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Thursday, May 16, 2019

Small Business Government Grants Versus Direct Government Contracts



Start-ups, entrepreneurs and new small businesses regularly seek information regarding small business grants. There are many misconceptions about the nature of such instruments, who qualifies for them and what constitutes a small business grant. The misunderstanding stems from advertising on the Internet and other media creating the impression that grants are readily available and that they are "Free Money".

There is no such thing as “Free” small business government grant money. In many instances individuals seeking grants should be looking to direct government contracting; this article will explain why.


Small Business Government Grants

Small Business government grants are a type of contract and involve performance of a statement of work for agencies that are in some socio-economic endeavor serving the public, such as health care, public information, communications, high technology, or similar undertakings. A small business entity receiving a grant from a government agency becomes an extension of the agency mission and obtains funding to enhance that mission while growing as an enterprise.

Small Business Direct Contracts

Small business direct government contracting differs from grants in sheer numbers and regulatory control. Direct contracts are used by all agencies of the federal government to acquire supplies and services. Both for-profit and non-profit organizations compete in direct government contracting. A direct government contract has a very specific work scope, schedule, deliverable items, pricing and in many instances incremental funding. A grant has a more generic functional orientation to funding and may or may not include deliverable items.

There are some programs, such as Mentor/Protege and Small Business Innovative Research (SBIR) that appear to be hybrids of grants and direct government contracting and are often mistaken for grant instruments. They are not grants and are governed under the Federal Acquisition Regulation (FAR) as direct government contracts.

Guidance on registering to become eligible for both small business grants and direct contracts is at the following link:

Registering For Government Contracting


Non-Profit Organizations

Most small business government grants go to non-profit organizations because of the nature of the work such entities do.

A non-profit organization operates in much the same way that a for-profit company does except that the founder (s) work for a board of directors that pays them a salary and, upon registration with state and federal governments under IRS provision 501 3 (c) or a similar designation, the business pays no taxes.

What would normally be considered profit in a for-profit company is re-invested back into a non-profit to further its work. Annual reports are required by the IRS to demonstrate the re-investment and maintain a tax-free status.

Non-profit organizations are usually initiated to pursue a religious or socio-economic endeavor serving the public, such as churches, health care, public information, communications, high technology, or similar undertakings.

No one owns a non-profit organization. A board of directors, a charter, articles of organization filed with the state and the IRS designation with the federal government establish it as a public entity. In the event it is discontinued, all proceeds and assets are distributed by the government for public use and no one individual benefits. A non-profit charter must include that provision.

The following link at NOLO provides the chronological process between a state registration and the IRS in applying for non-profit registration and tax-exempt status:

For-Profit Organizations

A for-profit organization is founded by individuals specifically defined by name as owners in the articles of incorporation with the state and registered with the federal government for tax purposes. There are many different types of for-profit entities (S Corp, Sole Proprietorship, LLC, Partnership, etc.); each type has its own unique tax and operating characteristics.

A for-profit organization exists for the specific purpose of providing a return on investment for the owners. All assets on the books of the company are the property of the company, and although certain types of corporations, such as a Limited Liability Company (LLC) reduce the risk and insulate the owners' private assets to some degree, in general what is invested by an owner in the firm is the property of the firm and subject to business risks and the laws governing such matters. In return the owner or stockholder is entitled to the return on his or her investment as an individual in the form of dividends, direct proceeds after costs or other forms of entitlement (conveying what is commonly known as profit).


Small Business Grant Funding

Small Business Government Grants have the effect of supplying lump sum funding to a non-profit organization for a specific period once the grant is awarded. In general the funding is used to further the stated mission of the business. However, the grant provider may reserve the right to receive reports on how the money was spent and may require deliverable items associated with performance of the work under the grant.

Certain grants take the form of cooperative agreements, whereby the non-profit and the agency commit to supplying mutual funding amounts to a project. Under limited or special circumstances involving 0 profit, a for-profit entity may be eligible for such a cooperative agreement with the federal government.

Federal Government grant regulations are at the following link:

Grant Regulations

A Web site for researching federal grants as well as additional information on grants in general is at the following site:

Government Grants

Small Business Direct Contract Funding

Federal Government direct contracting regulations are at:

Federal Acquisition Regulation

“Small to Feds”, the web site you are reading, was initiated to assist small businesses in understanding the above regulation and direct federal government contracting. Please see the table of contents in the left margin of this site for topics.

