This article explains what business-to-government (B2G) means, how the federal, state, and local procurement markets work, and what it takes to compete for and win government contracts.
Why it matters: Government is the largest buyer in the U.S. economy — the federal government alone spends up to $42.6 billion per day with outside contractors — making B2G a high-value channel for businesses of every size.
Key Takeaways
- B2G covers all levels of government purchasing: Business-to-government refers to the sale of goods, services, and information to federal, state, and local government entities.
- The federal market alone exceeds $665 billion annually: In 2020, the DoD accounted for $421.8 billion of new federal contract obligations — and that excludes civilian agency spend.
- Market intelligence software accelerates contract wins: Tools like Deltek GovWin IQ help contractors identify opportunities earlier, track RFPs, and build pipeline before solicitations go public.
What Is The Difference Between B2B, B2C, And B2G?
B2G is one of three basic kinds of business relationships. The other two are business-to-business (B2B) and business-to-consumer (B2C). B2G may also reference business relationships with governments abroad.
Free Guide
A Guide to the Government Contracting Lifecycle
Success in B2G marketing and sales requires understanding the government contracting lifecycle. Review our free guide to learn its stages and how to optimize your B2G sales and marketing strategy.
B2G Market Overview
If your business is looking for sales prospects, consider the federal government. It is, quite simply, the largest business prospect around, with the federal discretionary budget exceeding $1.6 trillion.
B2G includes an extremely wide range of opportunities. A small business may provide services to a local municipality. Or when a top defense contractor delivers billions of dollars' worth of equipment to the Department of Defense, that too is B2G.
The B2G market is huge. The federal government alone spends $18.2 to $42.6 billion per day with outside contractors. The General Services Administration (GSA) regulates and coordinates federal B2G transactions, and a government contract is commonly awarded following bids submitted in response to a request for proposal (RFP).
Small businesses secure a decent proportion of local, state, and federal spending. At the federal level, the current goal is to direct 23% of prime contracting to small businesses.
In many situations, the law requires a government entity to select the lowest bid. However, the agency must screen prospects to ensure that the winning bidder is indeed capable of providing the product or service.
Government Agencies Procure Goods and Services
At every level of government, almost all departments and agencies must procure goods and services.
B2G examples include:
- Construction of buildings, highways, and infrastructure
- Cloud-based or on-premises software solutions
- Installation of a unified communications solutions
- Maintenance of everything from parks to government buildings
At every level of government, IT infrastructure is continually updated and often expanded. Smaller businesses enjoy myriad IT opportunities, particularly at the state and local levels.
Every year, the Veterans Administration (VA) spends billions of dollars on its community care network. The VA spends much of this money on professional services. VA projects often grant special status to veteran-owned businesses.
Examples of B2G opportunities
The range of B2G opportunities includes everything from office equipment needed at city hall to components for a $4 billion aircraft carrier.
In 2020, the Department of Defense (DoD) accounted for $421.8 billion of the federal government's $665.1 billion in new contract obligations. Civilian federal agencies account for the rest. The DoD buys 99% of all military equipment in the country. The Veterans Administration also needs diverse professional services to address the needs of the nation's veterans.
Every year, state DoTs award billions of dollars worth of contracts for road construction and maintenance. Information technology (IT) systems are important to state and local governments. Nationwide, the annual value exceeds $100 billion at the state and local levels.
Locally, cities and counties need to supply their law enforcement agencies with critical equipment. Municipalities also need equipment for wastewater treatment plants. Janitorial services are another common need at the local level.
Local governments also offer opportunities beyond standard contracts. For example, check whether your home city has a sheltered market program. Or, explore whether your municipality offers term or pilot contracts. For example, a startup might enter into a term contract to prove a new product's usefulness.
A local government's discretionary budget is often a source of funding for a paid pilot project. There are also unpaid pilot projects in some jurisdictions.
Finally, a smaller enterprise may partner with an established business through a teaming agreement to establish a foothold in the B2G market.
Free Guide
Teaming Agreements 101
Discover how the virtual business environment has changed the way government contractors make connections, best practices for subcontracting, why small businesses should team with larger primes and next steps to get started.
How To Get Government Contracts
Government agencies use various means to pre-qualify contractors who want to bid on projects. At the federal level, you can register your business at SAM.gov. States maintain their own registration systems. For example, you can register to participate in the State of Illinois eProcurement system at Illinois BidBuy.
