Considerations for potential federal government contractors

July 16, 2015

Practical Law logo newTaking on a contract with the federal government can be an enticing prospect. The US government is the single largest purchaser of goods and services in the world. Along with these opportunities, federal government contracting also presents significant regulatory challenges that are not present in commercial contracting. This Post highlights the major differences between commercial contracting and contracting with the federal government.

What are some Basic Differences between Commercial and Government Contracts?

Commercial contracting is based on freedom of contract principles. As long as a transaction is not illegal or against public policy, the parties are generally free to negotiate and agree terms based on their business considerations and relative bargaining power. By contrast, federal government contracting is highly regulated and the contractor’s bargaining power is more limited. The Federal Acquisition Regulation (FAR), related supplements and other procurement regulations govern most aspects of procurement agreements between private suppliers and the federal government.

Notable considerations that are unique to federal government contracting include:

  • Cost principles and accounting standards.
  • Socio-economic considerations.
  • Treatment and ownership of intellectual property.
  • Use of subcontractors.

When Can the Government Terminate a Contract?

The government may terminate a contract for:

  • Convenience. A procuring agency’s right to terminate a contract for convenience is only limited by its duty of good faith and fair dealing.
  • Default. A procuring agency has the right to terminate a contract if the contractor defaults on its obligations.

How are Disputes Resolved?

Federal government contracting disputes typically involve either:

  • Bid protests. The competitive bidding process is a source of frequent disputes between disappointed or potential bidders and procuring agencies. These types of disputes, commonly referred to as bid protests, are not resolved through the normal litigation process at a court of general jurisdiction. Rather, bid protests are resolved through special procedures at the following forums.
  • Contract Disputes. The Contract Dispute Act (CDA) governs federal government contracting disputes between contractors that have been awarded the procurement and the government agency. To initiate the dispute process a contractor must present its claim to the agency’s CO, who is tasked with rendering a decision on contractor’s claims. If the contractor disagrees with the CO’s decision or does not receive a decision within the statutory time period, the contractor can appeal to either:
    • the applicable Board of Contract Appeals (Civilian or Armed Services), within 90 days after the CO’s decision; or
    • the COFC, within one year after the CO’s decision.

For the full article, see Article, Considerations for Potential Federal Government Contractors.

For a suite of resources for potential government contractors, see Federal Government Contracts Toolkit.