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What is Defense Contracting? A Guide to Win More DoD Contracts

Contracting for the Department of Defense (DoD) is an incredible opportunity with the government agency annually awarding billions in contract dollars. The proposed 2024 budget for the DoD is $842 billion, up 3.2% from 2023. Additionally, in 2023, the Department of Defense spent $36.7 billion just on contractual services and supplies. All this is to show that there is a great amount of defense contract opportunities available to bid on.

Yes, large corporations like Lockheed Martin get a substantial share of these numbers, however, don’t let that scare you away! The federal government has special programs to ensure small businesses secure at least 23% of contracting funds each federal fiscal year. Keep reading to learn everything you need to know about what defense contracting entails, how to get registered with these programs, and where to look for DoD contracts.

What is defense contracting?

Defense contracting is the process by which private companies enter into contracts to provide goods and services to government agencies involved with defense and national security, such as the Department of Defense. This process adheres to strict regulations and guidelines set by the federal government to ensure fairness and transparency. 

It includes soliciting bids or proposals from contractors, evaluating them based on various criteria such as cost, quality, and capability, and awarding contracts to the selected vendors. These contracting vendors can range from small, highly-specialized companies, to large, global corporations. 

Contractors who work with the Department of Defense can benefit in several ways. Most notably, this type of contracting offers the potential for a more stable revenue, enhanced access to funding and resources, increased reputation, and incredible opportunities for collaboration and technology transfer. Ultimately, this can help contribute to a business’s overall growth and success in their field.

On the other hand, by outsourcing certain tasks to contracting firms, military personnel can focus on core missions and operational priorities, while scalability will ensure the ability to adjust resources as needed without significant investments. Overall, defense contracting with the DoD allows for more innovation without sacrificing cost-effectiveness, better strengthening national defense capabilities. 

What do defense contractors do?

Through contracting, the government can access all types of specialized expertise and resources from the private sector to meet defense and security needs. That’s why defense and military contractors alike play a critical role in supporting the US military around the world, in and out of war zones. Defense contractors encompass a wide range of projects including the development, manufacturing, and maintenance of military equipment and technology, logistical support, training, consulting, and more. 

What are DoD contracts?

Department of Defense contracts are typically awarded through a competitive bidding process. They are also subject to extensive regulations and procedures to guarantee fairness and transparency throughout the process. Typically, defense contractors will then work closely with the DoD or other government agencies to fulfill specific project requirements outlined in the contract.

Types of DoD contracts

Awarded through the United States Department of Defense, the types of DoD contracts can come in a variety of forms. Here are the most common: 

  1. Fixed-price contracts: The contractor agrees to provide goods or services at a set price, which remains constant regardless of the actual costs incurred by the contractor. The risk of going over budget falls on the contractor.
  2. Cost-reimbursement contracts: These contracts reimburse the contractor for their allowable costs incurred during the project, plus a fee representing profit. Most commonly, these are used when the scope of work is uncertain, or the government wants to share with the contractor the risk of surpassing the budget.
  3. Indefinite delivery/indefinite quantity (IDIQ) contracts: This type of DoD contract provides for an indefinite quantity, or repeat purchases, of supplies or services within a predetermined period. 
  4. Time-and-materials, labor-hour, and letter contracts: When the exact scope and duration of the project are difficult to determine upfront, these contracts can be used to set predetermined rates for materials and labor.
  5. Subcontracts: Subcontractors enter into subcontracts with a prime contractor where they can contribute to the prime contractor’s performance of a larger agreement with the DoD. Head here to learn more about becoming a government subcontractor.

How to become a military contractor to bid on DoD contracts

Becoming a federal contractor to bid on Department of Defense contracts requires navigating a structured registration process. Below are the essential steps you need to take to register and position your business for success in securing DoD contracts with one of the largest buyers of goods and services in the world.

1. Research the industry

Step one is to conduct thorough research in the defense industry, such as the specific goods and services that the Department of Defense procures. To better position yourself, learn the trends, key players, and potential opportunities within the defense contracting sector.

2. Register with

Before you begin bidding on contracts, you’ll want to register your business in the System for Award Management (SAM), which is the primary database used by the federal government to manage vendor information, certifications, and registrations. This is mandatory for businesses seeking to do business with the DoD. 