Here's how the government procurement process works:
- An agency posts a request for proposal (RFP) on a registered government website.
- An interested business responds with a bid by the stated deadline. In the submission, the bidder may highlight the strengths they bring to the project.
- The government entity evaluates your proposal along with any others it receives.
- When the evaluation process is complete, one bidder will receive a tender offer. An unsuccessful bidder will often receive a notice with reasons for rejection.
For a small business, the key is getting that first government contract from a given agency. Then, it is often easier to get subsequent government contracts. Government contracts are often larger than in the private sector, and some RFPs can take years to award. Therefore, small businesses must be resilient enough to cope with lengthy procurement timelines. They must also meet the demanding standards often contained in contract specifications.
B2G Marketing Strategies
There is a wide array of government units, from local to state to federal. Effective B2G marketing strategies require you to zero in on your target audience or, in this case, your target government unit. Do your research by:
- Noting the products and services they use
- Reading their blog posts
- Determining their mission
- Identifying their preferences
Create accurate buyer personas for each government agency you're interested in, and customize presentations and products for each agency.
Use content marketing to build trust and credibility. Showcase your company's skills, expertise, and knowledge with a creative mix of blog posts, videos, and demos. You may also consider including images of completed projects.
A good business website can also be an excellent marketing tool. You can follow these suggestions to build a better website:
- An eye-catching, highly functional website separates you from the competition
- Post compelling and timely content, particularly on your main landing pages
- Highly visual elements grab attention: infographics, videos, and unique images
- Highly interactive web pages engage and retain visitors
- Search Engine Optimization improves organic search results
Garner even more attention with weekly or monthly newsletters. Finally, leverage the power of your customer relationship management (CRM) tools. Launch your marketing campaigns from a single platform, and gather information about your qualified prospects.
Opportunities For Small Businesses
Small businesses may actually have an edge in B2G sales in certain situations. Government mandates require a percentage of spending to go to specific types of businesses. These may include those owned and operated by women, minorities, or veterans. Whenever possible, focus marketing efforts on areas where your specific enterprise has an edge.
The Small Business Administration (SBA) helps small business contractors secure government work. To qualify, register your business with the SBA. Align your marketing strategies with opportunities identified via the SBA.
Special B2G Marketing Challenges
Your B2G marketing strategy should reflect a long-term commitment to the pursuit of small business government contracts. Keep in mind that project timelines are often much longer than in B2B and B2C. Sometimes, the RFP process can take years. Regulatory hurdles may also slow the process.
Free Guide
How to Win Small Business Government Contracts
Download this guide to learn how to get your small business started in government contracting and get tips on bidding on contracts and developing a strong proposal.
B2G Sales Strategies
To get an idea of the magnitude of federal spending, visit GSAAdvantage.gov. It is a major shopping portal for federal agencies. There are also third-party platforms, such as GovWin IQ, that help businesses find and win government contract opportunities.
Doing business with federal agencies often demands pre-registration or a directory listing. Businesses may find it necessary to secure one or more of the following:
- NAICS (North American Industry Classification System) code
- FSC (Federal Supply Classification) code
- DUNS (Data Universal Numbering System) number
In 1997, NAICS established a single North American standard. It replaced the Standard Industrial Classification (SIC) system. Some agencies post opportunities only to businesses with a specific NAICS code. For example, the SBA does this through the SAM (System for Award Management). Also, tax incentives may correspond to NAIC classifications.
Keep in mind that state governments have their own websites dedicated to doing business with them. For example, Consider eVA, Virginia's Marketplace. Or check out the Vendor Information Center for the State of Texas. The Procurement Division of California's Department of General Services also lists information about statewide contracts.
Dealing with federal and state agencies can be daunting for some enterprises new to the B2G marketplace. Consider whether it might be best to focus on local governments first.
How Deltek Supports Enterprises Interested in B2G
Deltek GovWin IQ is an industry-leading platform providing comprehensive market intelligence for:
- U.S. federal government procurement
- State and local government procurement
- Canadian government procurement
Enjoy continual updates from award-winning experts. With GovWin IQ, you'll:
- Identify early-stage opportunities
- Plan more strategically
- Build important government relationships
- Navigate the competitive landscape
