Government Contracting
Government contracting (GovCon) is a partially a supply logistics mechanism and partially a form of privatization in the United States. It is also variably referred to as acquisitions or procurement.
Contents
History
TODO: learn some history!
Award Process
Government agencies wishing to contract a private or non-profit organization must publish a request for proposal (RFP). These outline goals, the scope of work, and requirements for the contract. RFPs are almsot always published through SAM.gov.
Organizations then submit bids to the RFP. In many cases, organizations coordinate to submit a bid with a prime contractor and one or more subcontractors. This is especially common for RFPs that give preference to women-owned, minority-owned, or small or medium enterprises (SME). Larger organizations that can deliver services and products cheaply, and that have extensive experience in writing bids, can build a preferential proposal by incorporating a smaller organization with desirable characteristics.
Agencies are closely regulated in how they select a bid for an award. Once awarded, a contract can still be appealed. A bid protest can be filed with the GAO, and a lengthy arbitration process begins. These processes are almost always covered by protected information rules, so practically nothing beyond the final determination is revealed.
Payment Schemes
Government contracts can be categorized by their payment scheme. These are for direct costs and allowable costs (e.g., IT).
Fixed price
Fixed price or firm fixed price (FFP) contracts have a set payment that is not subject to adjustment.
A closely-related category is cost-plus contracts. These have a set value, but allowable costs can be reimbursed. Cost plus fixed fee (CPFF) is the most common payment scheme in this category. The fixed fee is negotiated before the contract is signed. There are alternative structures that reward performance or efficiency instead.
Time and Materials
Time and materials (T&M) contracts cover variable costs of servicing the contract. These are generally only used when the scope of the contract is itself unknown.
Indefinite Delivery, Indefinite Quantity
Indefinite delivery, indefinite quantity (IDIQ) contracts are major contracts composed of many task orders (TO) that each can have different payment schemes.
Indirect Costs
Indirect costs are unallowable costs not related to execution of a contract (e.g., employee benefits).
Indirect costs are governed generally by Cost Accounting Standards (CAS) and more specifically Federal Acquisitions Regulations (FAR). CAS is a standard for calculating indirect rates in contracts. (FAR incorporates CAS in FAR 52.230.)
FAR 52.216-7 requires that a contractor make a final submission of indirect rates by 6 months after the fiscal year end. The administrative contracting officer (ACO) may then audit or negotiate the final rate. Once the final rate is agreed, the contractor has 60 days to update bills and 120 days to issue final invoices.
For DOD contracts, DCMA and DCAA are responsible for this process.