The United States Government buys more goods and services than anyone else, even more than Walmart. It depends on large and small contractors to provide it with everything from simple construction projects to aircraft carriers. However, companies doing business with the U.S. Government face a challenge that is very different from a typical business arrangement. The Government uses a contract that directs nearly every aspect of the businesses’ work process. If a contractor fails to properly interpret the contract, or overlooks a requirement, the result may extend beyond financial losses to include reputational damages.
The Federal Acquisition Regulations (“FAR”) is more than 1,800 pages long, and includes instructions and regulations for acquiring goods and services required by the U.S. Government. The Defense Federal Acquisition Regulations (“DFARS”) is about 1,000 pages long and includes additional instructions and regulations for the acquisition of goods and services that are required by the Department of Defense.
All Government contracts will include FAR and DFARS contract clauses either word for word in the contract or by reference. Success with the Government depends primarily on a contractor’s ability to interpret and fulfill these contractual requirements. Although the contractual clauses are obviously important to understand the contract as a whole, companies often do not put the proper amount of emphasis on this area and face problems as a consequence. Many of the problems stem from a failure to fully understand or review the clauses that are incorporated by reference.
It is especially important for small businesses to invest time and effort into fully understanding its obligations under a Government contract. Understanding the terms of the contract can help avoid contract disputes. Failure to meet a contractual requirement can lead to a range of penalties against a contractor, including a lowered performance rating to termination for default. Suspensions and debarment are the most serious consequences faced by federal contractors who fail to fulfill contractual requirements.
Bill Martin is a former B-52 and B-1B pilot and Senior Attorney for the Federal Deposit Insurance Corporation. He is currently a partner in the law firm of Keefe, Anchors & Gordon in Fort Walton Beach, Florid. Bill is admitted to practice in the U.S. Court of Federal Claims.