Foundations of GOVCON - the Basics
by Brandon Graves, Partner
Foundations of GovCon, Government Contracting
We’ve gotten a number of inquiries lately on how government contracting works. I thought it would be useful to start a series of posts on some of the basics around GovCon. Of course, our Centre Federal Contracting Institute offers courses on many of these topics for anyone interested.
What is GOVCON?
Contracting through the federal government is such a unique experience that a specialized body of law has developed to govern it. It is a morass of acronyms, counter-intuitive concepts, and pitfalls. But the federal government has a lot of money to spend, which can make the risks worthwhile.
A contract with the federal government is just that—a contract, subject to many of the same legal analyses as a commercial contract but with a lot of different clauses and requirements that are unique to federal contracting. For GovCon beginners, there are two big complications that always need to be front of mind.
Federal Acquisition Regulation
GovCon is governed by the Federal Acquisition Regulation (FAR). The FAR has the full authority of any other regulation and is generally developed in the same way. For government contractors, it operates a little differently, however.
Certain sections of the FAR are non-negotiable contract clauses. The Contracting Officer (a government official with the ability to negotiate and execute contracts on behalf of the government) must include certain FAR clauses in contracts. The specific FAR clauses differ based on the type of contract, but most of these terms are non-negotiable. Many of these clauses must be flowed down to subcontractors.
To some, FAR clauses might seem like boilerplate. However, while in some rare cases boilerplate may be unenforceable, FAR clauses are always enforceable. And while some private corporations make a business decision not to enforce clauses that don’t directly affect the underlying purpose of the contract, the government will enforce all clauses in the contract, even ones so esoteric as the prohibition on inverted corporations.
Finally, certain violations of FAR clauses require mandatory disclosure. Whereas numerous commercial contract breaches go unremarked on daily, government contracting often requires that a company inform the government that the company breached a term in the contract and accept the consequences.
Commercial contract breaches are typically civil matters, resolved between two equal parties. That is not the case with the government. In GovCon, civil disputes that reach courts are litigated by the Department of Justice. Those disputes can be escalated to the criminal division of DOJ, which is incredibly rare if not unheard of in purely commercial disputes.
Before an issue gets to federal court, agencies can issue subpoenas and compel extensive document production. Sometimes, other agencies, such as the Department of Labor, can audit a government contractor, even if there is no direct contractual relationship with the other agency. This creates significant compliance burdens that are not present in commercial contracting.
Finally, there is a set of boards that exist to resolve disputes without going to courts. But these boards are federal agencies with all that implies.
Government contracting can be very lucrative, but it can also be risky. Companies with experience in the commercial space that jump into the GovCon space may not fully appreciate that risk. It is critical that those companies take time to understand the differences between commercial and government contracting. This series should help in that, and of course we are always available.