As stated in the introduction above, both for-profit and non-profit entities compete for direct federal contracting. A non-profit entity will bid grants and direct contracts at 0 profit. The following links are suggested as an introduction to direct federal government contracting:

Introducing Federal Government Contracting Into Your Commercial Small Business

Small Business Government Contact Set-Aside Designations

Should You Consider Small Business Federal Government Contracting?


This article has provided a brief (and admittedly general) overview of the difference between non-profit and for-profit business entities and the small business government grants and direct contracting available to each. 

Both small business government grants and direct government contracts are highly competitive. Selecting potential agency sources and submitting winning proposals are acquired skills. For assistance in writing grant and direct contract proposals please see the following links:

Proposal Preparation

Proposal Writer

When considering forming an enterprise, please assess in your business plan the potential of both types of entities in direct contracting or grant competitions. Go to the SBA web site that guides you through the business planning process. I suggest you follow the site presentation and note the factors to consider:

Write Your Business Plan

The following site contains samples of business plans:

Sample Business Plans

Look for examples in the above of both for-profit and non-profit organizations at the above link.

Ask yourself some strategic questions, such as what competition you envision and what your marketing plan will be. Addressing these questions may take some research and that is all part of the process of putting in place your plan. It is your road map for the future.

Monday, May 13, 2019

U.S. Small Business Administration Offers Help to Veterans

"The U.S. Small Business Administration has resources available for veterans who want to start their own businesses or for small businesses that may have been affected by employees who have been deployed.
The numbers are substantial, according to the SBA: Nearly one in 10 small businesses in this country are veteran-owned; veterans are 45 percent more likely to be self-employed than non-veterans; and businesses owned by female vets have increased 297 percent from 2007 to 2012.
The SBA’s website has collected a list of programs that can offer help, especially in navigating the complexities of returning home for members of the Guard or Reserve after being deployed.
It has information on starting a business, financing, mentoring and training and selling to the government. It can be found on the website Veteran Owned Businesses
One example of a resource is the Military Economic Injury Loan, which provides funds to eligible small businesses to meet operating expenses when an essential employee is called to active duty. The filing period for businesses to apply begins on the date the essential employee is ordered to active duty and ends one year after the essential employee is discharged or released from active duty.
Another aspect to consider are laws that make federal contracting more attractive to veterans, particularly those with a service-connected disability. The Veterans Entrepreneurship and Small Business Development Act of 1999 established an annual government-wide goal of awarding at least 3 percent of all federal contracts to small businesses owned or controlled by service-disabled veterans.
There’s also Boots to Business, a two-step entrepreneurship training program open to service members and their spouses. The two-day course introduces participants to the opportunities and challenges of business ownership. An eight-week online course allows participants to work through the fundamentals of developing a workable business plan."

Wednesday, May 1, 2019

Federal Government Contract Terminations

On occasion the government finds it necessary to terminate contractual arrangements with contractors. FAR Sub-part 49.5 governs such actions. Here are the two most common forms of contract termination, what you should know about them and how to manage them.


Certain conditions are usually present when contact termination is on the horizon. These factors range from product and services obsolescence to developments that change the direction and amount of agency funding. They may also include customer relations difficulties or changes in the mission of an agency.

It is best to manage the risks associated with terminations by viewing them in the light of funding and performance liability. We have previously discussed limitation of funds and funding exposure in the following articles:

Limitation of Funds and Funding Exposure

Contract Baseline Management

If it is generally known, for instance, that if the government is having funding challenges in terms of justifying the next phase of a program, your company should carefully monitor incurred costs and commitments so they do not exceed the existing funding on the contract.

Moreover, if performance on a particular contract has been sub-par, deliveries have been late and corrective action has not remedied the situation, the reality of a termination for default should be assessed from a liability perspective; particularly concerning costs the government may bill the contractor for inconvenience. Receipt of "Show Cause" notices or "Cure Letters" are signs the government is positioning a justification for contract termination.

Terminations for default are particularly harmful to a contractor's past performance rating on federal government contracts:

Contract Past Performance Record

The remainder of this article will focus on each of the two major types of terminations and how to manage each.


This form of termination arises from standard clause(s) in your government contract that give the government the right to unilaterally terminate the contract at any time with or without giving any reason. The contractor is generally entitled to a negotiated settlement for an equitable recovery of costs and losses incurred. Please see the following link for applicable clauses:

Subpart 49.5 Termination Clauses

A termination for convenience is the least risky form of termination to the contractor. Although receiving a notice that your contract is being terminated for convenience is never good news, it does offer the opportunity to recover costs you have incurred and those you estimate will impact your business due to the termination.

