By Thomas O. Mason
Shareholder, Williams Mullen
We are often asked what a business owner or board of directors should know before seeking to work as a U.S. government contractor. All contractors should consider whether they have adequately addressed the following concerns:
10. Will your company be filling a legitimate government need? Is the company promoting its business plan?
Contractors must ensure that contract performance will address a bona fide need of the government. Moreover, the work should be a natural extension of your current business plan. Also, it is imperative that the government work is a natural extension of your current business plan.
9. Is your company dealing with a warranted government contracting officer that has actual authority to bind the United States?
It is imperative that you deal on contracts matters with a contracting officer who has been given actual authority to bind the government. A company should not agree to perform a new contract or change the terms of an existing contract without the express written approval of a warranted contracting officer who has actual authority to bind the United States. The burden is on the contractor to ascertain that the government official with whom one deals is so authorized.
8. Does your company understand the requirements of government’s solicitation or statement of work (SOW)?
A government contract is no different from any other contract. Contractors must understand contract performance requirements. It is a bidder’s duty to point out any ambiguity that exists on the face of a solicitation. Performing work not specified in the contract likely will not be compensated.
7. Does your company have the technical capability to provide the goods or services required by the government?
Prior to award of any contract, the Federal Acquisition Regulation (FAR) requires the contracting officer to make a determination that the designated awardee is technically and financially responsible to perform the work required by the contract. Bid only on jobs where you meet these criteria.
6. Will your company’s accounting system be adequate to account for work done under government contracts?
Financial responsibility depends on whether your accounting system is up to the task. Under the FAR, larger companies will be required to file a disclosure statement addressing the capability of its cost accounting system. Smaller companies must employ a system that will permit the capture of costs associated with each government contract and facilitate billing of labor and material costs. Professional counsel in this area is a necessity.
5. Does your company’s code of conduct and business ethics comply with requirements of the Federal Acquisition Regulations?
This area requires due diligence. Under the FAR, Contractors are required to establish and maintain appropriate systems and procedures to ensure that the company operates ethically and in compliance with the requirements established by the FAR. A duty is imposed on government contractors to report certain violations of the FAR and other laws to the government. Counsel and training in this area are essential.
4. Will your company need any licenses or permits?
Your contract with the U.S. will not excuse the failure to obtain required licenses and permits. Most government contracts place the burden on the contractor to gain necessary licenses and permits needed to complete the work required by the contract. Consider whether export licenses or security clearances will be required.
3. What about teaming? Should your company engage the government as a prime contractor or become a subcontractor of an existing prime contractor?
Consideration as to whether to become a prime or subcontractor is essential. Case law and business principles guide our use of various contracting vehicles to accomplish the work. These vehicles include subcontracts, teaming agreements, joint ventures, strategic alliances, as well as covenants not to compete or disclose certain information.
2. Should our company become an 8(a) or other designated small, woman-owned or veteran-owned contractor in order to obtain a more competitive advantage?
Many owners focus on whether their company qualifies for entry into the Small Business Administration’s 8(a) program for small disadvantaged businesses or designation as a woman-owned, veteran-owned or other qualified small business. The notion on the ‘street’ is that designation as a socially and economic disadvantaged business pursuant to Section 8(a) of the Small Business Act will result in the award of many contracts. Besides an 8(a) designation, eligible contractors also can be designated as a disabled veteran-owned company, a women business enterprise, a HUBZone contractor, or receive one of the numerous other designations. The requirements for such designation are strict and the consequences for misdesignation can be great. Professional counsel is appropriate. A good place to start is the local office of the Small Business Administration.
1. Do you understand that your company cannot fire the government as a customer?
Unlike commercial contracts, a government contract contains clauses that require advance planning and preparation. The government retains the right to terminate or cancel the contract for almost any reason. Secondly, if a dispute arises, performance must continue while the dispute is resolved. Finally, as needs change, the government has the authority to order changes which the contractor will be required to perform. The implications of these clauses require a detailed level of understanding of contract requirements in order to correctly price performance and agree to a schedule.
As business leaders, it is beneficial to consider these basic questions before undertaking a government contract. We must be prepared if we are to provide high quality service to the largest customer in this region.
Tom Mason is chair of the Government Contracts Practice at Williams Mullen, a full service law firm serving businesses for more than a century. For more information, please contact Mr. Mason at 703.760.5200, tmason (at) williamsmullen (dot) com. www.williamsmullen.com.
This article is not meant to be and should not be construed as legal advice. Readers with particular needs on specific issues should retain the services of competent counsel.
