Selling to Uncle Sam
The Basics of Contracting with the Federal Government
By: Ronald S. Perlman, Esq., Chair, Buchanan Ingersoll Government Contract
Practice Group and Michael Tuite, Esq., Associate, Buchanan Ingersoll
Government Contract Practice Group.
Whatever you sell, the United States Government, or one of its contractors,
probably buys it. In fact, the government purchased more than $200 billion
in goods and services last year. The government is not just buying battleships
and smart bombs either. It needs everything from No. 2 pencils to ceramic
dishes to security hardware to robotic devices to finely honed machined
parts.
A customer with that kind of buying power cannot be ignored! New contractors
and subcontractors may need help in avoiding the pitfalls often encountered
when dealing with the government. Here are some key areas to consider:
The Rules of the Game
There are several statutes and regulations that govern the federal procurement
process. Some of these flow down to subcontracts. Anyone involved with
government contracts or subcontracts should start by reviewing the Federal
Acquisition Regulations (FAR). The FAR is available on-line at www.arnet.gov.
It contains the acquisition policies and procedures used by all federal
agencies. The policies and procedures are implemented by the inclusion
of mandatory FAR clauses in government contracts. The typical government
contract usually contains 50 or more FAR clauses. A basic understanding
of the terms and conditions under which your company will provide a
good or service to the government is critical to ensuring proper contract
performance.
Acquisition Methods
There are two basic methods by which the government acquires goods and
services – sealed bidding and competitive negotiation. In sealed
bidding, a contracting officer initiates a sealed bid acquisition by
issuing an invitation for bids (IFB), which describe the government's
needs and requirements. IFBs will be published in the Federal Business
Opportunity Web site located at www.FedBizOpps.gov. The contracting
officer will make award to the responsible bidder that submitted the
lowest priced responsive bid.
Contracting by negotiation allows more flexibility. For example, the
contracting officer may engage in discussions with offerors. In evaluating
proposals, he or she may consider non-cost factors like managerial experience,
technical approach and past performance. The process begins by the contracting
officer issuing a request for proposal (RFP). The RFP will state the
agency's need, anticipated terms and conditions of the contract, the
information the offeror must include in the proposal and the factors
and subfactors the agency will consider when evaluating proposals.
The contracting officer may award a negotiated contract without further
negotiations. Alternatively, the contracting officer may conduct discussions
with the offerors that fall within the competitive range. The contracting
officer is supposed to compare the final offers in accordance with the
evaluation criteria set forth in the RFP and select the offer that is
most advantageous to the government. "Best value" selections
are common.
Contract Clauses Unique to Government Contracts
Certain contract clauses are unique to government contracts and subcontracts.
These include the default clauses, changes clauses and termination for
convenience clauses. A default clause allows the government to terminate
a contract based on unsatisfactory performance. The contractor is often
given an opportunity to remedy the situation before the contract is
terminated. A contractor whose contract is terminated may be liable
for damages, as well as the cost of securing a new contractor.
A changes clause allows the government to make changes to the contract
as long as the changes are within the scope of the original contract.
The contractor must then comply with the new contract requirements.
The contractor may then request an adjustment to the purchase price
based on the increased costs incurred as a result of the changes to
the contract. A termination for convenience clause allows the government
to terminate a contract for any reason at any time if it is in the best
interest of the government. A contractor will have a limited right to
seek compensation for costs resulting from the termination.
Standards of Conduct
There are numerous statutory and regulatory provisions outlining the
standards of conduct that must be followed by government contractors.
Government contractors must ensure that their employees comply with
these standards of conduct. Contractors are restricted from giving anything
of monetary value to federal employees, including gifts, meals and discounts.
While it may be perfectly acceptable in the commercial world to pay
for a prospective client's dinner, such practices are prohibited when
interacting with federal employees. There are certain de minimis exceptions
– however, great care should be taken to avoid the appearance
of impropriety. Employees that regularly interact with federal employees
should be trained and reminded about the rules governing interactions
with federal employees.
Honesty is definitely the best policy when interacting with contracting
officers. The False Claims and False Statement Acts prohibit the making
of false claims and representations to the government. For example,
reports, invoices and supporting documentation provided to the government
must be accurate. Contractors that make false claims or statements are
subject to both civil and criminal liability.
Contractors must also be aware of the statutes and regulations governing
employment of federal officers and employees after they have departed
the government. Contractors often look to hire former government employees
in an attempt to secure greater insight into the contracting needs of
agencies and to capitalize on the former employees relationships with
current government employees. The restrictions vary depending on the
position formerly held by the federal employee and the work performed
while a federal employee.
Marketing
Marketing your company's product or service to the federal government,
or one of its prime contractors, is similar to marketing in the commercial
marketplace. But you may have an advantage if you are a small business,
woman-owned or a certified 8(a). It is important to meet with program
managers (the buyers) to discuss the advantages associated with your
company's product or service.
The buyer needs to know what your company offers. The government, or
its prime contractor, like any customer, will want to know what makes
your product better, cheaper and more effective than your competitor's.
An effective marketing strategy is as important in the federal market
place as it is in the commercial. You should be leery of companies that
offer to market your product or service to the government and guarantee
results. You should consider using your congressional delegation in
the marketing process.
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