Government Contracts

Governments hire private enterprise to perform “governmental” functions. But many government contracts are merely simple commercial contracts with a governmental customer.

What’s Different
Governmental contracts are subject to limitations not found in commercial transactions. Politics, the balance of the executive and legislative branches, the timing of elections and the ideologies of politicians affect the timing and structure of contracts. Small contracts might be easier to implement.

Government Customer’s Considerations
Governments considering transferring responsibilities for in-sourced functions should map a strategy not only for the contracting process, but also for the political approval process that validates the outsourcing contract. In some cases, litigation may arise out of failure to comply with “fair governmental contracting” practices.

Under international trade rules of the Uruguay Round, governments are not totally free to discriminate against foreign service providers. Such trade rules promote international trade in goods and services.

Service Provider’s Considerations
Service providers entering into this arena need compliance officers and specialized contract administrators. They also need to identify go-to-market strategies that may include strategic allies designed to win the bid. Teaming agreements, especially with minority- or women-owned businesses, are often used to obtain the benefits granted under special entitlement and set-aside programs to promote minority- and women-owned business. Non-U.S. service providers should thus consider such teaming arrangements as a tool not only for promoting socially-responsible outsourcing, but also to succeed in their own market niches.