Overcoming struggles in Government Contracting

Why do companies struggle with government contracting – Part 1

Companies often struggle with government contracting for several reasons:

The first is of course the most obvious. A Complex and Lengthy Process.

Government contracting involves a complex and often lengthy process with numerous regulations, paperwork, and procedures. Navigating through this complex system called the Federal Acquisition Regulations (FAR) along with numerous agency regulations (DFARS for Defense for example) can be challenging for companies, especially those unfamiliar with the specific requirements of government contracts.

A close second would be the Strict Compliance requirements to Regulations.

Government contracts come with strict compliance and regulatory requirements. Companies must adhere to various laws, such as labor regulations, safety standards, environmental regulations, and specific contract terms (pricing, performance, quality, invoicing, subcontracting). Failure to comply can result in penalties, contract termination, or legal consequences.

And if you were to make it past the first two obstacles you would run into what is known to be highly Intense Competition. Government contracts often attract significant competition. Large companies with extensive experience in government contracting may have an advantage over smaller or less experienced firms. Moreover, government agencies often prefer working with established contractors that have a proven track record, making it difficult for new entrants to secure contracts. However, this does not have to be the case, as there are many options to overcome this challenge quite easily.

The Lengthy Procurement Cycle is a major turn-off for qualified bidders. The government procurement cycle can be lengthy, involving multiple stages such as solicitation, proposal submission, evaluation, and contract negotiation. This extended timeline can strain a company's resources, particularly if they are relying on the contract for revenue or growth. The amount of time it takes for the Government to award (issue) a contract to a company can lead to a quick exit of the government market for interested companies. It is most definitely a long-term strategy for any business interested in pursuing government contracts. On the other hand, not all contracts take as much time to be awarded. It is depending on multiple factors such as availability of funding, the type of funding (which we will get into in a later blog), competition, contracting resources, all of which could cause a delay in making an award decision for a contract.

After all of that there are also Cost Considerations.

The cost of bidding on government contracts can be significant. Companies need to invest resources in preparing proposals, complying with specific requirements, and often engaging legal or consulting services to navigate the process. Even if a company wins a contract, the costs associated with fulfilling the contract can be high due to additional compliance and reporting obligations. Quality control, risk management, personnel, policies, procedures, and processes all have an additional impact to cost when it comes to managing a government contract.

A strategy to potentially consider would be the Unique Contracting Practices used in Government contracting. This is often a struggle for companies but it doesn’t have to be. The standard processes often require companies to adapt to unique practices, such as fixed pricing, cost accounting, or progress reporting. These practices may differ from standard commercial contracts, requiring companies to adjust their internal processes and systems accordingly. However, a wise company who is alert will most likely consider the unique contracting practices as a playbook, roadmap, guide but more importantly a perfectly legal and compliant look into the answers to the “test” without breaking the rules. The Federal Acquisition Regulations (FAR), if understood, is basically that – a look at the answers without break the rules. To put it more clearly, the FAR is used by the government to do business with industry. The FAR specifically states what you need to do to win a contract with the government, stay compliant, be competitive, and more (including pricing, research, records management, etc.).

These examples provide a broad range of issues that companies may encounter when engaging in government contracting. It's important to note that not all companies will face every challenge listed here, as each situation can vary based on factors such as industry, company size, geographic location, and the specific government agency involved. If you found this information useful then there is a Part 2 available where we discuss additional struggles faced in government contracting.

Resources

www.acquisition.gov - Access the Federal Acquisition Regulations (FAR)