Actions necessary:

1. First, insure your costs to date, plus commitments have not exceeded the funding level of the contract. If they have, consider asking for a funds amendment to your contact to cover the overrun. It may not be granted by the government. Next, immediately notify departments internal to the company with regard to the termination and inform them that their charge numbers for the program have been closed. Close all charge numbers. 

2. Notify all suppliers and subcontractors with respect to the contract termination, direct that they cease work, discontinue deliveries and submit to you a termination proposal containing itemization and costs associated with terminating their order or contract. You will negotiate with your supply chain and include their costs in your termination settlement proposal to the government.

3. Open a contract termination charge number for selected use by those who are associated with the termination to charge related time and expenses for ceasing work, inventorying material, supporting a termination proposal, dealing with suppliers, handling special requests or other direct efforts to cease work. It makes no difference whether the individuals are direct or indirect in their normal time keeping. This special accounting charge number will be utilized to record the cost to your firm for terminating the contract and proposing a settlement to the government. 

4. Complete your contract termination settlement proposal and submit it to the agency contracting officer to meet the date specified by the agency for same. The following article o is an excellent reference for your termination settlement proposal preparation:

Contract Termination Settlement Proposals

5. When the contract termination settlement proposal has been negotiated and formalized with an amendment to closeout the contract in accordance with the following government approved practices:

Government Contract Closeout


A termination for default rises from standard clause(s) in your contract that give the government the right to unilaterally terminate the contractor if the contractor fails to perform according to the specified terms. The contractor is generally not entitled to any payment for the unfinished part of the contract and, instead, may be liable for (1) repayment of monies advanced, (2) liquidated and other damages and (3) excess cost incurred by the government in completing the contact under a new contractor. Please see the following link for applicable clauses:

Subpart 49.5 Termination Clauses

The Government contracting officer will terminate a contract for default when he or she determines that the contractor has failed to adequately perform in accordance with the contract. The Default clause applicable to fixed-price contracts limits the Government's liability for unaccepted work, subjects the contractor to actual (or liquidated) damages, and may subject the contractor for the excess cost of re-procurement. Moreover, the default becomes part of the contractor's past performance record which will harm the contractor's ability to compete on future contracts. Because the Government is not liable for work not accepted, the termination for default has a greater adverse consequence on supply contracts than service and construction contracts.

The government may terminate all or part of a contract for anything that was done that was not in the interest of the government, including:
  • Attempted fraud
  • Failure to meet quality requirements
  • Failure to deliver the supplies or perform the services within the time specified in the contract
  • Failure to make progress and that failure endangers performance of the contract
  • Failure to perform any other provisions of the contract.

Cure Notice

Before terminating a contract for default because of your failure to make progress or to perform, the contracting officer will usually give you a written notice, called a "cure notice." That notice allows you at least 10 days to cure any defects. Unless the failure to perform is cured within the 10 days, the contracting officer may issue a notice of termination for default.

Show-Cause Notice 

If there is not sufficient time for a cure, the contracting officer will usually send a show-cause notice. That notice directs you to show why your contract should not be terminated for default. It ensures that you understand your predicament, and your answer can be used in evaluating whether circumstances justify default action.

If a contractor succeeds in appealing the termination for default, the default is usually converted into one for the convenience of the Government.

Actions Necessary:

1. When a termination for default is at hand, contact a law firm that specializes in government contract terminations and proceed within the guidance offered by them in pursuing any part of the termination that could be converted to a termination for convenience or other form of relief with respect to conditions over which you may not have had control or for which you may be entitled to a request for equitable adjustment or contact claim.

2.  You should also proceed in accordance with paragraphs III. 1. through III. 3. above to limit your internal and supplier liability as well as isolate costs associated with the termination for a potential settlement or claim.  

When the contract has been amended by termination for default, close out the contract in accordance with the following government approved practices:

Government Contract Closeout


Contract terminations should be avoided if at all possible. They are expensive on the part of both the government and the contractor. The negative aspects of a termination for default, in particular, can last for years in government contractor past performance data bases.

Wednesday, April 24, 2019

Your Free Small Business Federal Government Contracting Advisory Service

This site is dedicated to Small Businesses who wish to succeed in Federal Government Contracting. 

