Overcoming Common Challenges Faced by Small Businesses in Federal Contracting.

Entering the federal marketplace as a small business is both an opportunity and a test of endurance. The potential for steady, long-term revenue is real, but so are the hurdles: complex registrations, dense regulations, intimidating solicitations, and a competitive landscape that favors organizations with established past performance and systems.  

If you feel that the process is confusing, time-consuming, or stacked against smaller firms, you are not alone. The goal is not to chase every solicitation, but to build the right foundation, focus your efforts, and move from guesswork to a repeatable, compliant process.  

Below are five of the most common challenges small businesses face in federal contracting—and practical steps you can take to overcome each one.  

Challenge #1: Getting Set Up and Staying Compliant  

Before any contract award, you must be visible, valid, and compliant in the federal systems that matter. For many small businesses, this first phase becomes a significant bottleneck.  

Common issues include:  

• SAM registration errors or delays  
• Entity validation problems  
• Misaligned or incomplete NAICS and Product Service Codes  
• Inconsistent information across SAM, Small Business Search (SBS), and agency vendor portals  

These gaps can delay awards, cause you to miss set-aside opportunities, or raise questions about your eligibility. 

How to Overcome It  

Start with a clean SAM registration

• Confirm your legal business name, address, and banking information match across all systems.  
• Carefully review your representations and certifications.  

Align NAICS and PSC codes with your actual capabilities

• Select primary and secondary NAICS codes that reflect what you actually deliver, not just what is broadest.  
• Map your services and products to clear PSC codes so buyers can find you.  

Optimize DSBS, not just SAM

• Treat DSBS as a marketing profile, not a formality
• Add a concise capabilities narrative, keywords, and performance highlights.  

Implement a compliance maintenance routine

• Set calendar reminders to review and update SAM, DSBS, and agency profiles at least quarterly.  
• Document your registration credentials and renewal dates in a centralized, secure location.  

Challenge #2: Finding the Right Opportunities  

Many small businesses either see “nothing that fits” or feel overwhelmed by the volume of notices on SAM.gov, agency sites, and multiple portals. Without disciplined market research, it is easy to:  

1. Spend hours sorting through irrelevant solicitations  
2. Chase every RFP instead of the right ones  
3. Miss smaller, strategic opportunities ideal for building past performance  

How to Overcome It  

Clarify your federal niche

• Define the agencies, mission areas, and contract types where you are most relevant.  
• Align that focus with your NAICS and PSC codes.  

Create repeatable search filters

• Use consistent keywords, set-aside filters, NAICS, and agency filters on SAM.gov and other portals.  
• Save and document your search logic so it can be performed by others on your team.  

Develop a bid/no-bid framework

• Before reading every page of an RFP, quickly evaluate:  
• Agency familiarity and relationship level  
• Required past performance and certifications  
• Contract size and complexity compared to your current capacity  
• Competitive position (prime vs. subcontractor)  

Track opportunities as a pipeline, not a collection of links  

• Use a tracking sheet or CRM to record status, key dates, teaming needs, and decision points. 

Challenge #3: Building Competitive, Compliant Proposals  

A strong proposal is more than well-written content. Federal evaluators look for clarity, compliance, and a logical story that connects your solution to their mission and evaluation criteria. Common challenges include:  

1. Missing or misinterpreting RFP requirements  
2. Weak or inconsistent proposal structure  
3. Limited understanding of how evaluators score responses  
4. Pricing that is disconnected from the technical approach  

How to Overcome It  

Start with a compliance matrix

• Break down the RFP into specific requirements, sections, page limits, and evaluation factors.  
• Use this matrix as your checklist to ensure nothing is missed.  

Align your structure with the RFP

• Use headings and subheadings that mirror the solicitation’s structure.  
• Make it easy for evaluators to “find” their requirements and scoring elements.  

Tell a clear, evaluator-focused story

• Address the “what,” “how,” and “why it matters” for each requirement.  
• Emphasize outcomes, risk mitigation, and benefits tied to the agency’s mission.  

Integrate pricing and technical strategy

• Ensure your pricing reflects realistic staffing, risk, and performance requirements.  
• Avoid underpricing in ways that conflict with your proposed approach.  

Use structured reviews

• Conduct RED team reviews for compliance and structure.  
• Conduct GOLD team reviews focused on win themes, clarity, and evaluator impact. 

Challenge #4: Limited Past Performance and Resources  

Many small businesses worry that without large-scale federal past performance, they cannot compete. At the same time, internal resources are stretched across delivery, operations, and business development.  

This often leads to:  

• Hesitation to pursue prime opportunities  
• Overreliance on a single customer or contract  
• Difficulty demonstrating capability at the scale evaluators expect  

How to Overcome It  

Leverage subcontracting and teaming agreements

• Pursue roles as a subcontractor where you can contribute critical capabilities.  
• Form teaming agreements that fill gaps in experience, certifications, or capacity.  

Consider joint ventures when appropriate

• Use joint ventures to combine complementary strengths while still benefiting from small business status where applicable.  
• Ensure roles, responsibilities, and workshare are clearly documented.  

Build past performance strategically, not randomly  

• Target opportunities that match your core services and support a clear narrative (for example, similar missions, technologies, or geographies).  
• Capture and document performance metrics, customer feedback, and outcomes for use in future proposals.  

Protect internal bandwidth 

• Define clear roles for capture, proposal development, and delivery.  
• Use external support when internal capacity is limited, especially for complex bids. 

Moving from Chaos to a System  

Federal contracting will always involve complexity, but it does not have to be chaotic. By addressing these core challenges—registrations and compliance, targeted opportunity identification, structured proposal development, strategic past performance building, and streamlined digital workflows—you create a system that supports sustainable growth instead of one‑off wins.  

You do not need to solve everything at once. Start by identifying your most urgent barrier:  

- Are registrations and profiles holding you back?  

- Are you unsure which opportunities are worth your time?  

- Are proposals consuming your capacity without consistent results?  

From there, define a simple, realistic action plan and implement improvements in stages.  

FEDCON exists to support that journey. Through **Registration and Compliance Services**, **GSA Schedule Assistance**, **Proposal Development and Capture Support**, **Digital Services and Analytics**, and ongoing **Help Desk and Advisor Support**, we partner with small businesses to strengthen their readiness, sharpen their strategy, and compete more effectively in the federal marketplace.  

If you are ready to move from reacting to opportunities to building a deliberate federal contracting system, consider which challenge you want to address first—and take the next step with a focused plan and the right support.