Government Procedures

April 13, 2006

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Let's get started by looking at some of the differences in procedures. First of all, the federal government conducts its business through authorized agents, called contracting officers:

The Procurement Contracting Officer (referred to as the "PCO") places contracts and handles contract terminations when the contractor defaults.
The Administrative Contracting Officer (referred to as the "ACO") administers the contracts.
The Termination Contracting Officer (referred to as the "TCO") handles contract terminations when the government terminates for its convenience.

Depending on the situation, the same person may be all three.

Because the government is a sovereign entity (in other words, it is the ruling power), it has rights that commercial businesses do not have. For example, the government has the right to unilaterally revise the contract, so long as changes are within the parameters of the contract.

This means the government can change the quantity it is contracting for, or how it is packaged or how it is being shipped. The contractor is entitled to equitable cost adjustment, but must comply with the changes. The government also has the right to cancel the contract if the need for the product or service no longer exists. Here again, the contractor would be entitled to reimbursement for costs incurred.

Because taxpayer dollars are being spent, the government can impose extensive audit and surveillance requirements under the terms of a contract. However, extensive and stringent requirements are usually imposed only on higher priced contracts (i.e., contracts of $100,000 or more in value) and thus are not usually applicable to contracts with small businesses.

One of the big fears that small business owners have is that the government will come in and audit their books, go through their files with a vacuum cleaner, and tell them how to run their business. That fear is totally unfounded and far from the truth.