There are over 100 agencies or "Departments" in the federal government. Each of these agencies has a statutory obligation to contract from small business for over 20% of everything it buys. Contracting officers must file reports annually demonstrating they have fulfilled this requirement. Not fulfilling the requirement can put agency annual funding in jeopardy. You have a motivated customer in federal government contracting officers and buyers.

Large business, under federal procurement law, must prepare and submit annual "Small Business Contracting Plans" for approval by the local Defense Contract Management Area Office (DCMAO) nearest their headquarters. These plans must include auditable statistics regarding the previous 12 month period in terms of contracting to small businesses and the goals forecast for the next year. 

The federal government can legally terminate a contract in a large business for not meeting small business contracting goals. Approved small business plans must accompany large business contract proposals submitted to federal government agencies. Small businesses have motivated customers in large business subcontract managers, administrators and buyers.

This site provides practical, no cost, “How to" guidance on the following:

1. Understanding the federal government contracting environment and small business set-aside opportunities

2. Registering a small business as a supplier with the federal government

3. Marketing to the federal government

4. Understanding the requirements of the Federal Acquisition Regulation (FAR) and Cost Accounting Standards (CAS)

5. Teaming with other small businesses

6. Achieving a General Services Administration (GSA) Schedule

7. Subcontracting to prime contractors on federal government contracts

8. Preparing competitive proposals

9. Negotiating federal contracts with government agencies, prime contractors and subcontractors

10. Managing government contracts

Tuesday, April 2, 2019



Your small business is established in the federal government contracting sector. You have become a member of the government contracting community by registering with System for Award Management (SAM). You have proposed, negotiated and have been awarded your first government contract(s) and have a successful past performance history with the government in selling your products and/or services.

On several occasions open solicitations or procurement activities have referenced a ," GSA Schedule", as a qualification criteria or as a venue by which to buy items or services you can supply. This article will discuss the GSA schedule program, how to apply for and negotiate a schedule for your company and how to utilize it as a sales and marketing tool.


From the GSA Web site:

"Founded in 1949, GSA serves as a centralized procurement and property management agency for the federal government. GSA manages more than one-fourth of the government’s total procurement dollars and influences the management of $500 billion in federal assets, including 8,300 government-owned or leased buildings and 205,000 vehicles. GSA helps preserve our past and define our future, as a steward of more than 420 historic properties, and as manager of, the official portal to federal government information and services. GSA’s mission to provide superior workplaces, expert technology solutions, acquisition services, purchasing and E-Gov travel solutions and management policies, at best value, allows federal agencies to focus on their core missions.

GSA’s Disaster and Emergency Operations Vendor Profile form puts small businesses on the government’s radar so they do not miss out on federal contract opportunities in a time of disaster. More than 1,500 small businesses have used the online form to identify themselves."

Putting it simply the GSA is a federal government buying agency. It performs many buying-related activities which you can read about at the GSA Web Site:

GSA is empowered to accept procurement requirements from all other federal agencies, locate and source qualified bidders and negotiate pricing for supplies and services on behalf of the government. Although all federal agencies perform procurement themselves that is peculiar to their individual domains, a vast number of products and services, particularly those common among agencies, are procured by the GSA. Over the last 10 years the GSA has sought to establish economies of scale through volume buying.


To equitably compete and pre-position terms, conditions and pricing for supplies and services, the GSA divides what it procures among various commodities and services lists with generic schedule designators. The agency also assigns procurement contracting officers to each schedule who conduct regular open advertising against the schedules through solicitation. The schedule numbers and contracting officers are listed at the following web site:

Each open solicitation for a generic schedule is published at FEDBIZOPPS, the portal for all federal government solicitations over $25k. The open solicitations contain details, specifications, terms, conditions and pricing instructions for the specific items on the schedule. Contractors prepare proposals in response to the open solicitations and submit them to the schedule contracting officer. The proposals are audited and negotiated like any other federal procurement. The term of the negotiated schedule is usually multi-year and can be as long as 5 years in duration so being able to develop and hold your pricing for the period of performance is a key factor.

Upon completion of negotiation, a specific supplier is granted a company-unique schedule identifying number under the applicable generic GSA schedule. The pricing, terms, conditions and validity duration are set for the specific company and the schedule number is unique to the firm. The company schedule is then authorized by the GSA for publication on the web for use in subsequent proposals to government agencies. The company GSA schedule is listed at the GSA Advantage Web Site and becomes part of the data base which government buyers can search.

