Government Contracting for Beginners: 8 Steps Your Small Business Can Take to Ensure Compliance with Federal Contracts and RFPs

Understanding your federal contract and navigating the Federal Acquisition Regulation (FAR) and its supplements can feel overwhelming, especially for small businesses balancing growth and compliance or companies new to government contracting.

Understanding your federal contract and navigating the Federal Acquisition Regulation (FAR) and its supplements can feel overwhelming, especially for small businesses balancing growth and compliance or companies new to government contracting. But staying compliant with these elements is critical, not just to win contracts, but also to avoid costly audits or terminations for default once you have the award. This step-by-step guide breaks down how your small business can maintain contract and FAR compliance with confidence.

1. Understand Your Contract Requirements and Applicable FAR Clauses

Begin by reading your contract and identifying client approvals and which FAR clauses apply to your contracts. Many newcomers to the industry may not realize that the entirety of the FAR does not apply to them, and will get overwhelmed with trying to understand and apply every FAR Part to their business. Instead, focus on reading your contract thoroughly and identifying the FAR clauses (and supplements) referenced within. This exercise is commonly referred to as staying within the “4 Corners of Your Contract”. The brunt of the clauses you find will come from FAR Part 52 (and the supplemental regulations’ Part 52 – such as DFARS Part 252, HHSAR Part 352, etc.), along with some references within those clauses to other parts. For example, FAR 52.216-7 which governs allowable cost and payment under reimbursable contracts requires compliance with the cost principles at FAR Subpart 31.2. Then, get familiar with those clauses and the contract approval requirements, and document them in a contract compliance matrix. Cite the clause and contract section, note the requirement and the client authority, and identify the steps you must take to become compliant. Keep this matrix on-hand as a quick reference guide as your teams implement their work.

2. Develop and Maintain Internal Compliance Policies

Many requirements in the FAR will require that you comply with your company’s written policies or practices that you consistently follow. Thus, it behooves your organization to document these policies and practices. This way, you ensure consistency in how you operate and you can also support the actions you take if later faced with an audit or questioned costs by your contracting officer.  If an exception to a policy or practice is unavoidable, make sure to draft a memo to the contract file outlining the context and rationale for the exception. Policies and practices should include codes of business ethics and conduct, timekeeping, cost accounting, procurement policy, recruitment and hiring, and fringe benefits. These policies will be influenced by the requirements in your contracts – yet another reason to make sure you understand its requirements and the applicable FAR clauses.

3. Train Your Team Regularly

Ensure all employees involved in contract management and proposal development understand commonly referenced FAR clauses and those specifically relevant to their roles. For example, your procurement team must understand that your company is required to compete any procurements under your contracts to the maximum practical extent, per FAR 52.244-5. Regular training reduces compliance risk.

4. Develop Compliance Matrices for Proposals

If you’re new to government contracting, you may not realize just how seriously the government is about ensuring your proposals address every requirement in the Request for Proposals (RFP). Just like with ensuring compliance with your contract, a great practice is to map solicitation requirements to proposal sections to ensure you address every mandatory element clearly and avoid technical, cost, or responsibility disqualifications. In your matrix, cite the requirement and its RFP section, note the action you must take to ensure compliance, identify which team member is responsible, and have a “Notes” column to identify where it is in progress and action items remaining. Your matrix is a living document, so as you prepare your proposal, use a “stoplight” method to update it, so that team members know the requirements’ current status: a green highlight means the task is complete, yellow means it’s in progress, and red means it hasn’t been started.

5. Keep Accurate and Timely Records

DCAA audits present a very real and serious risk to contractors who do not maintain detailed records. For example, you must maintain detailed documentation of things like labor hours and costs incurred, contract deliverable status, client communications, internal memos, and procurement source selection decisions. This is not an exhaustive list, so make sure to again consider the importance of point 1 above. There is a good chance (with some exceptions) that you will have FAR 52.215-2 “Audit and Records-Negotiation” in your contract, which requires that you cough up back-up documentation to justify the costs you incur and time you bill, if the government requests it, and that you keep those records available for three years.

6. Monitor Changes to the FAR and Agency Supplements

Regulations evolve. In fact, we are currently in the midst of the “Revolutionary FAR Overhaul” – arguably the biggest change to the FAR since it was established 40+ years ago. You must stay current with regulatory updates to avoid surprises during audits or contract execution. A quick way to do this? Sign up to receive daily updates straight from the source on changes to the Code of Federal Regulations (CFR), including Title 48, which provides the FAR and its supplements in full. While a changed FAR clause won’t apply to your contract until your Contracting Officer modifies your contract to include it, some changes may affect your corporate operations and policies.

7. Communicate Clearly and Regularly with Your Client

Your Contracting Officer (CO) and your Contracting Officer’s Representative (COR) are the most important people at your client office. Maintain an open dialogue on contract interpretation and directives to prevent misunderstandings. Make sure you understand the differences in the authority of these two individuals so that you are communicating with the appropriate person on a particular matter. It’s particularly important to note that only your CO (NOT your COR) has the authority to interpret your contract and regulations, request changes to your scope of work, make cost allowability determinations, and sign modifications. And, finally, always keep copies of emails in the project files, and document meeting minutes that you then share via email with your CO and COR. This way, you establish a paper trail of who said what when. Keep these records on-hand in the event a question arises during a dispute or audit.

8. Engage Experienced Advisors When Needed

Contract and regulatory compliance is a critical factor in becoming a successful, responsible, and trusted federal contractor. Unfortunately, many emerging federal partners and small businesses do not have the resources available to hire the necessary senior-level contracts and compliance expertise. However, part-time, cost-effective options are available. At Akiri Consulting, we ensure compliance for small businesses by providing services, such as:

• Part-time contracts and compliance support – a more cost-effective and often more appropriate fit than hiring a full-time employee to ensure you stay compliant during proposal preparation and contract implementation;

• Auditing your corporate policies, procedures, systems, and contract records on an annual basis to ensure you are audit-ready; and

• Providing proposal support in cost and pricing and RFP compliance and risk assessment.

Compliance doesn’t have to be a barrier to your business growth. With the right processes and support, your small business can confidently pursue and successfully implement federal contracts.

Learn more about our fractional contract and compliance support plans that are designed specifically for small businesses and emerging contractors who lack the in-house resources to ensure compliance. Contact us today for a free consultation to discuss your compliance challenges and how we can help.