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Small Businesses Gain More Access to Federal Contracts

Quick look: The U.S. government is amplifying its efforts to reserve more government contracts for federal small businesses. Here’s how the new actions will open growth avenues for small and medium-sized businesses (SMBs). Also, review how professional employer organizations (PEOs) can offer support in navigating the complexities of federal contracts, ensuring these companies are well-prepared to seize these new opportunities.

Building a strong customer base continues to be a priority and challenge for small businesses. This benchmark gets more complicated while pursuing work within the government contracting industry. Fortunately, the United States government is addressing this burden with its latest federal contracting initiative to reserve contracts for SMBs. Keep reading to discover the inspiration behind the Biden-Harris Administration’s new action plan and learn how a PEO’s HR services can help small businesses prepare and take advantage of these government contract opportunities.

Why small businesses are getting additional government contracting support

In January 2024, the government announced its decision to open numerous contracts exclusively to small businesses. To encourage more federal agencies to work with small businesses, the Office of Management and Budget (OMB) is introducing strategies and best practices for federal agencies, such as executing earlier contract planning, considering small businesses during performance periods, and setting specific projects aside to be competed for by small businesses.

Additionally, the Small Business Administration (SBA) is adopting beneficial changes. Its program, Empower to Grow (E2G), will receive technical improvements to facilitate better one-on-one training for small business leaders pursuing government contracts. While offering advice, the SBA hopes to continue setting up networking events that connect small businesses to primary federal agencies. The program has been used by thousands of companies in 2023, even helping its training participants reach an average 45% increase in annual revenue.

The emphasis on these measures are expected to provide several significant benefits.

  1. Enhanced access to federal contracts: By expanding the accessibility of contracts, SMBs unlock more chances to sell their products and services to the federal government, one of the largest buyers in the world.

  2. Economic growth: The U.S. government spends over $700 million annually on contracted projects. Small businesses can increase their revenue by securing federal contracts, supporting their growth margins and sustainability.

  3. Job creation: When more contracts exist, more job positions become available. Taking on these opportunities allow small businesses to elevate their economic development and reduce unemployment within their team.

  4. Diversification: Equity and diversity are growing topics of interest within the government contracting industry. The push for more SMB contracts promotes equality, inclusiveness, and wealth dispersion among minority-owned, women-owned, veteran owned, and other diverse businesses.

  5. Innovation and competition: Raising the participation rate of small businesses in government contracting can drive innovation and competitive pricing, which can benefit federal agencies and the consumer market.

How small businesses can qualify

Before accessing these newfound tools for success, small businesses must still meet minimal requirements to be verified to work in the government contracting sector. Size standards are the leading qualifiers in this instance. The Office of Size Standards, part of the SBA, calculates multiple factors to determine if a company can be labeled a small business. Though every situation differs, the five primary factors considered are:

  • Average firm size
  • Start-up costs and entry barriers
  • Competition ratio within an industry
  • Size distribution of firms
  • Small business participation in federal contracting

Another qualifier SMBs need is registration through the System for Award Management (SAM). The industry uses SAM as an official database to search for contractors when a job is available. This registration also gives the small business a 12-character Unique Entity Identifier (UEI) that certifies an organization’s right to bid on and win government contracts. A North American Industry Classification System (NAICS) also needs to be obtained because it further categorizes businesses based on the products and services they can provide.

Lastly, small businesses must align their operations and practices with industry compliance standards. The federal government is responsible for near-limitless amounts of sensitive data. Since certain projects may require contractors to access or be in the vicinity of that data, this industry is heavily regulated to prevent detrimental risks. Therefore, businesses need to adhere to priority compliance guidelines set by administrations such as the Federal Acquisition Regulation (FAR), the Employee Opportunity Commission, the Occupational Safety and Health Administration (OSHA), and the Department of Defense (DoD).

How PEOs assist small business government contractors

Becoming an industry-qualified small business can be a complicated and time-consuming process. Fortunately, this challenge doesn’t have to be handled alone thanks to PEOs’ services and expertise. Here are multiple ways PEOs help small businesses stay ahead in their industry as they adapt to the new contract advantages.

Upkeep compliance: From cybersecurity to workplace safety, PEOs utilize their team of experts to research and decode regulations affecting government contractors. Their knowledge of federal, state, and local laws helps small businesses implement best practices and maintain compliance across their day-to-day operations.

Enhance the business’s growth trajectory: On top of staying aware of industry standards, national PEOs are knowledgeable of the HR guidelines and expectations mandated in each state. This extra support lets small businesses properly qualify for statewide bids and easily deliver their services to federal agencies across the United States. Doing so enables the business to win more projects, which helps strengthen their business reputation, growth, and profits.

Maximize internal bandwidth: Small businesses have different workload flexibility than enterprises. Bogging down a team member with paperwork can lead to a decline in company productivity and scalability. PEOs manage the intricate administrative duties behind HR tasks like payroll, taxes, recruitment, and benefits enrollment. There’s no need to choose between completing a bid proposal or rewriting HR documents. Instead, government contractors get more free time to pursue the high-level contracts set aside for them.

Manage risks: A government contractor’s risks depend on multiple factors, such as the services they offer and where their business resides. Within a PEO partnership, government contractors can conduct a risk management analysis to learn what potential issues could impact their workspace, employees, and overall functionality as a reliable and trusted business. These analyses will also keep companies on top of sudden industry guideline changes, limiting their chances of discovering unwanted liabilities.

Foster robust learning and development: When a contracting requirement is updated or replaced, small business leaders and employees must act accordingly. PEOs can collaborate with government contractors to create learning and development strategies and programs that empower workers’ operations, skills, and knowledge. These programs increase employee engagement and protect a business’s ability to operate efficiently. For example, career development programs can help boost employee credentials by assisting workers with renewing certifications or receiving special job training.

Gain cost-effective employee benefits: PEOs help small businesses evolve their employee benefit offerings with ease by providing enterprise-level health insurance and other supplementary perks that positively impact employee well-being. Leveraging a PEO’s Fortune 500 benefits helps reduce a project’s wrap rate, or the calculated cost of employee labor before profit; this advantage gives them a competitive edge in the bidding process. Such benefits are also attractive to potential employees, which can help the business onboard top candidates and meet the demands of contracts sooner. 

Leverage certification assistance: In addition to set-aside contracts related to the small business initiative, some contracts are also reserved for diverse companies like veteran-owned or women-owned. PEO experts can help small businesses research these regulated requirements, helping broaden the opportunities and qualifications they can have.

ExtensisHR refines HR management for small businesses

We at ExtensisHR are here to add efficiency to the small business journey. As growing government contracts seek more bidding opportunities, our PEO professionals ensure that the HR functions uplifting employees and enhancing business operations are well-kept and optimized. Government contractors who partner with ExtensisHR can leverage the following solution advantages: 

  • Thorough compliance maintenance to uphold regulation standards
  • Risk management and mitigation strategies to protect from costly liabilities
  • Enterprise-level benefits that support employees’ health and well-being
  • Recruitment and onboarding assistance to attract and retain high-quality employees
  • Performance tracking on HR initiatives within our mobile-first Work Anywhere® platform
  • A dedicated account team, including an HR Manager and implementation manager, to oversee the progression of each service
  • Human-first customer support from our Employee Solution Center (ESC), who boast an 11-minute response time on initial inquiry outreach

With ExtensisHR, small business contractors can navigate their complex industry with an extra layer of professionalism and proficiency.

Contact us today to learn how our PEO solution can evolve HR management for small businesses.

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