The complete guide to selling to the Department of Defense, America's largest government buyer.
The Department of Defense (DoD) represents the largest procurement agency in the United States government, with annual spending exceeding $400 billion. This massive budget is distributed across numerous buying organizations, making the DoD a critical market for companies seeking government contracts. Understanding how the DoD operates as a buyer is essential for any company looking to enter the defense market.
Organizational Structure
The DoD's buying authority is distributed across multiple levels and organizations. At the highest level, you have the Office of the Secretary of Defense (OSD), which oversees policy and major acquisition decisions. Below this are the military departments: the Department of the Army, Department of the Navy, and Department of the Air Force (now part of the Department of the Space Force). Each military department operates relatively independently with its own procurement authority.
The military services are further divided into numerous agencies and commands, each with specific acquisition responsibilities. Major organizations include the Army Materiel Command (AMC), Naval Supply Systems Command (NAVSUP), Air Force Materiel Command (AFMC), and the Defense Logistics Agency (DLA). These organizations handle procurement for their respective areas, whether that's weapons systems, supplies, information technology, or services.
Beyond the military departments are independent defense agencies such as the Defense Advanced Research Projects Agency (DARPA), the Defense Information Systems Agency (DISA), the Defense Contract Management Agency (DCMA), and the Missile Defense Agency (MDA). Each agency has unique procurement needs and processes.
What the DoD Buys
The defense market encompasses an extraordinarily broad range of products and services. At the high end, you have major weapons systems like fighter jets, naval vessels, and missile systems, which require years-long development and production contracts worth billions of dollars. However, the vast majority of DoD spending actually goes to supporting these systems and conducting day-to-day operations.
Major procurement categories include: Advanced weapons systems and platforms; Information technology and cybersecurity solutions; Military logistics and supply chain management; Professional services including engineering, management consulting, and program support; Research and development for emerging technologies; Medical supplies and healthcare services; Communications and command-and-control systems; Training and simulation systems; Transportation and mobility solutions; And countless other categories spanning virtually every industry sector.
The diversity of DoD procurement means that companies from nearly every industry can find opportunities, whether you manufacture specialized hardware, provide software solutions, offer professional services, or supply raw materials and consumables.
The Legal Framework: FAR and DFARS
All DoD procurement is governed by the Federal Acquisition Regulation (FAR) and the Defense Federal Acquisition Regulation Supplement (DFARS). These regulations establish the rules for how government contracts must be awarded, managed, and performed. Understanding these regulations is critical because non-compliance can result in contract termination, debarment, or legal action.
The FAR is the primary regulation used across all federal agencies, covering topics like competition requirements, contract types, pricing policies, and contractor responsibilities. The DFARS adds additional requirements specific to the DoD, including security requirements, export control compliance, cost accounting standards for defense contractors, and specific clauses that must be included in all DoD contracts.
Competition Requirements
DoD policy strongly emphasizes full and open competition. This means that most contracts must be advertised on FedBizOpps (now SAM.gov) and open to all qualified contractors. There are exceptions for sole-source awards, but these require extensive justification and approval from high-level procurement officials.
When DoD conducts a full and open competition, they issue a Request for Proposal (RFP) or, less commonly, a Invitation for Bid (IFB). The RFP describes what the government needs, the evaluation criteria that will be used to select a winner, and instructions for submitting a proposal. Contractors must follow all instructions precisely; proposals that don't comply with instructions can be rejected immediately.
Other Transaction Authority (OTA)
In recent years, the DoD has increasingly used Other Transaction (OT) agreements, which allow for more flexibility than traditional contracts. OTA agreements are not subject to the full FAR/DFARS, which means they can have faster timelines, more innovative pricing arrangements, and different contract terms. However, OTA agreements are typically only available for research, development, and prototyping activities, not for production contracts.
SBIR and Small Business Set-Asides
The Small Business Innovation Research (SBIR) program is a significant source of contracts for small businesses. SBIR requires large contractors (those receiving $100+ million in R&D funding) to reserve a percentage of their R&D funding for small business contracts. DoD agencies post SBIR solicitations several times per year, each focusing on specific technology areas and challenges.
In addition to SBIR, DoD uses small business set-asides for certain contracts, meaning only small businesses can compete. Set-aside contracts can be for any type of product or service and represent a significant opportunity for small firms.
Contract Types and Pricing
The DoD uses various contract types depending on the nature of the work and the risk involved. The most common types are Firm Fixed Price (FFP), where the contractor assumes the risk if costs exceed the quoted price; Cost-Plus Fixed Fee (CPFF), where the contractor is reimbursed for costs plus a fixed fee; and Cost-Plus Incentive Fee (CPIF), where the contractor's fee varies based on actual costs versus target costs.
For development and R&D contracts, Cost-type contracts (CPFF and CPIF) are common because the work is uncertain and the full scope cannot be defined upfront. For production contracts involving well-understood work, FFP is more common.
Timelines and the Contracting Process
DoD contract timelines are typically longer than in the commercial sector. A typical sequence might be: Pre-solicitation industry conferences (3-6 months before RFP); RFP release; Question and answer period (usually 2-3 weeks); Proposal submission deadline (typically 30-45 days after RFP); Evaluation period (2-4 months); Award; and Contract negotiation (1-2 months). Total time from concept to award can easily be 12-18 months for major programs.
Understanding each phase and preparing thoroughly for each stage is critical to success in the DoD market.
