What Is Government Contracts Law?

The U.S. Government is the largest consumer in the world. It buys and sells everything from everyone. Because it is a government agency, there are laws about how it must do business with other government agencies and businesses. Becoming a government contractor can be profitable for large and small businesses. Dealing with the regulations is the only issue.

Government contracts law ensures that the government, the companies, and other agencies follow particular laws, such as the Federal Acquisition Streamlining Act (FASA), which encourages the government to buy existing products. The U.S. Small Business Administration (SBA) helps small companies become federal contractors.

What Is Government Contract Law?

Government procurement laws restrict the government in ways that benefit American companies. The Buy American Act of 1921 requires that materials bought within the U.S. be manufactured within the U.S. from U.S. raw materials. Later laws added to the Buy American Act. The most recent Build America Buy America Act of 2021 adds construction materials to the products.

The procurement process involves a competitive bidding process designed to avoid favoritism and nepotism and ensure fairness to all bidders. A company must register as a federal contractor before it can bid on a contract. This is when you may need a government contracts attorney.

Prime Contractors and Subcontractors

Because government contracts are often large and complex, big companies or agencies bid on and win the contracts. These are prime contractors or general contractors. Smaller companies provide specialized services or products to the contract as subcontractors. Subcontracting can be equally lucrative and as demanding as prime contracting.

All contractors must follow federal regulations when doing business with the government. These rules can include:

• The size of the business. The government has standards for "small businesses" and who may bid on those contracts.
• Sourcing rules to avoid self-dealing and conflicts of interest.
• Limits on subcontracting and what companies and agencies can subcontract.
• Compliance with international trade agreements, including NAFTA.

Private businesses contracting with the U.S. government must also follow federal labor laws and state guidelines. If you contract through a federal agency, it may have other requirements. With all these restrictions, a government contract lawyer is essential.

Types of Government Contracts

The government regulates bids through the Federal Acquisition Regulation (FAR), a department of the General Services Administration. Once you are a federally registered contractor, you will go here to learn what each department wants for its bid packages.

There are many kinds of contracts, depending on what the government needs and how soon it needs the products. An incentive contract encourages contractors to complete long-term projects on time or under budget. Governments use incentive contracts in large, complex projects with extended deadlines.

Most contracts in the private sector fall into four categories.

• Fixed-price contracts have a set dollar amount that the contractor cannot exceed. When the contractor knows the scope of work ahead of time, they can sign fixed-price contracts. The contract may contain a clause for payment if there is a cost overrun.
• Cost reimbursement contracts often get used in research and development projects. The government pays the contractor a fee and reimburses the contractor for extra expenses.
• Time and materials contracts are used when the end cost is unclear and the scope of the work is difficult to define. The contractor must provide regular invoicing for hours and materials during the project.
• IDIQ or "indefinite delivery/indefinite quantity" contracts are the reverse of requirements contracts common in manufacturing. In an IDIQ, the government knows it will need a certain product at some time, but not when or how much. The contract informs the contractor that the government will ask for the product at some point and expect the contractor to deliver.

How Does Competitive Bidding Work?

To get these and other contracts, companies must engage in competitive bidding. This eliminates favoritism and discrimination in contract awarding. The procedure differs slightly from ordinary bidding competitions in government contracts.

The federal government maintains a list of qualified bidders. It must include women-owned, minority-owned, disabled-veteran-owned, and HUBzone (historically underutilized business zones) businesses by law. Only qualified government contractors can bid on contracts.

The government sends all qualified contractors a Request For Proposal (RFP). Government requirements for RFPs are strict. If you have never completed a government RFP, you should not try to learn on the fly. Get legal advice before submitting your proposal. The RFP must be sealed and submitted by the deadline.

The Government Accountability Office (GAO) has the final say over contract claims or disputes. Bids or awards violating federal law are subject to review by the GAO.

Contract Dispute Resolution

The False Claims Act allows the government to sue fraudulent contractors for three times their damages plus a fine. The FCA also allows private people to sue on behalf of the government (a qui tam action) and collect part of the settlement.

Unfortunately, fraud against the government is a profitable occupation. It was widespread during the Iraq and Afghanistan conflicts. The U.S. Department of Justice (DOJ) handles false claims cases in Federal Circuit Court.

The Contract Disputes Act (CDA) is a system for resolving legal issues in all government contracts about procuring property, services, or construction. Once a party brings a request for decision to a contracting officer, the contracting officer must decide before the contractor can appeal the result to a board of contract appeals. The claimant may also present the case to the U.S. Court of Federal Claims.

Terms to Know

• Appropriation. In governmental accounting, an expenditure authorized for a specified amount, purpose, and time.
• Bid protests. A process to challenge the award or proposed award of a procurement contract. Contractors can also challenge the terms of the contract solicitation and the federal procurement action itself.
• Comptroller general. The accounting officer who investigates financial claims against or on behalf of the U.S. government.
• Government Accountability Office (GAO). The federal government office that carries out legal, accounting, auditing, and claims settlement functions about government programs and operations. (In 2014, the General Accounting Office formally became the Government Accountability Office)
• Mentor protégé. The SBA mentor protégé program helps small businesses ("protégés") bid on government and DOD contracts with help from existing federal contractors.

Why You Need a Government Contract Attorney

Federal government contracts are a reliable source of income for many companies. Bidding on these contracts means understanding the details the government demands. If you plan to try for some of that money, get the legal services of a government contract lawyer in your area.

Related Practice Areas

• Business and Commercial Law
• State, Local, and Municipal Law
• Administrative Law
• Government Agencies and Programs