So you’re contemplating running the gauntlet to land a contract with the US government (USG). What do those vehicles look like and what should you target?
First, the Federal Acquisition Regulation (FAR) is the overarching federal rulebook that governs all federal contracting. It is comprehensive AND intimidating for the uninitiated! (Check out the link and you’ll see.) Fortunately, there are a number of well used paths through the FAR, so we’ll cover a couple that are typically used.
If you offer standard products and services, like a software package or lawn care, the GSA Schedule is a government-wide contract from which US federal entities can purchase from pre-approved vendors at pre-negotiated prices. Once you have listed a product or service on GSA, the law mandates that this be the best – and lowest – price that you can sell that product or service throughout the federal government.
For acquisitions that drive additional complexity, in terms of development or operations, there exist a number of contract types and styles that may be used with varying degrees of risk allocation between the government and the supplier.
- Fixed Price Contracts. These contracts are exactly what the name implies. The contractor agrees to set a price for the work, regardless of the actual cost. The government gets limited or no insight into profit margins, but these contracts are generally highly competitive so the selected winner likely has relatively low profit margins and good understanding – and control – of their production costs. There are variations of these that allow for inflation, including labor costs. The government may offer incentives based on specific performance targets, such as a building delivery timeline.
- Cost-Plus Contracts. These contracts permit the government to reimburse the contractor for all allowable costs incurred. As this implies, the USG gets much more detailed insight into what the contractor is charging and profit margins must fall within acceptable thresholds. In addition, there are generally award fees of some sort that can be fixed, incentive-based, or award-based. For example, building the first production line for a stealth fighter that involved major new elements would likely be acquired through a cost-plus contract.
- Time-and-Materials (T&M) Contracts. These contracts are used when the exact scope of work is uncertain and the exact labor and materials needed cannot be estimated ahead of need. The contractor is reimbursed for labor hours at a pre-negotiated hourly rate plus the actual cost of any materials. Ongoing IT support services for a Federal Agency is an example where T&M contracting is often applied.
- Indefinite-Delivery/Indefinite-Quantity (IDIQ) Contracts: These vehicles are used when the quantity and timing of goods and services are not known ahead of need. Instead, a long-term relationship is put in place that the USG can draw against over the life of the contract. Generally, these set a minimum and maximum draw on the contract over some set period to help the contractor maintain expertise and adequate inventory to meet USG needs. Updating an antiquated IT infrastructure might use an IDIQ vehicle, as part of the scope may result in discovery of additional needed support systems.
One other consideration as you contemplate a USG contract: data rights and “your” IP. Most USG contracted development activities include a Government Data Rights clause. Data rights define the government’s ability to use, modify, distribute, and disclose technical data or software delivered under a contract. Most contracts for which the government is paying for development of either capabilities or unique insights mandate Government Purpose Rights (GPR). This means that the government can use the data internally and share it with other agencies but cannot release it to the public.
For example, if you tailor your code base to encompass use cases that are government unique, the contracting agency could share those use cases with another agency without your permission. In practice, we see very little of this type of behavior, but it is allowable. It does mean, however, that contracting rates can be shared – are often are – among government agencies.
