Federal Contracts: Everything You Need to Know

Federal contracts are used by the federal government to procure services or property in order to benefit the government. They cover a wide variety of goods and services. Although companies can benefit from contracting with the government, they should be well aware of all the rules and regulations that surround these types of contracts.

What Is a Federal Contract?

Federal contracts are similar to grants or cooperative agreements. The government uses contracts to provide funding for development projects and research. Federal contracts are subject to a strict set of terms and conditions, and they typically require regular reporting and a high degree of responsibility to the sponsor.

The law stipulates that federal agencies must establish certain contracting goals, so 23 percent of all government purchases are to involve small businesses. Other contract goals are established for the following:

  • Small, disadvantaged companies
  • Women-owned businesses
  • Companies in HUBZones
  • Disabled veteran-owned companies

If the contractor fails to perform and produce the promised product or results on time and/or within budget, it could result in any of the following:  

  • Civil actions
  • Criminal actions
  • Financial consequences


The responsible party would be the administrators, university, or other involved parties. Contracting with the government  from formation through administration is a very regulated process. If you’re not aware of all the rules and regulations, you can suffer serious consequences. It’s not like commercial contracting, which is generally governed by common law and the uniform commercial code. Federal government contracts are governed by a complex maze of regulations and statutes.

Examples of regulatory and statutory provisions and what they specify include the following:

  • The process or method an agency uses to solicit contracts
  • How the agency can negotiate or award a contract 
  • The costs the government will reimburse, if any, and the circumstances under which they’re reimbursed 
  • How a contractor accounts for those costs


The government imposes some socioeconomic obligations on its contracts, including requirements related to the following: 

  • Drug-free workplaces
  • Affirmative action
  • Subcontracting
  • Minimum wage


Congress has made the contracting process easier to decrease the burdens on contractors wishing to offer commercial services and products. However, anyone who wants to enter into a government contract should proceed carefully.

An Overview of the Contract Process Can Be Found Here


January 2022


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Aug 2021


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