Positioning for Opportunities

Part 2 of the series for the uninitiated

Now that we have a general understanding of what is going on, we’re going to discuss the various nuts and bolts that have to be in place before work can commence:

• Acquiring contract vehicles
• Financial aspects
• Contract Types
• Various Requirements
  • Certifications
  • Security

Contracting Vehicles

Review the glossary for any acronyms here that get confusing.

A contract vehicle, within the scope of government contracting, refers to a pre-established procurement agreement or mechanism that government agencies use to acquire goods and services from external vendors or contractors. These vehicles streamline the procurement process by providing a framework for how contracts will be established and managed. Contract vehicles are designed to save time, reduce administrative burden, and ensure compliance with government regulations and policies.

There are several types of contract vehicles commonly used in government contracting:

1. Indefinite Delivery/Indefinite Quantity (IDIQ) Contracts: IDIQ contracts allow the government to acquire an indefinite quantity of goods or services over a specified period. These contracts include a maximum dollar value, but the exact quantities to be ordered are not predetermined. Task orders or delivery orders are issued under the IDIQ contract as needed.
2. Multiple Award Contracts (MAC): MACs are IDIQ contracts that involve multiple vendors who have been prequalified to provide certain goods or services. These contracts create a pool of vendors, and task orders are competed among this pool, often based on factors like price, technical capability, and past performance.
3. Government-Wide Acquisition Contracts (GWACs): GWACs are contract vehicles that are available for use across multiple government agencies. They are usually managed by specific agencies and cover a wide range of IT products and services.
4. Blanket Purchase Agreements (BPAs): BPAs are arrangements that allow government agencies to establish an account with a vendor for repetitive purchases of specific goods or services. BPAs streamline the procurement process for commonly purchased items.
5. GSA Schedules: The General Services Administration (GSA) establishes schedule contracts that offer a wide range of products and services at pre-negotiated prices. These contracts are open to federal, state, and local government agencies.
6. Strategic Sourcing Contracts: These contracts involve a strategic approach to procurement, aiming to leverage the government’s buying power by consolidating requirements and achieving cost savings.
7. Single-Award Contracts: Unlike multiple award contracts, single-award contracts are given to a single vendor for a specific product or service. These contracts are often used when only one vendor is capable of fulfilling the government’s requirements.
8. Small Business Set-Aside Contracts: These contracts are exclusively reserved for small businesses, promoting their participation in government contracting.

Contract vehicles provide various benefits, such as reduced procurement lead times, simplified acquisition processes, cost savings through bulk buying, and increased competition among vendors. Government agencies can choose the most appropriate contract vehicle based on their specific needs and requirements. It’s important for contractors to be familiar with the specific terms and conditions of each contract vehicle they are participating in to ensure successful collaboration with government agencies.

The catch-22 that happens here, however, is the fact that to get on a vehicle, you usually have to have some prior performance that you can reference to show competency. You can use commercial or subcontracting experience in this process, however, so not all is lost. Also, it should be noted that just getting on a vehicle requires working through a proposal process, detailed here.

Financial Aspects

From an industry perspective, engaging in government contracting presents some unique financial considerations that require careful management. There is an intricate landscape of government budgets, funding cycles, and regulatory requirements demands a comprehensive understanding of the financial intricacies involved. Contractors must allocate resources for compliance with stringent accounting and reporting standards (This will be an entire post on it’s own!), usually requiring specialized systems and personnel. Cash flow can be influenced by delayed payments and lengthy procurement cycles, requiring companies to maintain sufficient working capital. Additionally, the pursuit of government contracts means large upfront investments in proposal development and compliance measures, potentially impacting short-term profitability. However, successful navigation of government contracting can yield substantial rewards, including stable revenue streams, long-term contracts, and opportunities for growth in diverse markets.

Contract Types

Government contracts awarded to industry can vary based on the nature of the goods or services being procured and the specific needs of government agencies. There are several major types of government contracts, each with distinct characteristics and implications for both the government and the contractor. Here are the three primary types I see most often:

1. Fixed-Price Contracts (aka Firm-Fixed-Price – FFP): In a fixed-price contract, the government agrees to pay the contractor a predetermined, fixed amount for the goods or services provided, regardless of the contractor’s costs. FFP contracts carry higher risk for the contractor, as any cost overruns are borne by them.
2. Time and Materials (T&M) and Labor Hour (LH) Contracts: Time and materials contracts combine elements of both fixed-price and cost-reimbursement contracts. The government pays the contractor for the actual hours worked by personnel, plus the cost of materials used (materials are not covered in a Labor Hour contract, that is the only difference).
3. Cost-Reimbursement Contracts (Cost-Plus-Fixed-Fee – CPFF, Cost-Plus-Incentive-Fee – CPIF, Cost-Plus-Award-Fee – CPAF): In cost-reimbursement contracts, the government reimburses the contractor for allowable costs incurred during the performance of the contract, plus a fee that is fixed (CPFF), incentive-based (CPIF), or award-based (CPAF). These contracts provide greater flexibility for the contractor but place more risk on the government, as costs can exceed initial estimates.

CPFF contracts are not as common as they used to be and in the small business technology sector, the majority of solicitations are FFP.

Contract Requirements

This also could have a page of it’s own, but this is often a requirement of a company to invest in a level of certification to “prove” that you have the capabilities to perform this work:

One example is CMMI (Capability Maturity Model Integration), which is a framework used to assess and improve the processes of organizations. CMMI covers various levels of process maturity, but the level I see most often required is Maturity Level 3. ML3 for both the CMMI for Development (CMMI Dev) and CMMI for Services (CMMI SVC) models represents an intermediate level of process maturity and capability.

The other example is ISO, specifically ISO 27001 for Information Security Management, ISO 9001 for Quality Management and ISO 20000 for Service Delivery Management.

I have regularly managed these through a compliance program and have a lot to say on them, if this is something that you want more information on.

One final note, CMMC, the Cybersecurity Maturity Model Certification Program has been in the works for many years, but it is not yet a requirement (my guess is it will be around 2025 or 2026). Focus on the NIST 800-171 standard is a great preparation for when CMMC becomes a requirement… one day.