Can Foreign Companies Win Government Contracts: Requirements and Process Explained

Government contracting feels like the ultimate validation—stable revenue, long-term contracts, and a client that always pays. But for foreign companies, the path from interest to contract award runs through registration mazes, security clearances, and compliance requirements that can disqualify your bid before evaluators see your pricing.

This guide covers the legal framework, mandatory registrations, local presence options, and common pitfalls that separate successful foreign contractors from those who never make it past pre-qualification.

• Foreign companies can legally bid on government contracts in the US, UK, and EU, though registration requirements vary by jurisdiction
• Employer of Record services enable without entity setup, accelerating contract delivery
• Defence, pharma, and financial services face stricter vetting around security clearances and export controls
• Compliance-first platforms handling payroll across
  

Legality of Foreign Suppliers in Government Procurement

Yes, foreign companies can win government contracts. Foreign-located firms received approximately $12 billion in U.S. government contracts recently. Trade agreements between the US, UK, and EU explicitly allow international suppliers to compete for public sector work, though specific rules vary by country and contract sensitivity.

The barriers aren't about excluding foreign firms—they're about security, local compliance, and proving you can deliver on the ground.

US Federal Acquisitions Regulation

The Federal Acquisition Regulation (FAR) permits foreign suppliers to bid on US government contracts. However, the Buy American Act applies price penalties to foreign offers, making domestic bids roughly 6-12% more competitive on price evaluation.

Trade agreements with the UK and EU waive these penalties for qualifying contracts. Defence contracts face additional scrutiny under DFARS, which prioritises US-based suppliers for sensitive work.

UK Public Contracts Regulations

The Procurement Act 2023 governs UK public sector contracts and maintains open competition for most opportunities. Foreign suppliers bid on equal terms with UK companies, except in defence and national security sectors.

Financial services firms expanding into UK government work often find registration more straightforward than US requirements. The focus sits on financial stability and past performance rather than company nationality.

EU Defence and Security Directive

The EU Defence and Security Directive (2009/81/EC) allows member states to restrict contracts involving classified information or essential security interests. Article 346 permits exemptions when national security is at stake, though these remain exceptions.

For non-sensitive contracts, EU procurement rules mandate open competition. Foreign companies from countries with reciprocal trade agreements access the same opportunities as EU-based suppliers.

Mandatory Registrations and Codes Before You Bid

Government systems require specific registrations before accepting bid submissions. Missing even one code automatically disqualifies your proposal, regardless of how competitive your pricing or technical solution appears.

Add flowchart showing mandatory registration sequence and dependencies

1. Obtain a D-U-N-S and NCAGE

The Data Universal Numbering System (D-U-N-S) is a nine-digit identifier from Dun & Bradstreet that US government systems use to track contractor performance and financial stability. The number costs nothing, though expedited processing runs around £200.

The NATO Commercial and Government Entity (NCAGE) code identifies your company in NATO and US defence procurement systems. UK companies apply through the Ministry of Defence, others use national codification bureaus. Processing takes two to three weeks.

2. Complete SAM or Find a Tender Registration

The System for Award Management (SAM) is mandatory for US federal contracting. Registration creates your Unique Entity Identifier (UEI) and stores company details, banking information, and compliance certifications, typically taking up to 10 business days.

UK suppliers register on Find a Tender, which replaced the EU's Tenders Electronic Daily after Brexit. Both systems require annual renewal.

3. Secure Tax and VAT IDs

Local tax registration proves you can handle payroll and employment obligations in the contract jurisdiction. US contractors obtain an Employer Identification Number (EIN) from the IRS, whilst UK suppliers register for VAT with HMRC.

Tax registrations directly affect your ability to employ staff locally and run compliant payroll—critical capabilities that HR and Finance teams demonstrate during bid evaluation.

4. Upload to Supplier Portals and Frameworks

Government agencies maintain pre-qualified supplier lists and framework agreements that streamline future contracting. Getting on approved lists before opportunities arise accelerates the bidding process significantly.

Framework agreements allow agencies to issue contracts without full competitive tendering each time. Early registration positions your company for faster awards.

Local Presence Options: Subsidiary, Employer of Record or Partner

Winning the contract is one thing. Delivering it requires compliant local employment, which means choosing how to establish your on-the-ground presence.

Subsidiary Incorporation Requirements

Incorporating a local subsidiary gives you full operational control. You'll register a legal entity, obtain local tax numbers, and set up payroll systems that comply with jurisdiction-specific labour laws.

Entity setup takes three to six months in the UK and EU, costing between £5,000 and £15,000 in legal and registration fees. US entity formation moves faster but requires state-by-state compliance for multi-state contracts. The ongoing compliance obligations are substantial.

Employer of Record for Rapid Deployment

An Employer of Record (EOR) becomes the legal employer of your staff whilst you retain day-to-day management. This eliminates entity setup entirely, enabling 24-hour onboarding in most jurisdictions.

For mid-market companies bidding on defence or pharma contracts, EOR services handle the complex compliance requirements that government auditors scrutinise closely. Payroll runs without errors, employment contracts meet local standards, and HR teams avoid mastering multi-country labour law.

