Federal Contracts: Everything You Need to Know
Federal contracts are used by the federal government to procure services or property in order to benefit the government. 3 min read
Federal contracts are used by the federal government to procure services or property in order to benefit the government. They cover a wide variety of goods and services. Although companies can benefit from contracting with the government, they should be well aware of all the rules and regulations that surround these types of contracts.
What Is a Federal Contract?
Federal contracts are similar to grants or cooperative agreements. The government uses contracts to provide funding for development projects and research. Federal contracts are subject to a strict set of terms and conditions, and they typically require regular reporting and a high degree of responsibility to the sponsor.
If the contractor fails to perform and produce the promised product or results on time and/or within budget, it could result in any of the following:
- Civil actions
- Criminal actions
- Financial consequences
The responsible party would be the administrators, university, or other involved parties.
Contracting with the government — from formation through administration — is a very regulated process. If you're not aware of all the rules and regulations, you can suffer serious consequences. It's not like commercial contracting, which is generally governed by common law and the uniform commercial code. Federal government contracts are governed by a complex maze of regulations and statutes.
Examples of regulatory and statutory provisions and what they specify include the following:
- The process or method an agency uses to solicit contracts
- How the agency can negotiate or award a contract
- The costs the government will reimburse, if any, and the circumstances under which they're reimbursed
- How a contractor accounts for those costs
The government imposes some socioeconomic obligations on its contracts, including requirements related to the following:
- Drug-free workplaces
- Affirmative action
- Minimum wage
Congress has made the contracting process easier to decrease the burdens on contractors wishing to offer commercial services and products. However, anyone who wants to enter into a government contract should proceed carefully.
An Overview of the Contract Process
The contracting process is similar to the relationship someone has with a sponsor. The process consists of various stages. Expect some interaction between the various stages to promote efficiency and effectiveness for all involved.
To determine if an award is actually a federal contract, trace the source of funds back to the main or prime sponsor, or the organization that holds the contract from the government. During the modification stage of the contract, you might need to go to the award document to check the prime sponsor.
Federal contracts come in the following forms:
- Standard contract
- Master agreements with task orders
- Order for supplies or services
Business Opportunities From Federal Contracts
The biggest buyer of services and products around the world is the U.S. government. Military and civilian installations make about $200 billion in purchases every year. These types of purchases include everything from janitorial services to cancer research and space vehicles. The government obtains just about any and every type of service and commodity available.
The law stipulates that federal agencies must establish certain contracting goals, so 23 percent of all government purchases are to involve small businesses. Other contract goals are established for the following:
- Small, disadvantaged companies
- Women-owned businesses
- Companies in HUBZones
- Disabled veteran-owned companies
The government doesn't always achieve these contract goals, but they remain important because federal agencies have an obligation to consider small businesses for procurement opportunities. Small business owners, however, must market and match their products and services to the government's needs.
Selling to the government isn't very different from dealing with the private sector. Government procurement procedures likely have different rules and regulations, but the same marketing techniques that business owners already use will probably work in this marketplace.
Before moving forward, business owners should carefully consider their products and services. They should think about what the government might look for when considering their business for a contract award. Federal agencies will be very interested in a business's track record, financial status, and staff capabilities when looking into award possibilities.
Small business owners can benefit from contracting with the government, as long as they identify how their products or services can best fit a federal agency's needs.
If you need help with federal contracts, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.