What is a Government Contractor?
The term "govcon" or government contractor describes individuals or businesses that enter into a contract with the United States federal, or SLED (state, local, or educational government entities), or Canadian government to perform work or provide products and services.
Government contractors must comply with the same laws that apply to everyone else. They're subject to the same regulations, pay taxes like every other business, and follow the same rules as anyone else.
A govcon subcontractor is a company that does business with another prime contractor. These companies often work for the government as part of larger projects or programs. However, some subcontractors operate independently without any other government connections.
Government contractors and subcontractors take up different roles in delivering government services. Prime contractors typically lead in providing goods and services to the government. Subcontractors usually play a supporting role, helping with specific tasks.
Types of Government Contracts
The government uses four main types of government contracts to acquire goods and services.
- Fixed-price contracts: Fixed-price contracts mean that the government pays a fixed amount for each task, regardless of how long it takes to complete the job.
- Cost-plus contracts: Cost-plus contracts allow the government to determine the project's total cost before awarding the contract. Once the contract is awarded, the contractor may charge the government an additional fee based on expenses incurred during the performance period.
- Time-and-materials contracts: Time-and-materials contracts allow government purchasers to acquire goods or services based on the cost of direct labor hours and materials used.
- Indefinite delivery/indefinite quantity (IDIQ) contracts: The federal government can often be uncertain of the amount of a product or service it will need to purchase. To account for this, they occasionally use Indefinite Delivery Indefinite Quantity (IDIQ) contracts that provide flexibility regarding exact quantities. This contract type is becoming more common.
How Do I Get Started in the GovCon Industry?
If you want to get started as a government contractor, here's what you need to know.
First, you'll need to find a contracting opportunity. There are many ways to search for new government opportunities. You could use your personal contacts, look through trade publications, or even post a request on social media sites like Facebook. But your best resource is to leverage industry-leading opportunity aggregators like GovWin IQ.
Once you've found a potential opportunity, you'll need to submit a proposal. Proposals explain why your company should be awarded the contract. Your bid will include information about your experience, qualifications, and past performance. It may also include details about your financial stability and ability to meet deadlines.
Once you've submitted your proposal, you'll need to wait for a response from the government. If they award you the contract, you'll need to sign a formal agreement. After signing this document, you'll officially begin working on the project.
Find and Win Government Contracts with GovWin IQ
With the federal government contract industry growing rapidly, there are plenty of opportunities for companies to win more contracts using GovWin IQ.
GovWin IQ helps contractors who sell to the federal government by providing them with early awareness of new opportunities, deep planning intelligence, potential teaming partnerships, and the strategic insights they need to be able to compete for more federal government contract bids.
Find and Win More Government Contracts with GovWin IQ
Learn how the leading market intelligence platform can help you win more contracts with U.S. federal, state, local, and Canadian governments
Common GovCon Acronyms and Abbreviations
Each government department has its special language for contractors. However, acronyms may vary from department to department. Consult your local authorities if your question concerns an issue specific to your region.
- The United States Government Manual: Commonly Used Acronyms
- Acronyms and Abbreviations published by the General Services Administration (GSA)
Here are some common acronyms and abbreviations that you might hear when talking within the GovCon Industry:
- ACQ - Acquisition Contracting Officer
- AR - Administrative Record
- CDA - Contract Disputes Act
- CR - Contract Review
- DCAA - Defense Contract Audit Agency
- DFARS - Department of Defense Federal Acquisition Regulation Supplement
- FATCA - Foreign Account Tax Compliance Act
- GSA - General Services Administration
- LOA - Letter of Award
- OFCCP - Office of Federal Contract Compliance Programs
- PA - Procurement Activity
- PD - Purchase Decision
- PP - Preferred Provider
- RCFC - Rule Changes For Contractors
- REA - Request for Equitable Adjustment
- RFI - Request for Information
- RFP - Request for Proposal
- RFQ - Request for Quotation
- RFR - Request for Reconsideration
- RFS - Request for Schedule
- SO - Statement Of Objection
- SP - Statement of Protest
- ST - Statement of Terms
- UF - Unfulfilled Requirements
- UR - Unresolved Requirement
- VC - Vendor Certification
- VD - Vendor Declaration
- VOSB - Veterans Owned Small Business
Federal Government Contracting
Federal agencies award billions of dollars in contracts every year. These contracts are awarded to businesses that meet specific requirements set forth by the government. Some companies bid on multiple contracts; however, some specialize in one type of work.
