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Should Small IT Companies Compete for Government Projects

  JDBurbank      2017-12-28 17:51:09      199    0

No matter where in the world you look, you will find that various government agencies spend enormous amounts of money to procure products and services from outside companies. And while most of us immediately think about construction projects and perhaps defense contractors, a huge portion of government projects over the last decade or so were in the IT sector. In essence, governments on all levels often require services that their existing employees cannot handle and they invite outside IT companies to bid for those contracts.

The question that we are asking today is whether smaller IT companies should consider competing for these contracts and whether they even have a chance of winning.

A Variety of Options

One of the main reasons as to why smaller IT companies can seriously start considering finding their place in the business-to-government game is that there is no shortage of contracts and, what is perhaps more important, they tend to be really varied.

For instance, a local government agency may be looking for some IT people to redesign their website or a number of state-run websites. Some other agency may realize it is time to upgrade their employee payment software from 1986. Another government organization may wish to upgrade their cybersecurity because they have experienced some problems with the whole ransomware chaos that has been taking place for the last two years.

No matter what your IT company is specializing in, chances are that you will be able to find contracts that will fit your expertise, especially if you check out all the levels of government – federal, regional, city, etc.

In addition to this, there are always major IT contracts where the main contractors cannot handle all of the work and they reach out to smaller IT companies to subcontract parts of the big contract. This is actually one of the best ways for small IT companies to put their foot in the door.

Obstacles to Overcome

The most commonly cited reason for not even considering government contracts is that the process is just too complicated and that there is no way to actually win contracts when pitted against larger IT companies.

We have to be honest and admit that the bidding processes tend to be quite complicated, no matter what country we are talking about. Government agencies and people who make decisions on who wins the contracts have their taxpayers to answer to and they minimize the chances of making mistakes by installing serious vetting processes, sometimes even setting up seemingly excessive steps along the way to ensure the contracts are awarded to the best companies.

Smaller IT companies that wish to compete for government contracts need to ensure that all of their paperwork is in order and depending on the country and the local authorities, this can involve a lot of paperwork (in the U.S., bid bonds and performance bonds are required, e.g.). The process itself can involve a lot of steps, as companies are required to answer requests for proposal and/or invitations for bid. The process can also be lengthy, which is another reason some IT companies give up.

It should also be pointed out that the competition can be stiff, especially for larger contracts that bring truly serious money. Moreover, the competition often includes larger companies that have been doing government contracting for a while or which might have an inside track with various agencies.

Why Smaller IT Companies Should Not Give Up

While the obstacles put in front of smaller IT companies that wish to compete for government contracts can seem like too much, there is no need to be completely discouraged.

First of all, winning government contracts can be a huge deal for such companies. For one, it provides a certain stability that no other kind of contract can, with payments being regular and sizeable, allowing smaller companies to plan ahead without worrying about market trends and the economy.

In addition to this, governments around the world are becoming more and more forthcoming to smaller companies through various programs and incentives that allow them to become more competitive. Some of these incentives help out smaller companies financially, while others provide invaluable advice and legal help.

There is also the option of becoming a subcontractor on various projects, i.e. doing a portion of work on a larger contract that is awarded to a larger company. In such situations, a smaller IT company can learn the ropes without having to worry about the actual legal and bureaucratic considerations. Spending some time as a subcontractor also increases the chances for the company to later win independent contracts.

Closing Words

It takes some serious preparation and hard work to start competing and winning government contracts. The good news is that these contracts can be won and that there will only be more of them in the future.


The stability provided by winning these contracts alone is enough to make them something to consider.


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