The Small-Business Guide to Government Contracts

How to Comply with the Key Rules and Regulations . . . and Avoid Terminated Agreements, Fines, or Worse

The Small-Business Guide to Government Contracts

Author: Steven J. Koprince
Pub Date: June 2012
Print Edition: $27.95
Print ISBN: 9780814439722
Page Count: 352
Format: Paper or Softback
e-Book ISBN: 9780814431979

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IMAGINE YOUR SMALL BUSINESS losing millions of dollars in lucrative

contracts, paying heavy fines, or even being prohibited from

selling to your largest customer—all for violating rules you didn’t

know existed. It sounds like a nightmare, but when it comes to doing

business with the federal government, it is a reality countless small

business owners face.

If Uncle Sam is one of your small business’s customers, you’re not

alone. The federal government spends $500 billion annually to buy

goods and services from contractors, and thanks to special rules requiring

agencies to award contracts to small businesses, nearly a

quarter of those procurement dollars go to small companies. Contracting

with the government can be lucrative—but if you don’t know

the key rules and regulations, it can also be very risky.

When the government is your customer, you must learn a whole

new rulebook, very different from the one you may be used to in the

commercial marketplace. It’s a big rulebook—thousands of pages of

dense text, spread out over a hodgepodge of federal statutes and regulations.

And, as counterintuitive as it sounds, the rules are actually

more complex for small businesses than for large companies. Not only

does your small business have to follow most of the same government

contracting regulations as big players such as Boeing, Lockheed, and

IBM, but you must also obey a special set of regulations that apply

only to small business contractors.

Of course, behemoths like Boeing have in-house legal departments

to help them navigate their way through the regulatory maze.

But chances are, your small business doesn’t have a single lawyer on

staff, and you may not even know a lawyer who specializes in government

contracts (especially the small business rules), much less have

the budget to hire one to provide daily advice on compliance.

So what do you do?

If you’re like many small government contractors, you spend a little

time reading pieces of the FAR, talk to others in the industry, and

attend the occasional procurement conference or symposium. You try

your best to learn the rules. If you do call a government contracts

lawyer, it’s after something has gone wrong—you end up on the wrong

end of a protest, or government investigators show up to audit your

compliance with the small business rules or wage and hour regulations.

By then, it may be too late.

What Are the Risks?

You may be wondering whether it’s really important to teach yourself

all these government contracting rules. After all, if you act honestly

and apologize if you happen to inadvertently violate a rule you didn’t

know about, won’t that be good enough?

Probably not. Government contracting isn’t like being pulled over

for speeding, when, if you have a good driving record and are very

polite to the officer, there’s a chance you will get off with a warning.

Don’t expect the same treatment when it comes to government contracting.

Breaking the rules, even unintentionally, can have dire consequences

for you and your business:

! Terminated contracts. Every year, the government terminates

countless small business contracts as the result of competitors’ successful

size or eligibility protests. Other contracts are terminated—or

never awarded in the first place—because contractors violate ethical,

conflict-of-interest, and other requirements.

! Suspensions and debarments. The government is increasingly

suspending and debarring contractors, that is, prohibiting those

contractors from selling anything to the government for a certain period

of time—often six months for a suspension and three years for a

debarment. Political pressure is mounting to further increase the frequency

of suspensions and debarments and make debarments mandatory

for certain violations (they are already mandatory for some).

! Fines and financial penalties. Breaking many of the government

contracting rules can result in civil fines and other financial

penalties. For small contractors, the risk is especially acute in the wake

of a 2010 law providing that if a company incorrectly certifies itself as

“small” for a federal contract, it can be forced to repay the government

the total value of the contract, plus additional damages.

! Jail time. Egregious violations of the contracting rules can land a

contractor’s owners or officers in the Big House, where you may get the

chance to interact with another contractor’s employees—prison guards.

If you contract with the government, you owe it to yourself, your

company, and your employees to know the government contracting

rules. That’s what this book is all about.

Where Do All These Rules Come From?

For small contractors, learning the government contracting rules can

be particularly challenging because there is no single source to find

them. These rules are spread out among a variety of federal statutes

and regulations, most notably:

! The Federal Acquisition Regulation, or FAR. The FAR is the

largest single set of government contracting regulations, weighing in at

around 2,000 densely packed pages in hard copy. You can find the FAR


! The U.S. Small Business Administration’s regulations. As a

small government contractor, you will discover (if you haven’t already)

that the SBA plays a big role in your government contracting business.