Teamed's compliance-first platform covers 180 countries and uses built-in AI Agents to automate 70% of payroll and HR tasks, whilst experts handle the regulatory nuances government contracts demand. For Legal and Finance teams, this means audit-ready documentation from day one.

Teaming Agreement With a Domestic Prime

Subcontracting to a domestic prime contractor transfers much of the compliance burden to the prime. You deliver your specialised capability whilst they handle local employment, security clearances, and government reporting.

This works well for first-time entrants testing the market, though you'll share revenue and have limited control over contract execution.

• Full operational control, £5,000–£15,000 setup cost, 3–6 month timeline
• Compliance certainty across 180 countries, no entity overhead
  

Security Clearance and Staffing Eligibility Rules

Government contracts involving sensitive information require personnel vetting. The clearance level depends on the data your staff will access, not your company's nationality.

Baseline Personnel Vetting

Baseline Personnel Security Standard (BPSS) checks in the UK verify identity, employment history, and criminal records. US contracts use similar background checks for non-classified work.

Foreign companies can employ local nationals who pass verification without issue. The challenge arises when you want to use staff from your home country on-site, immigration status and work authorisation become additional hurdles.

ITAR and EAR Citizen Restrictions

The International Traffic in Arms Regulations (ITAR) and Export Administration Regulations (EAR) restrict access to defence and dual-use technology. Only US persons can work on ITAR-controlled contracts.

UK defence contracts have similar restrictions under the Official Secrets Act. EU member states apply varying rules, though NATO agreements facilitate some cross-border staffing in defence work. For pharma and financial services contracts, citizenship restrictions rarely apply unless the work involves classified government data.

Export-Control, Sanctions and High-Risk Markets

Regulatory frameworks governing exports and sanctions can disqualify bids or require special licensing. Legal teams benefit from visibility into relevant rules before pursuing certain contracts.

Violations carry severe penalties—fines exceeding £500,000, export privilege revocation, and criminal prosecution in extreme cases.

Country-Based Sanctions Lists

The Office of Foreign Assets Control (OFAC) in the US, alongside UK and EU sanctions regimes, prohibit business with designated countries and entities. Russia, Iran, North Korea, and Syria face comprehensive sanctions that block most government contracting opportunities.

Screening your supply chain and subcontractors against sanctions lists is mandatory. Even inadvertent violations during contract performance trigger significant penalties.

Dual-Use Goods Licensing

Dual-use goods have both civilian and military applications. Exporting items on dual-use lists, even to deliver a government contract, requires export licences.

Defence contractors encounter dual-use restrictions regularly, though pharma companies also face controls on certain compounds. Licence applications take weeks to months, so factor processing time into your delivery schedule.

Step-By-Step Bidding Process From Registration to Award

Government procurement follows structured stages designed to ensure fair competition and value for money. Understanding the sequence helps you allocate resources effectively and avoid missing critical deadlines.

1. Scan Future Opportunities

Government agencies publish procurement forecasts showing upcoming contracts. In the US, check SAM.gov and agency-specific forecast pages. UK opportunities appear on Find a Tender, whilst EU member states use their national procurement portals.

Industry engagement events give you early insight into requirements and allow relationship building with procurement officials before formal competitions open.

2. Pre-Market Engagement

Before formal bidding opens, agencies often hold supplier briefings or request information (RFI) responses. This stage lets you demonstrate capabilities and potentially influence final requirements.

Financial services firms use this phase to showcase regulatory expertise that generic competitors lack. The goal is positioning your unique value before evaluation criteria are finalised.

3. Submit Pre-Qualification Questionnaire

Pre-Qualification Questionnaires (PQQ) assess financial stability, past performance, and technical capability. You'll provide company accounts, insurance certificates, and case studies of similar work.

Past performance outside the jurisdiction counts, though you'll frame it in terms evaluators recognise. A pharma contract in Germany translates to UK procurement when you emphasise regulatory compliance and quality standards rather than just project scope.

4. Prepare Technical and Price Bids

Shortlisted suppliers submit detailed technical proposals and pricing. Government evaluations typically weight quality higher than price—often 60/40 or 70/30 splits.

Your technical response addresses every requirement in the specification. Evaluators score against published criteria, so directly referencing requirement numbers and providing evidence for each claim is essential.

5. Post-Award Compliance Audits

After contract award, government auditors verify your compliance with employment law, accounting standards, and security requirements. Audits can occur at any time during contract performance, often with minimal notice.

Audit-ready processes mean you're always prepared. Employment records, payroll documentation, and tax filings stay organised and accessible, reducing audit stress for Finance and Legal teams.

Typical Costs and Timelines for Mid-Market Entrants

Realistic cost expectations help you budget for government contracting as a strategic investment rather than an unexpected expense. Planning for both upfront and ongoing costs prevents budget surprises that can derail otherwise successful bids.

Registration and Certification Fees

Mandatory registrations like D-U-N-S numbers and SAM accounts are free, though expedited processing costs around £200. Security clearances for key personnel range from £500 to £2,000 per person depending on the level required.

