The Government Bidding Process: How Well Do You Know Your Contract?

Congratulations on winning that contract! But hey, now is not the time to relax just yet. In fact, your work has just begun. You need to meet all the terms specified in the contract and get the government the product or service (at the quality, cost, and timeframe that they chose you for over the other bidders) or you’ll find yourself in big trouble.

First Things First

It should go without saying that the first thing that you should do is to carefully read the proposal before finally signing it. While this may be a tedious work to accomplish, with most contracts containing several pages, it is of utmost significance that you and your business completely understand all the terms stipulated in the contract.


Of equal importance is identifying the office that will administer the contract. While it is generally the same office of the federal agency that awarded the contract, in the case of the Department of Defense however, a different administering office will be handling the contract. Make sure to contact the administering office if you have any concerns about the contract.

Contract Administration Provisions

Federal contracts contain a lot of general provisions that are unique to the government, making use of regulatory requirements that are only applicable to them. While they may be described in some parts of the Federal Acquisition Regulations, let us examine each of them more closely here:

Termination for Default

The government can legally terminate a contract if you fail to do the following:

• Perform the provisions as specified in the contract
• Deliver the product or service within the schedule specified in the contract
• Make progress and sabotage the contract’s overall performance

In the event that the contract is terminated for default, you will only be paid within the contract’s price for your products or services accepted by the government. If the latter needs those that you failed to deliver, they can still buy the same products elsewhere and have you pay for any excess costs.

If you can prove that your failure to make progress or to deliver can be excused, you do not have to worry about your contract being cancelled for default. In this case, a delay can be excused if it was brought by something beyond your control and not by your own negligence.

Termination for Convenience

When your contract is terminated for default and you are able to prove that the government’s decision is improper, the termination is treated as one for the government’s convenience or technically “termination for convenience.”

For its convenience, the government may unilaterally cancel a part of or an entire contract without the contractor being at fault. This kind of contract termination protects the government’s interests by enabling it to do so for products or services that are no longer necessary for their operation.

After a termination for convenience, the government will fairly and fully compensate you for all the work completed and those preparations completed prior to the termination of the contract plus a reasonable profit allowance.

Changes with the Contract

With the government’s needs changing every now and then, government business contracts normally include a clause that authorizes the contracting personnel to unilaterally order the implementation of changes on the contract terms and other specifications under it.

Changes should always be “within the general scope of the contract”—and not the contract’s general nature—which means that the change should be within the contemplation of the contracting business and contractor at the time when they both entered into the contract. When changes are ordered, a contractor is given reasonable adjustments in terms of time and costs.

Contract Payments

The fundamental obligation of the government in a procurement contract is ensuring prompt and full payments for products delivered or services rendered. The contract should clearly indicate the government office responsible for making payments and the invoicing instructions. Make it a point to keep your invoices as accurate and detailed as you can to ensure faster payment processing. You may submit a request for interest payments in cases when the government fails to pay on time.

Inspection and Testing

Contracts will indicate that the government can choose to inspect and test products that you deliver to evaluate and assess whether or not they conform to the requirements and specifications. A product that does not pass this phase will not be accepted by the government. The extent of the inspection and testing will vary depending on the product or service being purchased.

A great number of companies and organizations--big and small--largely depend on government bids and contracts for their entire (or most of their) business operations. While the bidding process can be easily understood and followed up on, doing business with the government is an entirely different story and can be a laborious job if you don't know exactly where to begin—and that is here with us at StateAndFederalBids.