Granting a GSA schedule to a company does not constitute a sale of goods and services. It simply establishes the pricing and the contract vehicle for readily buying from that company by a federal agency. A GSA Schedule saves time and effort for the buyer and it can be presented by the seller at his web site as an expedient way to get under contract with a federal agency. The agency places the order through the GSA. The GSA adds a small fee to the price of an item or service which the contractor collects from buying agency and pays to the GSA. The fee funds continued GSA operations and services. Under competitive conditions, sellers are authorized to offer discounts from their GSA schedules in the proposals to prospective agencies. State governments are also allowed to buy off GSA schedules.

Federal agencies can put in place blanket purchase agreements (BPA's) through the GSA with specific companies for long term buying. GSA also conducts Government Wide Acquisition Contracts (GWAC's) for IT and other technologies. Recent examples of a GSA GWACS for large and small business are the Alliant and Alliant SB Programs.


A. Register Your Company in the Central Contractor Registration (CCR) Data Base
If you are not familiar with this process please utilize for guidance the menu item at this site on registering your small business for federal government contracting:

B. Obtain Your "Open Ratings", Evaluation

Open Ratings is a service run by Dunn and Bradstreet that the GSA uses. It out sources what would have to be done by the GSA Staff in terms of initial past performance ratings in response to GSA Schedule Applications. Here is a web site to learn more about it:

Open Ratings

The site explains the process and shows some sample reports.

C. Locate your Generic GSA Schedule:

Examine the major generic schedules listed and determine the best match for the products and services your company offers. Note the name and contact information for the contracting officer designated for the schedule. Also note the open solicitation link to the FEDBIZOPPS. Carefully review the solicitation completely and determine that you can comply with the specifications, terms and conditions and requirements in the document.

D. Contact the Schedule Contracting Officer with Your Statement of Intent and a Concise Capabilities Statement

This is where the marketing phase of the process begins. It is best to contact the contracting officer with a statement of capabilities (CAPE). Your CAPE should be brief, concise and electronic. It should highlight the information in IV.A., B. and C. above and the management, technical and past performance elements of your products and services. Establish by letter (preferably electronic by email) your intent to submit a proposal for a GSA schedule to the contracting officer. Also confirm your anticipated proposal delivery date by telephone if possible and confirm by email. Highlight your CAPE as a qualification criterion for a company schedule award under the generic schedule you are proposing against.

E. Carefully Prepare and Submit Your GSA Schedule Proposal

Respond to each requirement carefully and in the order presented in the open solicitation. Pay particular attention to the requirements for cost and pricing data presentation. Utilize for guidance the menu items on proposal preparation and negotiation at this site. Understand that your proposal may be audited, particularly for previous pricing history related to your products and services. The contracting officer may negotiate with you the final pricing make-up of your products and services based on audit results and history. Since GSA schedules are in the public domain it is worthwhile to examine the reports available through the GSA web site on previous awards for the same or similar products or services. In addition, most companies who have GSA schedules post them at their web sites so you can get some insights into competitor pricing by looking at the fully loaded rates and their respective escalation from year to year by going to the sites and analyzing the rates located there.

F. Schedule Award

When you are awarded your GSA Schedule it should be prominently displayed at your web site and contained in your marketing literature. You can offer it to prospective federal and state customers and you can discount from it under competitive conditions. Please read the terms and conditions regarding required sales necessary on your schedule for it to remain in effect. Within a specified time frame it is necessary to have a designated dollar value of sales activity or your schedule will automatically become inactive.

Carefully follow the directions in your schedule contract for collecting the GSA fee from your agency customers as a function of pricing quotations and payment. The fee is calculated as a designated percentage over and above that which your schedule prices display. It must be collected by you as a function of your quotation to your customer.


In addition to featuring your schedule prominently at your web site, your GSA rates should be included in your market literature and your schedule number should be included as a reference in your new business proposals. A GSA schedule permits a quick ordering process for your federal and state clients. In your dealings with prime contractors to which you aspire to subcontract you can reference your schedule as valid pricing which they can readily include in their proposals to government agencies. A GSA schedule facilitates teaming with other synergistic small companies in proposing large scale efforts.

Keep in mind that obtaining a GSA schedule does not guarantee new business will come to you. Very few companies await government agencies to find them by searching the GSA data base. Most small businesses actively market their schedule to targeted agencies as an expedient way to contract with them or as a qualification criterion for new business awards.


