Strategies for Small Businesses to Succeed in Defense Contracting
With an $850 billion dollar budget allocated in 2025, the Department of Defense actively seeks small businesses to drive innovation, strengthen supply chains and support mission-critical operations. However, entering this market can be daunting. Small businesses must navigate the maze of regulations, compete with well-established businesses and develop in-depth proposals to secure contracts. Here we will provide actionable steps to help small businesses understand the defense contracting ecosystem, leverage small business programs and build winning proposals. By implementing these tactics, small businesses can position themselves for long-term success in this competitive industry.
Understanding Defense Contracting
First, it is important to understand the framework in which defense contractors operate. The DoD awards contracts by explicitly following strict guidelines outlined in the Federal Acquisition Regulation (FAR). This living document governs how agencies secure goods and services. Next, contracts are issued through specific avenues, including Indefinite Delivery/Indefinite Quantity (IDIQ) contracts and General Services Administration (GSA) Schedules. It is of the utmost importance that defense contractors familiarize themselves with these mechanisms in order to target the correct opportunities.
Additionally, research plays a key role in identifying opportunities. Reviewing DoD priorities and annual budgets can help small businesses align their work with defense needs. For instance, understanding emerging focus areas such as cybersecurity, artificial intelligence and supply chain resilience can guide service and product development. By first understanding the basics of how DoD contracting operates, small businesses can identify practical entry points and prepare to meet the government where they need it.
Leverage Small Business Set-Asides and Certifications
One of the largest advantages available to small business owners is the opportunity to compete for contracts set aside exclusively for them. The federal government mandates that a portion of its contracts be awarded to small businesses, creating a level playing field. Programs such as the 8(a) Business Development Program, HUBZone, Service-Disabled Veteran-Owned Small Business and Woman-Owned Small Business certifications allow small businesses to qualify for these reserved contracts. Obtaining these certifications allows a company to be eligible for these unique opportunities, helping it stand out in a crowded marketplace.
To utilize these benefits, however, small businesses must both acquire and maintain their certifications. The application process often involves documentation, such as proof of ownership, control and financial viability. Once certified, businesses need to regularly review their eligibility and ensure continued compliance with program requirements. It is, therefore, worthwhile to seek out certifications as they can provide both a badge of credibility and act as a entry to competitive advantages.
Develop a Competitive Proposal Strategy
How well crafted a proposal is can spell the difference between winning and losing a contract. Small businesses must pay close attention to the requirements outlined in Requests for Proposals (RFP) and Requests for Information (RFI) when looking at a contract to bid on. Clearly defining the company’s value proposition is essential as it can be the defining point that decides who is selected for the contract. To do this, demonstrate how the company’s product or service addresses the specific needs of the government agency as outlined in the RFP or RFI, while addressing the measurable benefits, such as cost savings, enhanced performance or innovative features that the company’s goods can also provide. Investing in tools like Odyssey’s proposal management software can streamline the preparation process, ensuring continued compliance with submission requirements and improving overall efficiency.
Ensure Compliance and Operational Readiness
We’ve discussed compliance in previous posts because meeting compliance requirements is a non-negotiable aspect of defense contracting. As previously mentioned, small businesses must adhere to the FAR. However, compliance does not stop there. Depending on the goods or service a company provides, there could be several other regulations that a small business must adhere to such as the Defense Federal Acquisition Regulation Supplement (DFARS), or the Cybersecurity Maturity Model Certification (CMMC). These standards ensure that contractors can safeguard sensitive information, maintain operational security and deliver reliable solutions. For example, achieving CMMC compliance is essential for companies handling controlled unclassified information. Small businesses need to prioritize regular audits and training to stay updated on evolving regulations to minimize the risk of non-compliance.
Conclusion
Success in defense contracting requires preparation, adaptability and persistence. By understanding how the industry operates, leveraging small business certifications, creating compelling proposals and ensuring compliance, small businesses can thrive. These strategies empower smaller enterprises to compete alongside industry giants while meeting the critical needs of the Department of Defense!
To see how Odyssey can help your business streamline operations, enhance compliance, and secure defense contracts, schedule a demo with us today. Together, we can position your business for long-term success in the defense marketplace.