Podcast Show Notes
2026-02-03 Federal Market Insights Episode 41 — Session Overview
WPI Podcast Episode 41 Summary
The Four Pillars of Government Contracting
In general, there are several elements required to create a contract. There must be an Offer, Acceptance of the Offer, and Consideration – that which is exchanged or bargained for. Consideration is agreed to between the buyer and seller. As such, as was mentioned in a class, the courts generally do not weigh in on what is acceptable Consideration; that is up to the parties to the transaction – buyer and seller. Two additional elements are also required – Capacity and Legality. Capacity deals with issues related to Age such as is the individual old enough to enter into a contract, are they on drugs or have they been drinking or are they mentally impaired in some other way. Also, a contract must have a legal purpose.
Government contracts include these features in addition to several other requirements which can be viewed as “The Four Pillars of Government Contracting.”
Government Contracts require a bona fide need. Appropriated funds (budget) must be available to fund the project – purchase – lease. Regulatory allowances exist for sole source contract awards but in general competition is required. Lastly, a Warranted Contracting Officer – more specifically a Procurement Contracting Officer (PCO) is the individual authorized to sign contractual documents on behalf of the county.
Why is it important to understand these ideas?
These ideas help to provide understanding as to what is driving a Procurement. Seeing a notice published in SAM – the Government Portal of Entry (GPE) is often the first time a individual/company is aware of an opportunity. Outside of Special Notices, Sources Sought Notices and a few other types, procurement notices posted to SAM must have both a Bona Fide need and budget or it must be disclosed that there is no funding available. Such notices may be seen when there is budget uncertainty or near the end of a fiscal year. In other words, there is other supporting documentation specifying the bona fide need and justifying the future expenditure. Budget requests must be based upon a government estimate. The process used to develop the government’s estimate is not critical. What is critical is the idea that there is a ceiling price which cannot be exceeded for the initial offered price or post award modification requests.
Both the bona fide need and budget are simultaneously both authorizations and limitations. Both are well defined and specific. The bona fide need is justification for the expenditure of funds for a specific requirement. Examples may include repair or replacement of equipment, purchase of new assets or supplies. Each authorization has boundaries which are detailed in Statements of Work – the scope.
Budgets like bona fide needs have little flexibility. The Anti Deficiency Act does not allow for the expenditure of appropriated funds in excess of the appropriation amount. This concept applies both to the initial authorization to expend funds and modifications to funding lines such as EPAs – Equitable Price Agreements. As individuals, we can walk into a store to buy a single item, change our mind and walk out with five. We make the decision and, in some cases, we may not have the money in the bank, we use a credit card. The federal government cannot operate like this. If there is a solicitation that specifies a quantity of one, that is all that is authorized to be purchased. Additionally, if the cost of the item on the shelf exceeds the authorized price (the Government’s estimate), there is zero allowance for spending more than what was authorized. The purchase price can be less than the authorized amount or it may equal the authorized amount but it cannot exceed the authorized amount without formal approval. This would require funds to be shifted from the general budget to this expenditure or fund to be shifted from another budget line (expenditure) to this procurement. Violation of the Anti Deficiency Act is extremely serious are reports to Congress are required for any violations. Depending on circumstances, the procurement may be postponed or cancelled.
The third pillar of Government Contracting is Competition. There are programs that allow for the award of sole source contracts. One well known program is the SBA’s 8(a) program. Another is DoD’s Mentor Protégé Program. DoD Mentors should have contracts such that sole source awards can be made to their Proteges. A third and likely more common program that the above to is the Micro-Purchase Program. Micro-Purchases are purchases below $15,000. They can be made with a P-Card, a government credit card. FAR Subpart 13.2 – Actions At or Below the Micro-Purchase Threshold addresses all relevant requirements. Specifically FAR 13.203 (a)(2) states “Micro-purchases may be awarded without soliciting competitive quotations if the contracting officer or individual appointed in accordance with 1.603-3(b) considers the price to be reasonable.”
In general, most opportunities posted to SAM will seek offers from a number of companies. This includes set-asides which will typically follow the Rule of 2. Simply put, competition helps to maintain quality and competitive prices which support the idea of “fair and reasonable.”
The last pillar of government contracting addresses the issue of who can sign a government contract – who can bind the United States of America to a commitment. FAR Part 2 Defines Contracting Officer as follows: “Contracting officer means a person with the authority to enter into, administer, and/or terminate contracts and make related determinations and findings.” There are several types of Contracting Officer (CO). The Procurement Contracting Officer has the authority to enter into contracts on behalf of the country. Administrative Contracting Officers or (ACO) handle routine contracts tasks such as performing Inspections and taking Acceptance. Defense Contracts Management Agency (DCMA) performs these duties for Army and Defense Logistic Agency contracts among others. DCMA also approves Duty Free Entry (DFE) requests.
Termination Contracting Officers (TCO) is the last type of contracting officer. TCOs oversee and manage Terminations for Default (T4D) and are the one type of contracting officer companies do not want to meet.
As can be seen, the Four Pillars of Government Contracting involve many key ideas related to doing business with the government. They specifically highlight the need to understand the system and regulations. They also highlight the need to understand your customers and their needs. Ultimately, the four pillars are key to conducting market research, developing are proposal and ultimately performing.