Foundations of GOVCON-Types of Contracts

When I first began working in the government contracting field, the sheer number of different things that people referred to as a contract confused me. This is one of the most substantive changes from commercial contract law, and it confuses most entrants. You can win a contract in the GovCon space and not be entitled to any money. In fact, many companies spend tens of thousands of dollars (or more) on competing for a contract and never see a penny.

In this post, I’m going to try to summarize some of the key terms and what they mean for your business. I’m also going to discuss some of the easiest ways to enter the GovCon market space.

Contract v. Contract Vehicle

According to GSA, a contract vehicle is “a contract, or group of contracts, that provides a streamlined process for government agencies to place multiple orders for certain products and services with a pre-selected vendor or group of vendors.” When you first try to enter the federal government marketplace, most agencies will prefer to buy through a specific contract vehicle. It is important to be eligible to sell through that contract vehicle if you want to sell to that agency. The most popular contract vehicle is the GSA Schedule.

Winning access to a contract vehicle does not guarantee any sales, however.

IDIQ Contract

An IDIQ contract means an indefinite delivery, indefinite quantity contract. The government uses these when it can’t decide how much of something it wants. They are typically focused on services over a specific amount of time. To qualify as a contract, they are supposed to have a minimum funding amount. Not all of them do, or the minimum amount is so small as to be meaningless.

Receiving an IDIQ contract is great, but again, it doesn’t mean you are going to get to sell to the government. After awarding IDIQ contracts, the government typically issues task orders which may also be competitive. Because of this, the government will ask for further discounts.

Blanket Purchase Agreement

BPAs are defined by the Federal Acquisition Regulation. The regulations permit agencies to “establish BPAs under any schedule contract to fill repetitive needs for supplies or services.” Agencies are supposed to prefer multiple award BPAs, where several offerors are awarded the contract. The agencies then make purchases through task orders issued under the BPA. This allows the agency in question to negotiate a lot of the key contract terms up front when awarding the BPA and negotiate a limited number of details at the time of order.

BPAs are a contract vehicle, and competition for actual awarded dollars under a BPA can be fierce. Like in IDIQs above, actual purchasing is typically done through task orders and the government will ask for additional discounts at that time.

GWACS

Governmentwide Acquisition Contracts are contract vehicles administered by a single agency for the purchase of IT services. A number of agencies run GWACs, each of which have different costs and benefits. GSA runs a number of GWACS (8(a) STARS III, Alliant 2, VETS 2), while other agencies have their own (e.g., NASA SEWP).

Providers of IT services should consider applying to all eligible GWACS. In addition to different eligibility requirements, the GWACS also specialize in the way they offer IT products and services to the government, so determining just one can be a challenge.

COTS v. Commercial Goods v. Commercial Services

These three terms all of have different meanings. A commercial good may not be the same as a commercial off the shelf item. Likewise, the requirements to qualify as a commercial service differ from the requirements to qualify as a commercial product. The application of these definitions varies as well based on what legal requirements are in play in a particular question. It is important to keep track of what you are selling to the government and how the government sees that good.

How the FAR defines Contract Types

When we talk contract types under the FAR, we are talking about how you bill the government. The FAR defines contract types as: fixed price; cost-reimbursement; incentive; indefinite-delivery; time-and-materials, labor hour, and letter contracts; and agreements. These are usually defined at the time of solicitation, but they all have important implications for how you price out your proposal and the compliance obligations that come with them. For example, cost reimbursement contracts have significant accounting requirements that are not present in fixed price contracts.

These terms tend to be confusing and are often used improperly, which can cause more confusion. Sometimes multiple terms apply to a single contract, which makes things worse. I’ve grounded the definitions above in language from official sources, but that doesn’t mean they are the most commonly used definitions.

The important thing when entering the world of government contracting is to determine which contract vehicles are appropriate to your business strategy and to understand that the first win doesn’t mean revenue; that can be a long time coming. The first win does mean compliance obligations, so balancing the cost to get a federal contract with the longer term payoff is critical.