Monday, April 1, 2019






The Federal Acquisition Regulation (FAR) contains provisions for contractors and the government to resolve contract disputes.  The disputes often arise due to events during performance, many times surfacing weaknesses in the original contract work definition, technical parameters, schedule factors or related terms and conditions that can lead to change implications effecting cost, schedule and delivery.

In short, when the understanding the parties thought they had at negotiation and execution of the contract is in dispute, there must be a resolution. 

These conditions open the baseline of the contract to further clarification and negotiation. The FAR recognizes that a fair and equitable process is necessary to settle disputes and re-establish a mutually agreeable contract baseline.


Contract baseline management has been discussed previously in the following article:

The above article offers six (6) rules of thumb:

1. KNOW - The contract value and its ceiling amount
2. KNOW - The incurred cost to date and commitments
3. KNOW - The scope of work and whether or not your current efforts are supporting it or some other objectives
4. KNOW - The estimated cost at completion based on where you are at today
5. KNOW - Your customer and who among the customer population is prone to direct out of scope effort.
6. KNOW - WHEN TO SAY "NO" to "Scope Creep" and say it officially in writing to the contracting officer specified in your contract.

The remainder of this article will discuss the three most common processes that contract disputes undergo when the baseline is in dispute and selecting the best method considering the circumstances that exist on the contract. 


An REA is most often the first and the least formal step undertaken by a contractor when there has been a clear and recognizable departure from the contract baseline in terms of events that warrant cost, schedule, technical performance or terms and conditions parameter modification.  It does not start the formal claims process under FAR with associated interest implications.

Submitted in the form of a proposal for contract change, the REA cites the "Before and After" conditions of the contract baseline and the details regarding the delta.  Implicit in the submission are actual cost records, documents regarding government actions and guidance, an estimate of the new baseline impact in terms of cost, schedule or technical modifications to the agreement and a request for contract change. 

The government agency may approve or deny the proposal, further negotiate the details with the contractor and may or may not modify the contact.  The following article is an excellent guide to use and preparation of REA’s:


ADR takes advance planning on the part of the government agency and the contractor.  Not every government contracting office chooses to place an ADR clause in contacts they execute.  Not every contractor is willing to accept one at contract award.

ADR is intended to be an alternative to the REA and formal claims process, whereby the government and the contractor agree in advance to place an ADR clause in the contract and subject any dispute that arises to the ADR process for resolution.  

Below is a quote from the FAR on the use of ADR:

33.214  Alternative dispute resolution (ADR)
(a) The objective of using ADR procedures is to increase the opportunity for relatively inexpensive and expeditious resolution of issues in controversy. Essential elements of ADR include—
(1) Existence of an issue in controversy;
(2) A voluntary election by both parties to participate in the ADR process;
(3) An agreement on alternative procedures and terms to be used in lieu of formal litigation; and
(4) Participation in the process by officials of both parties who have the authority to resolve the issue in controversy.
(b) If the contracting officer rejects a contractor’s request for ADR proceedings, the contracting officer shall provide the contractor a written explanation citing one or more of the conditions in 5 U.S.C. 572(b) or such other specific reasons that ADR procedures are inappropriate for the resolution of the dispute. In any case where a contractor rejects a request of an agency for ADR proceedings, the contractor shall inform the agency in writing of the contractor’s specific reasons for rejecting the request.
(c) ADR procedures may be used at any time that the contracting officer has authority to resolve the issue in controversy. If a claim has been submitted, ADR procedures may be applied to all or a portion of the claim. When ADR procedures are used subsequent to the issuance of a contracting officer’s final decision, their use does not alter any of the time limitations or procedural requirements for filing an appeal of the contracting officer’s final decision and does not constitute a reconsideration of the final decision.
(d) When appropriate, a neutral person may be used to facilitate resolution of the issue in controversy using the procedures chosen by the parties.
(e) The confidentiality of ADR proceedings shall be protected consistent with 5 U.S.C. 574.
(f)(1) A solicitation shall not require arbitration as a condition of award, unless arbitration is otherwise required by law. Contracting officers should have flexibility to select the appropriate ADR procedure to resolve the issues in controversy as they arise.
(2) An agreement to use arbitration shall be in writing and shall specify a maximum award that may be issued by the arbitrator, as well as any other conditions limiting the range of possible outcomes.
(g) Binding arbitration, as an ADR procedure, may be agreed to only as specified in agency guidelines. Such guidelines shall provide advice on the appropriate use of binding arbitration and when an agency has authority to settle an issue in controversy through binding arbitration.”