Quality certifications cost between £3,000 and £10,000 initially, with annual surveillance audits adding £1,500 to £3,000.

Payroll and Overhead During Mobilisation

Bid preparation often requires hiring local staff before contract award. EOR services let you onboard employees without entity setup, converting them to your subsidiary later if you win multiple contracts in the jurisdiction.

Monthly EOR costs of £400 per employee are predictable and transparent—unlike the variable costs of running your own payroll in unfamiliar jurisdictions where tax rates, social security contributions, and statutory benefits differ significantly from your home market.

Common Pitfalls That Disqualify Foreign Bids

Even experienced companies make avoidable mistakes that eliminate them from consideration. Government evaluators have limited discretion to overlook technical non-compliance, no matter how strong your proposal otherwise appears.

Missing Mandatory Disclosures

Procurement regulations require disclosing conflicts of interest, litigation history, and relationships with government officials. Omitting disclosures can disqualify your bid and bar you from future competitions.

Financial services firms face particular scrutiny around regulatory actions and enforcement history. Complete transparency, even about resolved issues, builds trust with evaluators.

Incomplete Past-Performance Documentation

Evaluators score past performance based on documented evidence, not claims. You'll provide client contact details, contract values, and specific outcomes you delivered.

International experience counts when you translate it into the evaluation framework. A defence contract in France becomes relevant to UK procurement when you emphasise NATO standards compliance and security clearance management rather than just project completion.

Non-Compliant Employment Practices

Government auditors verify that contractors follow local employment law. Non-compliant practices—misclassifying employees as contractors, incorrect tax withholding, missing statutory benefits—can terminate contracts immediately.

HR teams stretched across multiple countries often lack visibility into jurisdiction-specific requirements. Compliance-first platforms create audit-ready employment records automatically, giving you confidence that every hire meets local standards from day one.

Why Compliance-First Employment Accelerates Bid-Readiness

Government procurement evaluates your ability to deliver, not just your technical solution. Employment compliance directly affects that evaluation—procurement officials want confidence you can hire, manage, and pay staff without creating problems for their agency.

Platforms with built-in AI Agents automate routine compliance tasks that consume HR team time. Experts handle complex cases: works councils in Germany, collective bargaining agreements in France, statutory benefits calculations in jurisdictions you're entering for the first time.

This combination creates audit-ready processes that satisfy government requirements without overwhelming your internal teams. Payroll runs without errors, employment records stay complete and accessible, and regulatory changes get implemented automatically.

"In defence contracting, compliance isn't negotiable," notes an HR director at a mid-sized aerospace supplier. "Our EOR partner handles the complexity so we can focus on winning contracts, not managing employment law across eight countries."

For companies in defence, pharma, and financial services—where regulatory scrutiny runs highest—this compliance foundation separates successful bids from disqualified ones.

Build Confidence to Bid Globally With Teamed

Government contracting success depends on compliance certainty. Mid-market companies competing against larger incumbents benefit from every advantage they can get.

Teamed's compliance-first approach across 180 countries gives HR, Finance, and Legal teams confidence to pursue contracts in new jurisdictions. Our platform handles entity operations, EOR services, and contractor management in one system—so you can graduate from subcontractor to prime contractor without re-onboarding staff or switching platforms.

Built-in AI Agents automate 70% of payroll and HR tasks, whilst our experts handle the regulatory nuances that government auditors scrutinise closely. 24-hour onboarding means you can mobilise staff immediately after contract award, and fair and transparent pricing eliminates the budget surprises that derail procurement plans.

Whether you're bidding on your first government contract or expanding into new markets, Teamed solves the employment compliance challenges that make or break delivery success.

Talk to our experts about government contracting compliance and discover how we help companies like yours win and deliver public sector work across Europe and beyond.

Frequently Asked Questions About Foreign Companies and Government Contracts

How often do foreign companies renew their government supplier registrations?

Most registrations require annual renewal with updated financial and compliance information. SAM registration in the US renews yearly, whilst UK Find a Tender accounts need periodic updates when company details change.

Do foreign companies need performance bonds when bidding on government contracts?

Performance bonds are typically required for contracts above certain thresholds, regardless of supplier nationality. Bond amounts usually range from five to ten percent of contract value. Obtaining bonds can be more difficult for foreign companies without established credit history in the jurisdiction.

What is the typical duration for obtaining export control licences?

Export licence processing times vary by jurisdiction and technology sensitivity, typically ranging from several weeks to several months. Straightforward dual-use licences in the UK can clear in four to six weeks, whilst US ITAR licences for defence articles often take three to six months.

Can foreign companies pay government contract staff in their local currency?

Payment currency depends on local employment law and contract terms. Many jurisdictions require local currency payment for tax and social security compliance, even if your company operates in a different currency. EOR services handle multi-currency payroll automatically.

Is contractor employment acceptable for security-cleared government work?

Most security-cleared positions require direct employment relationships rather than contractor arrangements. This ensures proper vetting and ongoing security obligations remain with a single responsible employer.