Over the course of a rocky FY26, every federal contractor has been hearing the same thing: diversify. Look at state and local. Stop betting the company on one buyer.
It’s good advice. It’s also incomplete, because “diversify into SLED” is not one decision. It’s a different decision for a highway contractor than for a software company, and the gap between those two cases is enormous.
So instead of arguing about it, we went and counted. What follows comes from open, live solicitations across state, local, and education buyers, the ones sitting on procurement portals and city websites this week.
How many state and local contracts are there in my NAICS code?
Start with the simplest question a contractor can ask. For every open federal opportunity in my code, how many open state and local ones are there?
Same advice, opposite outcomes, and the only thing separating them is which code you happen to work in.
Are state and local contracts smaller than federal contracts?
Yes, and by more than most people expect.
We compared the median published contract value in the same NAICS code on both sides of the fence:
A federal IT services firm accustomed to pursuing four-million-dollar computer systems design contracts will find the state and local equivalent sitting around a quarter of a million. That is a sixteen-fold difference in deal size, inside the same code, for what is often very similar work.
The gap narrows as the work gets more commoditized. Janitorial services runs less than two to one. Software publishers, under three to one. But the direction is consistent. The same capability sells for less to a city than to a federal agency.
That sounds like bad news. It isn’t, necessarily. It just means you have to be honest about what you’re buying. You are not buying a replacement revenue stream at your current deal size. You’re buying more shots, at lower stakes, with lighter competition, in a market where a small win still counts as past performance.
For a company trying to build a record rather than defend one, that trade is often worth making. For a company that needs to replace a $4M contract that just went away, it isn’t. Know which one you are before you commit a business development quarter to it.
How long do you get to respond to a state or local RFP?
Federal contractors bracing for a frantic scramble tend to be surprised here. State and local solicitations stay open a median of 29 days from posting to due date. Federal, 19.
You get about ten more days. The pressure in SLED is not the response clock. It’s everything that happens before the clock starts, which is the part nobody warns you about.
Who actually buys in the SLED market?
Ask a federal contractor to picture a SLED buyer and most describe a state agency. That’s not what the market looks like.
State governments account for under a quarter of open solicitations. Cities alone outnumber them. Add counties and K-12 school districts and you have close to sixty percent of the market sitting below the state level entirely.
This matters more than it sounds. If you’ve looked at state-level procurement and decided you know how SLED works, most of the market still looks nothing like what you saw. A city of forty thousand people might post a bid on its own website, give you a phone number, and award it in six weeks. Plenty of these buyers run a handful of solicitations a year, and the process reflects that.
How local does “local preference” actually get?
Every federal contractor eyeing SLED has heard that local preference exists. Almost nobody knows where the line gets drawn.
When a solicitation carries a local preference, it’s drawn at the city limit or the county line about two-thirds of the time. State and regional boundaries are the minority.
And the tighter the boundary, the harder the rule. Preference drawn at the city limit is roughly twice as likely to be a hard requirement, an eligibility gate rather than a scoring nudge, as preference drawn at the state line.
The practical translation: “we’re going after Texas” is not a SLED strategy. Being a known, registered, physically present vendor in three counties is a SLED strategy. The geography that matters is far smaller than most federal contractors assume, which is bad news for a spray-and-pray approach and very good news for anyone willing to pick a patch and own it.
How should a federal contractor start bidding on state and local work?
Four things, in order.
Look up your own ratio first. Before you commit any BD time, count open SLED solicitations against open federal ones in your primary code. If that number is under three, the diversification case has to be made on relationship risk, not volume.
Reset your deal-size expectations before your first pursuit, not after. Going in expecting federal contract values guarantees you’ll conclude SLED “isn’t worth it” after two bids.
Pick counties, not states. Then register as a vendor in each one, because most agencies search their own vendor database before anything gets posted.
Fix your discovery problem before your proposal problem. Your win rate is not what’s limiting you here. There is no SAM.gov for state and local work. The opportunities are scattered across tens of thousands of individual government websites, and the ones you never see cost you more than the ones you lose. You can start by pulling up the open solicitations in your own NAICS code and counting how many of those buyers you’d never heard of.
The federal contractors doing well in SLED right now aren’t better at government contracting than you are. They just did the arithmetic on their own code before they committed.
David Fine is the founder of Bidscope, which tracks state, local, and education solicitations across more than 50,000 government sources and matches them to contractors by capability rather than by keyword or NAICS code. Bidscope also surfaces signals on upcoming opportunities, drawn from forecasts, published budgets, and expiring contracts.