In the D.C. area – the startup scene is emerging and expanding rapidly, but government contracting (GovCon) is the main business for technology companies. If you’re a Software as a Service company and new to the GovCon space, this article will give you a high level overview of 5 things you need to know.
Before submitting a bid or proposal in response to a solicitation by the U.S. Government, your company should be registered in the System for Award Management (SAM) database with all the appropriate information – including your industry classification, bank account information, and representations and certifications.
2. Understand The Federal Acquisition Regulation (FAR)
The formation and administration of U.S. government contracts is governed by the Federal Acquisition Regulation, or FAR, along with the 20 agency specific supplements within the FAR. If you plan to work with the government, make sure you get familiar with the FAR and how it applies to you (with the help of an attorney, of course).
The purpose of the FAR is to, essentially, oversee the government contracting process in a systematic matter while maintaining the public’s trust – because government contracting generally uses taxpayer dollars.
3. Know The Different Types of Federal Government Contracts
There are two main types of federal government contracts, along with several sub-types under them. They are:
- Fixed-Price Contracts – where the government agrees to pay a fixed price for a product or service at the time of award, and the contractor will bear the risk of excess performance costs. There are two sub-types of fixed price contracts:
- Fixed-price with economic price adjustment contracts – where the price can be increased or decreased for specific contingencies.
- Fixed-price incentive contracts – where the contracts adjust the contractor’s profit and establish the final contract price by using a formula based on the relationship of final negotiated total cost to total target cost.
- Cost-Reimbursement Contracts – where the government will pay the contractor’s allowable costs incurred during contract performance up to a specified ‘cost ceiling’ that’s written in the contract. There are five sub-types of cost-reimbursement contracts:
- Cost-plus-fixed-fee – A negotiated fee fixed at inception will be paid, and does not vary with actual cost. Fee can be adjusted if government changes the work to be performed under the contract.
- Cost-plus-incentive-fee – An initial negotiated fee is later adjusted based on a formula calculating the total allowable costs to the total target costs.
- Cost-plus-award-fee – A fee that consists of a base amount at the start of the contract and an award amount based on the government’s determination that the contractor has satisfied specific criteria in the contract. Think of it as an incentive for great performance.
- Time and Materials – permits the government to acquire supplies or services on the basis of direct labor hours at specified hourly rates and actual costs for material.
- Labor hour – Like time and materials, except materials are not supplied by the contractor.
4. Understand that Specific Requirements Apply
Since Federal government contracting is a political process with applicable laws and regulations, you must be aware of, and meet, specific requirements when it comes to working with the government – including but not limited to:
- Labor requirements
- Protection of Intellectual Property
- Truthful cost and pricing
- Cost accounting standards
- Foreign acquisition
- U.S. export controls and sanctions
- Contract changes
- Contract terminatinos
- Bid protests
- Contract disputes
- Fraud enforcement
5. Understand that Compliance is Important
Since you’re working with the Federal Government, your company should have an effective compliance plan in place. This includes, but is not limited to:
- Data Privacy
- Internal Policies and Procedures
- HR Policies
- Internal Training
- Internal Compliance Tracking
Let us Help
This post is just a high level overview of Government Contracting. There are more nuances and specifics around regulations and contracts that you should understand if you plan on bidding for a government contract. Kader Law can help you navigate government contracting.
If you need legal assistance, feel free to contact us.
This post is not legal advice, and does not establish any attorney client privilege between Law Office of K.S. Kader, PLLC and you, the reader.