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The World of Government Contracting 101: Part 1

The World of Government Contracting 101: Part 1

Part 1:  Characteristics of the Government Contracting Environment

The legal environment in government contracting differs in significant ways from commercial contracting.  Government agencies may have supplemental regulations and guidance that modify primary regulations.

  • Government standards are typically more stringent and are subject to audits.
  • Government has the right to unilaterally terminate a contract at any time.
  • Contractors normally do not have recourse in courts; they must use Board of Contract Appeals (BCA).
  • The Government does not recognize unwritten common law.

The difference between common law and a statute is, a statute is a written policy enacted by a legislative assembly.  Common law is normally an unwritten rule of action or conduct established by an authority, society, or custom.  Common laws may come from the courts in the form of a written opinion.

The Federal Contract Appropriation Cycle looks like this:

  • Bill is passed. Congress permits federal agencies to incur obligations and to make payments out of Treasury funds.
  • Funds are appropriated. Appropriation bills are created to authorize expenditure of public monies specifying the amount, manner and purpose of each expenditure.
  • Budget is committed. Budget becomes available for commitment as a result of an appropriation act or statute conferring contracting authority.
  • Funds are obligated. Government commits to spending the obligated funds via contract award.

Government funds are generally classified in two ways:

  • Appropriated – Funds are made available by Congress for a specific purpose, including the formation of contracts.
  • Non-Appropriated – Monies obtained from sources other than Congress.

Funds are distributed to meet the needs of small business groups through the Small Business Administration (SBA) Government Contracts office.  They assist contracting personnel on matters relating to small, disadvantaged and woman-owned business concerns.  The SBA defines small business size, makes loans, enters into contracts with the government and subcontracts to small businesses, determines the percentage of contract awarded to a contractor, and certifies the competency and capacity for each business to perform their contractual duties.

The Small Business Act was created to promote policies and actions that ensure small businesses obtain their fair proportions of supply and services contracts.

Under the 8(a) Program, the SBA enters into prime contracts with federal departments and agencies and subcontracts the performance of work to disadvantaged small businesses that are certified participants in the program.  The current overall small business goal is 23% of prime contracts.

Specifics goals include:

  • 5% of prime and subcontracts for Women-Owned Small Businesses
  • 5% of prime and subcontracts for small, disadvantaged businesses
  • 3% of prime and subcontracts for service-disabled veteran-owned small businesses
  • 3% of prime subcontracts for HUBZone certified small businesses

Small Business Set Asides are often used to reserve funds for small business contractors.  There are either total set asides where there are restrictions on the entire procurement process or partial set asides which only apply to a certain portion of the procurement.  To ensure the competitive process remains fair, specific provisions must be followed:

  • The Contracting Officer makes a determination for each separate procurement to be set aside and must document the rationale for their decision.
  • Prime contractor is required to make a “best effort” attempt to use small businesses for contracts whose thresholds exceed $150,000.
  • Prime contractor is required to provide the Contracting Officer with a written plan that includes small business subcontracts use for all procurements exceeding $700,000 or $1.5M (for construction).
  • Always check the SBA website: http://www.sba.gov/GC/ for up to date information on Small Business contracts.


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