What are the disadvantages of a government contract?

But of course, working for a contract comes with benefits and disadvantages. ... Cons of Government Contracting Extensive learning curve. ... Too broad of specialties. ... Significant initial time investment. ... Shrinking Budgets. ... Lots of rules. More items... •

govconwire.com - The Pros And Cons of Being a Government Contractor

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Small businesses, established corporations, research laboratories – everyone can potentially work and provides products or services to the federal government. But of course, working for a contract comes with benefits and disadvantages. The advantages and disadvantages of working for the government are listed below. So read along to learn what to expect when working for a federal contract and its procuring department.

Pros of Government Contracting

1. Small Business socio economic set-asides to get started

One good thing about government contracting is that it does not discriminate whether a business is a large corporation or small business in the following socioeconomic status:

Historically Underutilized Business Zones

Women-owned small business

Service-disabled veterans

8(a) minority company

The said socioeconomic businesses can get directed awards called set-aside contracts meant for them.

2. Billion-dollar annual budget

The federal government allotted billions of taxpayer dollars for their projects and announced contracts available for bidding. If you can provide the product or services that the federal is requiring, then a tremendous amount of money is waiting for you. Nevertheless, if you left a remarkable job, the federal employees may introduce you to another federal agency seeking businesses to work with, which can turn into a healthy revenue stream.

3. Stability

Most of the time, service contracts are usually a job that needs to be done in a year or three. If you could make it to the government contracting industry, it could help your large or small business have stability.

4. You can rely on your employer

Unlike private businesses, the federal government is unlikely to “run out of business.” The United States government operates with deep pockets annual budget. A significant portion of these taxpayer dollars is used on research and development and Information Technology. That being said, if ever you fail to win a successful bid, you can guarantee to submit a proposal for another contract.

5. Extra support

Government agencies do not want to go out of bids from small businesses. That is why they are readily available to answer any questions from potential government contractors. You can surely fulfill their contract expectations and standards by asking them for all the necessary details and ways to process a proposal effectively. There are also some programs where small businesses are connected with large contractors to gain relevant experience and know-how to win a contract successfully. You may visit the Small Business Administration or the Government contracting assistance program (GCAP) for more information about government assistance.

6. Local promotion

When working for government contracts, your business could increase exposure to the public and serve as a marketing strategy. As a result, your local community is more quick to recognize and purchase your product or services whenever they feel they need one.

7. Payments

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On average, payments are typically released within 30 days. But it may happen within ten days or even earlier for construction types of contracts. If you do not get paid with the terms of the government contracts, the procuring government agency will pay you interest on the amount they owe you.

8. Open entry

Once you have accomplished registering and submitting all the requirements needed, you can start working with the federal government right away.

9. Transparent

Government contracts are made to the public, and whether small businesses or large corporations – everyone who wants to gain government contracts are scrutinized. You can assure that every business is being examined because dishonesty among government contractors and agencies is not tolerated and must meet the intense standard.

10. Government contracts offer security in uncertain times.

We all know that the Covid-19 pandemic affected everyone’s living. Some businesses shut down or filed for bankruptcy. However, despite the uncertainties, the federal government continues to move forward. Government contracting shined through the darkness and helped many businesses fight for survival. Take note that government agencies look for products and services for a year-round capacity. This makes them recession-proof and a great source of reliable income.

11. Long contracts

The government contracting industry has a challenging process of becoming a federal contractor, but they are often employed for a long time once a business is chosen. Businesses working with the United States government are proposed with service contracts that can last anywhere between one to three years minimum. If a contracted business does well during the execution period, the government may offer more jobs or refer to other federal agencies that have projects that need to be completed.

Cons of Government Contracting

1. Extensive learning curve

Owning a business is hard – you need to learn how to run a business, handle payroll, manage employees, etc. Meanwhile, you may also need to learn the industry’s strict regulations, procurement process, tons of paperwork, unending business terms, etc. There is so much to learn in the industry, and you need to be equipped with the latest information about it to never miss the track.

2. Too broad of specialties

Whether it is a women-owned small business, Joint Venture, Historically Underutilized Business Zones, small businesses, or large corporations, everyone wants to maximize their services, products, or specialties. It may be hard for your company to find a niche to excel in or government agencies to work with due to thousands of competitors.

3. Significant initial time investment

Preparation for the bidding process requires a great number of paperwork and registration. These may include specific forms and information about licensing, insurance, business structure, and contract agreement. Not only must you complete the said requirements, but it also might turn incredibly frustrating when your bid was rejected for the federal contracts.

4. Shrinking Budgets

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It is given that federal contracts are funded with deep pockets, but it does not say that the allotted budget couldn’t be cut off. Federal authorities may pull out the procuring funding for a federal agency at no particular time.

5. Lots of rules

The federal government contracting has strict regulations and labor standards written in the Code of Federal Regulations. Businesses have to meet and apply for the qualifications to work with the government. Failure to follow the said rules may lead to disqualifications. Also, as mentioned above, government contracts use the citizen’s money (tax) which is why if the job is not completed or the contractor fails to follow the rules, it will be documented. Once the documentation process is complete, it is then posted and made available for the public to see at any time. Businesses may get a lower reputation or the number of possible clients and customers whenever this happens.

6. Dealing with Government Employees

Many said there seems to be a big misunderstanding between government employees and federal contractors. Government employees look down on contractors and treat them rudely. It is made worse because government contractors risk losing their contracts or being fired when government employees speak out against them.

7. No Rewards

Another frustrating thing that could happen when working for a government contract is the lack of rewards and benefits. Even though a government contractor operates more than a regular employee, they cannot be considered for a benefit. When working under a federal contract, it will be your responsibility to provide benefits to the team members, such as insurance, paid time off, or incentives.

Is it good to work for a government contractor?

Despite the mentioned pros and cons, many small businesses are still pursuing the industry, intending to bring their business to great success. Indeed it takes a lot of effort to successfully win a federal contract. Still, challenges and obstacles will never hinder you if you want to receive your first payment in the contracting industry.

However, if it seems that your business can’t handle all the requirements, expertise, and qualifications needed for the said contractor, you may consider working for a contractor. Is it reasonable to work for a government contractor?

Working for another contractor is called subcontracting. As a subcontractor, you will gain valuable experience while offering your products or services to them. Nonetheless, there are pros and cons to working as a subcontractor. You may read this article to know more about being a subcontractor.

govconwire.com - The Pros And Cons of Being a Government Contractor

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