requires IRS TIN verification, which can take several days.
4. Complete Representations and Certifications
Annual representations and certifications are required, covering topics like small business status, organizational size, ownership, and compliance with various laws. Review these carefully — false certifications carry serious legal consequences.
5. Renew Annually
SAM.gov registration expires every 365 days. Set a calendar reminder to renew before expiration. An expired registration means you cannot receive new contracts or contract payments. Renewal is free.
Understanding the FAR
The Federal Acquisition Regulation (FAR) is the primary set of rules governing how the government buys goods and services. It is divided into 53 parts covering everything from competition requirements to contract administration. You do not need to memorize the entire FAR, but you should understand its key concepts.
The most relevant part for commercial companies. FAR Part 12 streamlines the acquisition process for commercial products and services, reduces regulatory burden, and allows the use of commercial terms and conditions. If your product is commercially available, emphasize the commercial item designation.
Governs competitive proposals and best value procurements. Understanding how the government evaluates proposals (technical, management, past performance, cost/price) is essential for winning contracts.
Covers set-aside programs, small business size standards, and subcontracting goals. If you qualify as a small business, this part opens significant opportunities through reduced competition.
DoD contracts also incorporate the Defense Federal Acquisition Regulation Supplement (DFARS), which adds DoD-specific requirements. Other agencies have their own supplements. The key is understanding which clauses apply to your contract and what they require.
Certification Options
SBA 8(a) Business Development Program
A 9-year program for socially and economically disadvantaged small businesses. Provides access to sole-source contracts up to $4.5 million (services) or $7 million (manufacturing), mentor-protege relationships, management and technical assistance, and federal contracting goals. The application process requires demonstrating social disadvantage, economic disadvantage, and good character. Processing takes 90 days.
Service-Disabled Veteran-Owned Small Business (SDVOSB)
For small businesses owned and controlled by service-disabled veterans. The government has a 3% SDVOSB contracting goal. SDVOSB status provides access to set-aside and sole-source contracts. SBA certification is now required (as of January 2023) through the Veteran Small Business Certification (VetCert) program.
Women-Owned Small Business (WOSB)
For small businesses that are at least 51% owned and controlled by women. The WOSB Federal Contracting Program provides access to set-aside contracts in industries where women-owned businesses are underrepresented. Economically Disadvantaged WOSB (EDWOSB) status provides additional opportunities. SBA certification is required.
HUBZone
For small businesses headquartered in Historically Underutilized Business Zones with at least 35% of employees residing in a HUBZone. Provides 10% price evaluation preference in full and open competitions and access to HUBZone set-aside contracts. The government has a 3% HUBZone contracting goal. Use the SBA's HUBZone map to verify your location qualifies.
First Contract Strategies
Your first government contract is the hardest to win because you lack past performance — the Catch-22 of government contracting. Here are proven strategies for breaking in.
Subcontracting
Partner with an established prime contractor as a subcontractor. This builds past performance, teaches you the government contracting process, and generates revenue without the burden of managing the government relationship directly. Large primes need small business subcontractors to meet their subcontracting goals.
GSA Schedule
Getting on a GSA Multiple Award Schedule provides a pre-approved contract vehicle that agencies can order from directly. While getting on Schedule takes 4-8 months, it dramatically simplifies the procurement process for agencies and gives you visibility in GSA Advantage (the government's online marketplace).
Set-Aside Contracts
If you qualify for any small business certification, set-aside contracts significantly reduce competition. An 8(a) sole-source contract, for example, has no competition at all — the agency awards directly to the 8(a) firm. Small business set-asides limit competition to other small businesses in your category.
Micro-Purchases and SAP
Government purchase cards can be used for purchases under $10,000 (micro-purchase threshold) without any formal solicitation. The Simplified Acquisition Procedure (SAP) for purchases up to $250,000 has streamlined requirements. Both are excellent entry points for commercial companies with proven products.
Common Mistakes Commercial Companies Make
Treating Government Like Another Commercial Customer
The government operates under strict rules. You cannot take a contracting officer to lunch, cannot offer free trials to influence a procurement, and cannot negotiate terms outside of the formal solicitation process. The rules are different, and violating them can result in criminal penalties.
Underestimating the Proposal Effort
A government proposal is not a sales presentation. It is a detailed, compliant response to specific evaluation criteria that may require weeks of writing, review, and revision. Budget 2-5% of contract value for proposal costs. Start building proposal capabilities before you need them.
Ignoring Compliance Requirements
Government contracts include dozens of mandatory clauses covering labor laws, cybersecurity, reporting requirements, and more. Non-compliance can result in contract termination, False Claims Act liability, or debarment. Invest in understanding compliance before you bid, not after you win.
Not Planning for Cash Flow
Government contracts typically pay 30 days after invoice — and invoicing may require acceptance of deliverables first. Plan for 60-90 day cash conversion cycles. Ensure you have sufficient working capital before pursuing large contracts.
Bidding on Everything
Pursuing every opportunity is a recipe for poor proposals and wasted resources. Develop a focused capture strategy: identify 3-5 target agencies, understand their needs, build relationships, and bid selectively on opportunities where you have a genuine competitive advantage.
Frequently Asked Questions
How long does it take to get a government contract?
The timeline varies significantly depending on the contract vehicle and approach. Micro-purchases (under $10,000) can happen within days using a government purchase card. Simplified acquisitions ($10,000-$250,000) typically take 30-90 days. Full and open competitive procurements can take 6-18 months from solicitation to award. Getting on a GSA Schedule takes 4-8 months. For most commercial companies entering govcon, plan for 6-12 months before receiving your first contract. Use this time to register in SAM.gov, identify opportunities, build relationships, and prepare your proposal capabilities.
Do I need special certifications to sell to the government?
No certifications are required to sell to the government — any registered business can compete for contracts. However, certain certifications provide significant competitive advantages through set-aside contracts reserved for specific categories of businesses. The SBA 8(a) Business Development Program (for disadvantaged small businesses), Service-Disabled Veteran-Owned Small Business (SDVOSB), Women-Owned Small Business (WOSB), and HUBZone certifications all open access to contracts that are set aside exclusively for those categories. If your company qualifies, these certifications can dramatically reduce competition on your early contracts.
What is the biggest difference between commercial and government sales?
The biggest difference is the procurement process itself. In commercial sales, you build relationships, give demos, negotiate terms, and close deals through direct selling. In government contracting, the process is governed by law — the Federal Acquisition Regulation (FAR) dictates how the government buys, what it can consider, and how proposals are evaluated. You cannot take a contracting officer to lunch. You cannot offer special pricing in exchange for a meeting. The evaluation criteria are published in the solicitation, and the decision must be documented and defensible. Companies that try to sell to the government the same way they sell commercially consistently fail.
Should I start as a subcontractor or go for a prime contract?
Starting as a subcontractor is one of the best strategies for commercial companies entering govcon. Benefits include: learning the government contracting process from an experienced prime, building past performance that you can reference in future proposals, generating revenue without the overhead of managing a government contract directly, and building relationships with agencies and other contractors. Many successful government contractors started by subcontracting 2-3 contracts before pursuing their first prime contract. The key is choosing prime contractors who will give you meaningful work and allow you to build a track record.
Start Finding Government Opportunities
Search across SAM.gov, USAspending, FPDS, and Grants.gov in one place. Discover contracts matched to your capabilities and track opportunities from posting to award.