Its regulations establish the framework for deciding what companies

qualify as “small” businesses, as well as which companies are eligible

for the SBA’s special contracting programs for disadvantaged small


! The Department of Labor’s regulations. The Department of

Labor oversees the rules governing how much you must pay your

workers, how much vacation time you must give them, and other rules

covering your relationship with your employees.

! Federal criminal law. Breaking some of the government contracting

rules (like the prohibition on bribery) results in criminal

penalties. This is how some unscrupulous contractors have wound up

in prison.

While these are the major sources of the rules we will discuss in

this book, they’re not the only places the rules originate. Other laws

applicable to your small business are peppered throughout the Code

of Federal Regulations (CFR) and United States Code (USC). Some of

the rules have not been codified at all, but instead have been developed

by administrative bodies such as the Government Accountability

Office (GAO) and the SBA’s Office of Hearings and Appeals

(OHA). With so many pages of rules, coming from so many places, it’s

little wonder that many small government contractors simply throw

up their hands in frustration at the thought of trying to learn them.

About This Book

Written in layman’s terms (not “legalese”) and using easy-tounderstand

terms and examples, this book explains the most important

rules your small business must follow to remain in Uncle Sam’s

good graces. The book is intended for the busy small business owner

who doesn’t have the resources to consult a lawyer on every government

contracting decision or the time to master the thousands of

pages of rules on his or her own.

In addition to clear and concise discussion, each chapter includes

several features to help you understand and apply the rules:

! Examples. Key concepts are developed in examples, so that you

can see how a rule might apply in the real world. Some examples are

loosely based on real-life judicial and administrative decisions; others

spring from the author’s fertile imagination.

! The Primary Rules: Where to Find Them. If you want to

read the rules themselves, each chapter includes a section telling

you where to look. Simply plug in the regulatory citation to your favorite

Internet search engine and you should have no trouble finding

the regulation.

! Risk Questionnaires. Chapters 2 and 3, which deal with the important

question of whether your small business is considered affiliated

with other companies, include end-of-chapter questionnaires

allowing you to quickly assess whether your small business might have

an “affiliation problem.”

! Compliance at a Glance. Chapters 4–15 conclude with a summary

of the most important rules discussed in that chapter, each with

a “checkbox” next to it so you can track your company’s compliance.

You will sometimes see the notation (“recommended”) in Complianceat-

a-Glance, meaning that the action is strongly recommended but not

required by law.

This book covers the key rules you should know in order to ensure

that your company remains on the straight and narrow when it does

business with the government. But with thousands of pages of rules

to cover, it does not discuss everything. In particular, this book does

not address:

! State and local rules. This book only covers contracting with

the U.S. federal government. It does not address the myriad rules for

contracting with state and local governments around the country.

! Agency-specific rules. Many federal agencies have adopted

their own FAR supplements, which only apply to procurements conducted

by that particular agency (unlike the FAR and the regulations of

the SBA and Department of Labor, which apply to almost all federal

agencies). We do not address agency-specific rules in this book, with

one exception: in Chapter 12, we cover a special contracting program

for service-disabled veterans run by the U.S. Department of Veterans


! Accounting rules. As a government contractor, you need to ensure

that your financial house is in order and your accounting system

is up to snuff. We provide a brief overview in Chapter 10, but for space

reasons, do not address accounting in-depth.

! How to win government contracts. This book is a compliance

guide, not a “how-to” manual on winning government business.

Of course, we’d like to think that gaining a reputation as a knowledgeable

and compliant contractor will provide a competitive edge in

and of itself.

Two Brief Disclaimers

Because this book is, in fact, written by a lawyer, and because we

lawyers are a cautious bunch by nature, we want to pause here for two

important disclaimers.

First, this book is intended for your educational use only. It does

not constitute legal advice about any specific situation you may face.

Reading it (even if you read it very carefully and dog-ear your favorite

pages) does not create an attorney–client relationship between you

and the author or his law firm.

Second, like most things in life, the government contracting

rules sometimes change. This book reflects the rules as they were

when it was written, and most of those rules are probably still the

same as you’re reading it now. But keep an eye on trade publications

and blogs and keep your ears open for news that a rule has changed.

If you’re not sure whether a rule we discuss in this book has been

amended, use the “The Primary Rules: Where to Find Them” citations

to help you find out. In addition, bookmark the author’s blog, Small-

GovCon (, for updates about the rules discussed

in this book.

Let’s Get Started

All right, that’s enough disclaiming for one book, don’t you think?

Kick off your shoes, lean back, and let’s discuss what you need to

know to ensure that your small business plays by the rules.

Search the full text of this book


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