A federal government contractor is defined as anyone who enters into a contract with any branch of the federal government. These organizations include both large corporations and small businesses. Contracting companies must follow the rules set forth by the Office of Federal Procurement Policy, which oversees procurement policies for federal agencies.
Both federal government contractors and subcontractors are expected to comply with anti-discrimination laws. Companies cannot discriminate based on race, gender, age, sexual orientation, religion, disability, or veteran status. They must also hire employees from historically disadvantaged groups, such as women, minorities, disabled veterans, and Native
Free Guide
Federal Contracting 101
To build a strong foundation, start with the Federal Contracting 101 Guide—a free, practical resource that walks you through the basics of registration, opportunity search, and proposal preparation in today’s evolving market.
SLED Government Contracting
If you are interested in selling to State and Local Education (SLED) Agencies, follow these simple steps.
To begin the process of pursuing government contracts and winning more business from SLED government agencies, determine which levels of government they want to sell to and which territories are the best fits for their business.
Next, businesses should register to do business with those agencies by registering their company on the agencies' procurement portals. It's important to note that the registration may differ from agency to agency. Because of this, businesses should focus on which agencies they want to sell their offerings to.
You can use tools like GovWin IQ for SLED Contractors to identify best-fit agencies and opportunities for your business to focus on. This will help you maximize your win rates and effectively use limited resources.
How GovCons Can Win State and Local Government Contracts
With this understanding of how to identify state and local agencies that best align with a business's product or service, companies can prepare to start selling to SLED governments and win valuable contracts.
There are several vital steps that a business should take to prepare to sell to the state, local, and education markets effectively:
- Target and research the agencies by studying past procurement habits, identifying upcoming contract renewals, and zeroing in on future spending by looking at budgets and planning documents.
- Organize and fill the sales pipeline with near-term and long-term opportunities to effectively balance the short and long-term business outlook.
- Collect important agency contact information, such as job functions, email addresses, and phone numbers, and make sure the sales representatives know who to reach out to at which agency.
- Understand the agency's goals, recent initiatives, and if they prefer local vendors. The better an understanding of how an agency operates, the better organizations can position themselves to meet their needs.
- Determine whether the target agency has teaming opportunities and whether any opportunities fall under set-aside categories.
- Start connecting with decision-makers before a bid or RFP is released. These established relationships will make it easier to collaborate with decision-makers and improve the chance of winning the work.
Free Guide
State & Local Contracting 101
The SLED contracting market is full of opportunity. Discover how your business can succeed in selling to SLED government agencies across the country.
Canadian Government Contracting
Canadian government contracting processes are similar to those in the U.S., making the Canadian market highly accessible to U.S. government contractors. As in the U.S. public sector market, achieving success in Canadian public sector sales requires identifying the right opportunities, connecting with procurement officials or teaming partners, learning the market, and, most importantly, winning Government of Canada contracts.
Every government worldwide must secure the goods and services essential to serving its citizens and communities. To do so, they enter into agreements with businesses that can provide the products and services the government needs.
Governments in Canada are no different; whether federal, municipal, provincial, or territorial, they still need to provide what their citizens need. The Canadian government's contracting process differs depending on the type of contract or the government entity involved.
The Canadian government market is particularly accessible to U.S.-based vendors. For example, U.S.-based vendors receive 25% to 35% of all Canadian public sector spending, making the U.S. Canada's top foreign vendor. This is due in large part to notable trade agreements between the two nations.
Although Canada is open for business to many countries, the agreement relevant to U.S. companies is the World Trade Organization Agreement on Government Procurement (WTO GPA).
Under this agreement, U.S. suppliers have access to procurement conducted by most Canadian federal departments, including 10 Crown corporations, as well as all 10 provinces and 3 territories. On July 1, 2020, the United States-Mexico Canada Agreement (USMCA) – known as the Canada United States-Mexico Agreement (CUSMA) to Canadians – came into force, replacing the North American Free Trade Agreement (NAFTA). However, unlike NAFTA, Canada is not a party to the government procurement chapter in USMCA, which pertains only to Mexico and the United States. Canada will maintain government procurement commitments with the United States through the WTO GPA.
When a trade agreement applies to a procurement, the procurement delegation authority must consider a bid from any vendor based in a country that is a signatory to that agreement. The bid must be given equal consideration as all other qualifying bids submitted.
