Failing to comply with government standards for obtaining and keeping federal contracts leads to financial losses, lawsuits, and agreement cancellation.
Getting government contracts is a big win for any business. Imagine taking up a share of contracts worth over $700 billion? This could be the opportunity for growth you’ve been seeking. According to the GovSpend report on the financial year 2024, the federal government allocated $773.68 billion to 108,899 companies. Of these, 23.3% or $176.11 billion was granted as small business contracts to over 78,000 companies. However, for a company to access and keep these contracts, it must know the legal basics, from government contract bidding, waste management, and minimum employee salaries, for example. Understanding how to navigate legal compliance for businesses when working with the government boosts accountability and transparency (correct use of taxpayers’ money and fairness among employees), for instance. Note, proving you can meet compliance requirements helps secure federal contracts faster than you would by offering lower prices. Below we’ll discuss legal essentials every business must know to succeed as a federal contractor.
Proper Registration For Government Contracting
How can your business win a government contract? Stick to proper registration. Whether you’re a tech startup, construction firm, stationery supplies company, or security services contractor, you must register with the System for Award Management (SAM). This procedure unlocks the opportunities for firms to sell goods and provide services to government agencies. A crucial part of SAM registration is obtaining the UEI- unique entity identifier. Completing this registration enables the government to streamline the validation process, which makes working with the government stress-free for your business.
Besides being a bureaucratic requirement for government contracting, SAM registration ensures compliance with FAR (Federal Acquisition Regulation)- a body governing how federal agencies source services and goods. Ideally, without an entity in the SAM website, winning contract bids with the government is impossible. You cannot access resources for contracts or engage in contract bidding, and apply for grants and loans. As part of registration, you need to list your business based on the specific products or services it offers under the North America Industry Classifications System (NAICS) code.
Understanding Core Regulatory Frameworks
Meeting regulations is critical for businesses, especially those transacting with the government. Failing to meet regulatory issues costs companies about $300 billion every year, based on federal government estimates. Besides financial losses, businesses with existing contracts risk having their bids rejected, business agreements terminated, and lawsuits. To secure and keep a contract with federal agencies, understand procurement procedures under the Federal Acquisition Regulation (FAR), labor laws, and non-discrimination policies. Each rule has a purpose in ensuring contractors of the federal government don’t get into legal trouble. For instance, FAR is responsible for transparent, fair, and efficient procurement procedures.
As a business, you can stay compliant with FAR by reviewing the state of government contracts and procurement trends. In-depth knowledge of how contracts and spending are allocated in various sectors help you bid wisely. For instance, over the last 2 years, a significant amount was directed to healthcare procurement, energy, and infrastructure. You could bid for medical supplies if you’re in the healthcare sector or apply for Clean Energy contracts if you provide renewable energy products like solar. Aside from procurement, does your firm adhere to labor laws, such as the Fair Labor Standards Act and Service Contract Act? These regulations are essential for providing fair payment and safe working conditions for workers. Another legality companies must follow to work with the government is the Non-discrimination And Affirmative Act. Regular auditing is done to assess compliance with this law, so it’s mandatory to have an affirmative action plan that ensures inclusivity and diversity.
Meet Cybersecurity Requirements
In a world that’s digitally connected, cybersecurity has become vital for firms doing business with the federal government. When you sign contracts to deliver goods or services to government agencies, you’ll deal with tons of sensitive data like department information, account logins, payment transactions, or software licenses. To safeguard your company and the federal agency you’re contracting for, there are certain regulations you have to follow. Adhering to Federal Acquisition Regulation and related policies prevents cyber attack risks and leakage of confidential information, for example. Other cybersecurity requirements for government contractors are Defense Federal Acquisition Regulation Supplement (DFARS), CMMC (cybersecurity maturity model certification), and Federal Information Security Act- FISMA.
Under DFARS, a regulation for firms contracting for the DoD (Department of Defense), contractors must secure defense information shared through or stored in the contractor’s internal systems network. Contractors are also responsible for reporting cyber attacks that affect the department’s information. By complying with CMMC, firms prove to meet NIST (National Institute of Standard and Technology) guidelines for protecting controlled unclassified information (CUI) and federal classified information. Knowing the basic legalities for improved cybersecurity in federal contracting enhances trust between contractors and government agencies. It also protects firms from contract terminations and legal liabilities.
There are specific legal essentials government contractors should have in mind and practice always. Failing to comply with government standards for obtaining and keeping federal contracts leads to financial losses, lawsuits, and agreement cancellation. Basic requirements businesses should follow include registering an entity with the System Award Management and complying with federal cybersecurity laws. It’s also paramount for government contractors to follow procurement regulations, employment laws, and non-discrimination policies.
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