Defense Innovation Unit (DIU)
The Defense Innovation Unit operates under the Office of the Secretary of Defense and focuses on accelerating the adoption of commercial technology in the DoD. DIU uses Other Transaction authority to move faster than traditional procurement, typically with 6-12 month timelines instead of the traditional 12-18+ month process. Companies can submit unsolicited proposals to DIU if they believe their technology solves a DoD challenge. DIU maintains a list of focus areas that change periodically.
AFWERX
The Air Force Warfighter Exploitation of Real-Time Information Exchange (AFWERX) program identifies innovative solutions to Air Force problems. AFWERX conducts open innovation competitions, hackathons, and uses OTA agreements. Small companies and non-traditional defense contractors are explicitly encouraged to participate. AFWERX solicitations often have faster timelines and more flexible requirements than traditional Air Force procurements.
NavalX
NavalX is the Navy's innovation program, operating similarly to AFWERX. NavalX focuses on connecting innovative companies with Navy challenges and uses OTA agreements. NavalX has identified multiple focus areas including autonomous systems, hypersonics, and directed energy weapons.
SOFWERX
Special Operations Command (SOCOM) operates SOFWERX (Special Operations Forces Warrior Exploration Experimentation), which connects innovative companies with SOCOM's unique challenges. SOFWERX focuses on technologies relevant to special operations including mobility, precision, and intelligence.
xTech Program
The Army launched the xTech program to identify innovative solutions to Army modernization challenges. xTech conducts competitions and uses Other Transaction agreements. The program focuses on areas like artificial intelligence, autonomous systems, and biotechnology.
Army Futures Command (AFC)
The Army's Futures Command oversees the Army's modernization strategy and identifies technology needs. AFC works with industry to develop solutions and often sponsors prototype demonstrations and proof-of-concept programs.
Chief Digital and Artificial Intelligence Officer (CDAO)
The newly established CDAO office is responsible for driving the DoD's digital transformation and AI adoption. This office represents a significant new market for software, AI, and digital transformation services.
Acquisition Reform Initiatives
The DoD has implemented various acquisition reform initiatives to speed up procurement and encourage innovation. These include expanded use of OTA, simplified acquisition procedures for smaller contracts, and increased use of commercial standards instead of unique military specifications. These reforms are making it easier for non-traditional defense contractors to win DoD business.
Step 1: Understand What You're Selling and to Whom
Before pursuing DoD contracts, conduct a thorough analysis of your product or service and identify which DoD organizations might need it. A weapons system manufacturer's market is very different from a software company's market or a facility services provider's market. Research which military services, agencies, and commands are most relevant to your offering.
Step 2: Get SAM Registration and Create a DUNS Number
You cannot win any federal contract without being registered in the System for Award Management (SAM.gov). You'll also need a DUNS number from Dun & Bradstreet. Registration typically takes 1-2 weeks. Your SAM registration must list your North American Industry Classification System (NAICS) codes, which are the industry codes used by the government to classify what you do. Make sure you select the most accurate NAICS codes for your business.
Step 3: Obtain Required Certifications and Security Clearances
Depending on your business, you may need security clearances, facility certifications, or industry-specific certifications. Many DoD contracts require a Secret or Top Secret security clearance for your company. Apply for the Federal Facility Security Clearance (FFSC) if needed. This can take 3-6 months. If your facility will store or handle classified information, you'll need a Facility Certification. Additionally, if you manufacture products, quality certifications like AS9100 (aerospace) or ISO 9001 may be required or preferred.
Step 4: Monitor Opportunities and Attend Industry Days
Monitor SAM.gov for solicitations related to your business. Set up saved searches for relevant NAICS codes, keywords, and agencies. When a solicitation of interest is released, make attending the industry day a priority if one is scheduled. Industry days are pre-proposal conferences where the government explains the program, answers questions, and allows contractors to network with program managers. This is invaluable for understanding the government's actual needs versus what's written in the RFP.
Step 5: Build Past Performance
DoD contractors are required to report contract performance information to the Contractor Performance Assessment Reporting System (CPARS). Past performance is a critical evaluation factor in most DoD procurements. If you're new to government contracting, winning small contracts first and performing excellently builds your track record. Consider pursuing GSA Schedule contracts or small contracts through the Small Business Administration before pursuing large sole-source or highly competitive programs.
Step 6: Respond to Requests for Information (RFIs)
When the government has a requirement, they sometimes issue an RFI (Request for Information) before issuing the full RFP. RFIs ask contractors to provide information about their capabilities, allowing the government to understand what solutions are available. Responding to RFIs is a good way to get on the government's radar and provide input that can shape the eventual RFP.
Step 7: Build Relationships with Program Managers
Once you've identified relevant DoD programs, find the government program managers and build relationships. Attend DoD conferences and events. Request meetings to brief program managers on your capabilities. Provide unsolicited proposals if appropriate. Government officials want to know what solutions are available, and establishing yourself as a trusted technical resource is invaluable.
Step 8: Prepare Winning Proposals
When you identify a solicitation you want to pursue, dedicate adequate time and resources to proposal development. Government proposals are technical documents that must address all evaluation criteria and comply with all instructions. Common mistakes include failing to follow page limits or formatting instructions, not addressing all evaluation criteria, and making claims that cannot be supported with past performance data. Many successful companies hire proposal professionals who specialize in government contracting.
Step 9: Understand Contract Compliance Requirements
As a DoD contractor, you must comply with numerous requirements including cost accounting standards, security requirements, export control laws, Buy American Act compliance, and labor law requirements. Ensure your company has systems and processes in place to manage compliance. Non-compliance can result in contract termination, debarment, or criminal liability.