Local Government Contracting 101
by Retta Parsons | September 26, 2025
You are interested in setting up your business as a government contractor but are not sure where to begin. The process can seem like a confusing maze of deadlines, rules, and paperwork. Luckily, here are some quick tips to get you started:
- A business should be established for a few years with a clientele and clearly defined product or service offerings before entering the government contracting arena.
If you were a procurement officer, would you invest taxpayer dollars into a company that has not started; may not be fully licensed; has no GAAP accounting system; and specializes in providing undefined products or services? - A business needs to demonstrate a “Capacity to Perform.”
A business needs to be able to demonstrate a concept known as “Capacity to Perform.” This is the ability to show that the company has successfully completed other projects with a similar scope and a similar budget. If a business is being considered for a contract award, it is common practice for the entity to contact the listed customers to verify the information. Keep in mind that Capacity to Perform applies to the business submitting with the bid. If you had a different business, those projects and clientele cannot be listed to support the new company’s Capacity to Perform. - A submission needs to include all the deliverables detailed in the bid request.
Read the entire bid request and highlight deliverables so that all of them are included in the budget. It is good practice to prepare a preliminary budget before bidding to see if the project would be profitable. It is not recommended to submit a budget that does not result in some amount of profit for the company. - Would it be more beneficial to serve as a subcontractor on a project?
Subcontracting can be a profitable undertaking that frees the business to work on several initiatives without going through a lengthy, time-consuming bidding process. Make note of the firms that have indicated an intent to bid. Contact them to inform them of your business’ capacity to serve in a subcontracting role. Indicate inside the bid request your interest in subcontracting if the bidding software allows it. - Governmental entities have a reputation for paying later than expected.
It is common for governments to reimburse firms well outside of the contracted timelines. To fulfill the contract on time and on budget, it may be necessary for a business to secure a line of credit. If there is not complete performance on a contract, it is the business who can be banned from contracts with the municipality.
Finally, above all else, remember the mantra: “Government contracting is in addition to and not instead of.” Make sure to heed it and expand your clientele outside of government contracts. These steps should help in setting up your business as a beginner in government contracting but never forget to seek guidance from an experienced government contracting consultant in order to make sure that you are on the right track.
Retta Parsons
Consultants, Hillsborough, ParsonsFlorida SBDC at Hillsborough County
Specialty: Start-up, Bookkeeping
Retta Parsons brings a wealth of knowledge and experience in business management and public administration to her role as a business consultant. She previously served as CEO of Shiawassee United Way. In that position, she provided leadership to ensure the construction of a $26 million county medical care facility. She also led the change process and alliance establishment that resulted in the implementation of United Way 2-1-1 in Shiawassee County. Parsons also served as a training director for Girl Scouts, where each year she managed the delivery of approximately 124 trainings for more than 700 attendees. Parsons enjoys being active in the community. Past roles include chairperson for the State of Michigan, Department of Health & Human Services, Shiawassee County, board; chairperson of the Shiawassee Human Services Council; and ambassador for the Shiawassee Regional Chamber of Commerce. She earned a Master of Public Administration degree from Western Michigan University and a Bachelor of Arts degree in Human Resources Management from Spring Arbor College. She is a certified Child Care Facility Inspector, Instructor of Trainers, and Bridges Out of Poverty Trainer. In her spare time, Parsons enjoys bike riding with her husband, Roger, and spoiling her children and granddaughter.