The Contract Market

The market for contracts is the determining factor of business growth and sustainability. Vendors can only exist if there is a demand for their services, also the size of the market for their services, which constitutes the contracts market.

In the United States, the contracts market can be divided into five sectors, namely.

  • Private
  • Local Municipality
  • Town or City
  • State
  • Federal

Every sector of these markets operates independently of each other, with vendors operating in one or more of them. Private market for contracts covers the demand by individuals and private businesses for services. Local municipalities involve a county or district requiring a service or services, then offering to accept bids from local businesses. City and state markets involve contracts offered for services in city or state, with the respective businesses registered there only open to bid for the contracts. The federal market on the other hand covers contracts at the federal level for the whole United States, which are open to any business registered in the United States, in some cases worldwide.

The private market in many cases involves the smallest of all contracts, with the smallest businesses usually carrying them out. The local municipalities and city markets are usually dependent on the local population and amount budgeted to be spent on amenities in the local budget. The state and federal markets are larger, with the federal market being the largest buyer of goods and services in the world. In an average fiscal year, the federal market for contracts amounts to about $550 billion.

The registration criteria are similar for all businesses entities. The vender initially registers with the secretary of the state where it does businesses. In the private market, the registration qualifies the business to operate. If a business wants to apply to bid for contracts at the local, city or state level, it has to meet the set criteria for certification in the market. At the federal level, businesses must need a DUNS number and be registered in the Systems for Awards Management (SAM).

The advantage of doing private contracts is it’s the best way to start in business when beginning from scratch. Operating in the local municipality, town or state market level has the advantage of giving preference or sole rights to local businesses, therefore they can use them as a way of winning fairly large contracts. The advantage of operating in the federal market is the size of market, which is open to any business, irrespective of the size of the vendor.

The main disadvantage in the case of the private market is the limitation in scope for the award of contracts. Vendors are limited in their marketing range, as they can only bid for contracts announced by bidders in private media. In the cases of local, city and state markets, the size of markets may breed favoritism and corruption. Also, some municipalities and towns may be strapped for cash or go bankrupt, therefore result in late payments or complete losses on awarded contracts. The main disadvantage of operating in the federal market is, due to its size, many small vendors are intimidated to bid also, new vendors find it difficult to enter due to their lack of past experience.

The best way for a vendor to operate is to level a stake in more than one market. In doing so, you will be able to have a better chance of winning in an area.

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