Where a procurement does not fall under a trade agreement, a foreign supplier may still submit a bid, with no guarantee that it will be considered. The monetary thresholds above which contracts by Canadian entities are subject to free trade agreements vary by entity and by agreement. These thresholds are usually expressed in U.S. dollars.
Free Guide
Canadian Government Contracting 101
Discover how your business can get started and expand its sales to federal, provincial, territorial and municipal agencies across the Canadian public sector.
Why is GovCon Important?
Contracts are an integral part of the economy. When you buy something at your local grocery store, you're paying for it through a series of contracts. The grocer buys food from farmers, wholesalers, manufacturers, distributors, and retailers. Each step along the way requires paying someone. Contracts enable businesses to obtain these funds.
This process is no different within the U.S. federal government, which awards more than $1 trillion in contracts yearly. That's about 15 percent of the total value of all U.S. economic output. The federal government spends more money on contracts than combined education, housing, transportation, law enforcement, and environmental protection.
Furthermore, the U.S. state, local, and education (SLED) government awards an average of $1.5 trillion in contracts annually, and the Canadian government procurement spending is estimated to be worth at least $200 billion Canadian Dollars (CAD) annually, or approximately $150 billion U.S. Dollars (USD) with the current exchange rate.
In addition to being a significant source of income for many businesses, government contracts have other benefits:
- They create jobs. According to the Bureau of Labor Statistics, over 1 million people were employed by federal contractors in 2016. Today, that number is much higher.
- They promote innovation. A recent study found that new products and ideas often come from small businesses working under government contracts.
- They can provide access to capital.
- Small businesses that receive government contracts may qualify for low-interest loans.
Government Contracting Trends: Speed, Scrutiny, and AI Governance
Government contractors are operating in a market where growth remains real, but tolerance for error is shrinking.
The 17th Annual Deltek Clarity Government Contracting Industry Study findings reveal a defining tension: firms are being pushed to move faster across the lifecycle while also proving pricing defensibility, cybersecurity readiness, and audit-grade control.
Key Trends to Watch in Government Contracting:
- Growth with heavier execution pressure. The industry averaged ~15% revenue growth, yet 90% of contractors reported at least one declining financial metric—a signal that margin and performance pressure are rising even when topline demand holds.
- Speed vs. control is no longer a trade-off. Contractors are accelerating business development, pricing, automation, and delivery—while scrutiny around pricing, performance oversight, and compliance increases. In this environment, speed without control doesn't create efficiency—it creates exposure.
- Diversification becomes a resilience strategy. As competition intensifies and prime opportunities tighten, firms are adjusting revenue strategies and expanding into new markets, contract roles, and pipeline sources to remain resilient as agency priorities shift.
- AI adoption is widespread, but governance maturity lags. AI usage is now common across GovCon firms (including 92% reporting generative AI use), yet only 5% describe their AI as “fully developed.” The gap between adoption and governance is becoming a source of risk—especially where outputs must be validated, explainable, and auditable.
- Compliance and cybersecurity are competitive filters. 96% of contractors expect compliance costs to stay the same or increase, and cybersecurity remains a top audit risk area. 59% expect CMMC requirements to apply in 2026, and most anticipate Level 2 requirements—making readiness increasingly tied to eligibility rather than just IT hygiene.
- Integration separates leaders from laggards. The report repeatedly links performance confidence to connected systems and reliable data. When workflows rely on disconnected tools, organizations move faster with less visibility—and higher audit and execution risk.
Discover the 17th Annual GovCon Clarity Report
Deltek's 17th Annual Government Contracting Industry Study is built to help government contractors benchmark performance and interpret what's changing across federal, SLED, and Canadian public-sector markets.
This year's study reflects a market responding to disruption — not just tracking trends — showing not only what contractors are doing, but how effectively they're adapting.
What's inside the latest GovCon Clarity Report:
- Benchmarks and trend data from a proprietary survey of 917 government contractors.
- Expert context from qualitative interviews with government contracting practitioners to connect the data to real operating conditions.
- A clear view of the operating reality behind the headline numbers: strong growth expectations alongside rising scrutiny around pricing defensibility, cybersecurity, compliance, and audit readiness.
- A practical way to benchmark against both the market and high performers, including Top Performer and AI Mature subgroup comparisons in the GovCon scorecard.
Whether you lead business development, contracts, finance, HR, project delivery, manufacturing, or IT/security, the report is designed to help you answer: Where are we gaining speed, where are we accumulating risk, and what disciplines separate top performers?