At this step, you will also be assigned a CAGE (Contractor and Government Entity) code, if you don’t already have one. These five-digit ID numbers are assigned and used by the Defense Logistics Agency (DLA) as a standardized method for identifying and tracking suppliers and contractors.

3. Sign up for your UEI number

Next, you must register your businesses with the federal government. You will also need to get a Unique Entity Identifier (UEI) number. These nine-digit identifiers are used to help track the reliability and financial stability of organizations.

Filling out the UEI application process itself is complex, with roughly 50 different forms of varying lengths to complete. To avoid missing out on any of the advantages businesses are due, owners must complete each section accurately.

When registering your business with the federal government, you can choose to self-register, or you can work with professionals who manage the registration process on your behalf. If you’d rather have the overwhelming and tedious registration process handled by a pro, contact us here to learn how we will support you.

4. Obtain your NAICS code

Finally, you’ll want to find the appropriate NAICS (North American Industry Classification System) code(s) that correspond to the goods or services your business provides. Getting your NAICS code is an easier step since it is a self-service system. Just head to the Census website and make sure to select which codes best describe your organization.

These codes help the government categorize and classify businesses for contracting purposes. This is why selecting the correct NAICS code is essential for targeting relevant defense contract opportunities.

How to find and apply for DoD contracts

Whether you’re a seasoned government contractor or just starting, understanding the nuances of finding and applying for DoD contracts is essential for success. In this list below, we are sharing some of the best tips to help you navigate this competitive landscape and position your business to win contracts.

1. Network and build relationships

Now that you are all registered and set up to start finding DoD contracts, it’s important to actively network with key stakeholders in the defense industry. This can include government officials, prime contractors, industry associations, and other potential partners. 

You can find these people by attending industry events, conferences, and networking opportunities. By establishing connections and building relationships you can gain more contract opportunities.

2. Maximize the resources available for small businesses

Small businesses interested in contracting have access to a variety of resources tailored to their needs, such as the Small Business Administration (SBA) and its Dynamic Small Business Search (DSBS) database. By leveraging these resources, small businesses can identify DoD contracting opportunities specifically set aside for them, increasing their chances of winning contracts.

3. Get certified for additional assistance as a disadvantaged business

Disadvantaged businesses, including those owned by minorities, women, and veterans, can benefit from specialized assistance programs and set-aside contracts offered by the federal government. These programs, such as the 8(a) Business Development Program and the Veteran-Owned Small Business (VOSB) Program, provide support and procurement opportunities helping them compete effectively in the DoD contracting arena. Learn more about the guidelines for these certifications below:

4. Develop strong capability statements

Capability statements are essential marketing tools that highlight a contractor’s core competencies, qualifications, and past performance. Tailoring capability statements to showcase relevant experience in areas of interest to the DoD can significantly enhance your competitiveness and appeal to government buyers.

When you’re creating a capability statement, there are two primary routes you can take: General and targeted. Similar to a resume for finding a job, you can create a “one size fits all” version, general variations, or more targeted versions. And just like resumes, the targeted versions are usually most effective.

Contact us here if you want to learn more about how we can help write capability statements for DoD bids.

5. Continue to seek DoD contracting opportunities proactively

In the competitive landscape of DoD contracting, proactive pursuit of opportunities is key to success. Remember that consistent effort and engagement in the defense contracting community can lead to a steady pipeline of bidding opportunities. Here are some ways to stay ahead:

  • Regularly monitor federal procurement portals.
  • Attend industry events.
  • Network with government officials to stay informed about upcoming opportunities.
  • Connect with other prime contractors to learn how they position themselves.
  • Join FAMR’s FedAdvantage programs to streamline the process while maximizing results.

Become a defense contractor with FAMR – and win more bids! 

By leveraging a combination of these strategies and tips, you can effectively and more easily find DoD contracting opportunities that align with your business capabilities. In turn, you’ll be able to increase your chances of success in winning contracts with the Department of Defense.

If you’re just starting your defense contracting journey and aren’t yet registered, we recommend utilizing the support of registration specialists, like the ones at FAMR. If you’re already registered, the FAMR portal, which streamlines the browsing and bidding process for DoD contracts, provides a great starting point for jumping into the market with a team of specialists to support you along the way! 

Give us a call or reach out to us today to see how we can help position your business for DoD contracts!

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