A formal contract claim is a significant step in the relationship with your customer.  It acknowledges that the REA and ADR (if applicable to the contract) processes have not been effective in resolving the dispute and refers the matter to a formal claim which has the potential for adjudication.  It also starts the interest clock in terms of government payment liability in the event the agency loses the claim during adjudication. 

Below are the major clauses regarding formal contact claims and the certifications by the contractor that apply.  They have significant legal implications.


When contract disputes or the potential for claims and appeals arise it is best to view each instance uniquely in deciding which of the three avenues discussed in this article may be appropriate. 

Contract disputes are serious matters. In the event the impact to the company from a risk perspective is substantial, it is best to involve a law firm that specializes in government contract claims for advice on how to proceed. 

Saturday, March 30, 2019

Managing Teaming Relationships in Small Business Federal Government Contracting

Image:  "Generationnext"

Most small businesses, particularly those selling services, will encounter the need to team with industry partners in small business federal government contracting. 

As a prime contractor, a supplier or a subcontractor, the need to carefully develop stable relationships is a prime driver for success in the venue. 


Be prepared to encounter challenges in the areas discussed below. They are presented because they occur enough that you should be aware of them.  It is astute to manage the associated risks.

Initial challenges for the small business in government contracting are not so much in the areas of barriers as they are in lack knowledge (which I concede is a form of barrier but one that can be dealt with). In short, be aware of what you do not know you do not know.

Lack of knowledge goes all the way from local and state employment law to federal  contracting rules. Enough small businesses have succeeded in the venue that it has proven small enterprise education, with trained personnel in government and prime contractors to do so, greatly enhances success.

Contracting officer's, either government or corporate, and their staffs are often not equipped in the skills necessary to guide the small business. 

Large business and government agencies often inadvertently take advantage of the small enterprise lack of knowledge or make poor assumptions regarding what a small business knows. This can lead directly to abusive practices.

A prime example of an abusive practice is large corporations signing teaming agreements during proposal efforts and then not awarding subcontracts to the small enterprise as agreed, keeping the majority of work for themselves.  They then recruit the help away the small enterprise.

Agencies often take extended time frames to put in place prime contracts after source selection and award to a small business. They do not realize that a small enterprise does not have deep pockets and must have cash flow to sustain a new program with new employees.

Funding levels on programs are often insufficiently committed and the small enterprise is not adequately informed about limitation of funds and funding exposure

One of the most common traumatic situations is newly established enterprises having no job cost government compliant business system in place. The industry partner(s) or the government have assumed that capability will materialize and when it does not the government audits the bills, finds no backup and shuts down the cash flow until the system is fixed. At that point the business can fail. The company should have become educated much earlier in the process about these requirements.

The number of poorly performing SETA contractors in roles not suited to them in government contracting officer support is increasing in federal agencies. These firms need to be vetted and better managed for the omissions and commissions they contribute to the above. 

Not every small enterprise can get into a class on government contracting at George Washington University, The Defense Acquisition University or send their personnel to lengthy and costly seminars conducted by organizations like the National Contract Management Association. These are all great education sources but do not come close to filling the complete requirement and cost time and money.


The nature of the government contracting venue is that you may very well find yourself teaming with a company on a major, long term project and competing against them on another project where the team makeup is different. It is therefore essential to protect your intellectual property, your rates and your personnel.


Not every company that approaches you with a suggested teaming arrangement will be ethical, straight forward and honest. Vet them carefully through the Better Business Bureau, a Dunn and Bradstreet Report, references and searches on their prior business arrangements, contract awards, business activities, subsidiaries and history. 


There are free or very low cost resources through local government organizations who can assist the small business in understanding the government contracting venue.


Be straight-forward and honest with your industry teaming partners.

Do not violate share arrangements, teaming agreements or non-disclosure agreements. Such violations are a death knell for your reputation in the business.

Do not become known as a resource raider by hiring away from other firms with whom you have teamed.

Give it your best shot as a prime or a sub but involve the government contracting officer if you must resolve industry teaming disputes that may damage your past performance record.

Exclusivity is the practical way to go on any given program. Team early and exclusively then give it your all and be a winner. Your reputation is key, ethics count and your customers as well as your industry are observing you.