The Different Types of Government Contracts

There are a number of different government contracts that new vendors should familiarize themselves with:

  • Set-aside contracts
  • Sole source contracts
  • SBIR phase 3 contracts

All of these can be well-defined or broad in scope, depending on how creative the holder is. Set-aside contracts are contracts the federal government keeps especially for businesses that comply with specific requirements. Challenges and pitch events are two newer approaches to contracting and can be either well-defined or broad.

Well-Defined Acquisition Approaches

There are examples of well-defined contracts that may be more accessible to new businesses and vendors.

  • Individual awards listed on SAM.gov
  • Traditional SBIRs
  • Task orders
  • OTAs (Other Transaction Authority based contracts)
  • SAP (Simplified Acquisition Procedure)
  • Cash/card purchase

Broadly Defined Acquisition Approaches

Less-defined framework agreements are better for those with market experience, and are typically awarded only to those with years of past work. Examples of broadly defined government contracts are listed below.

  • GSA schedule
  • GWAC
  • IDIQ
  • BAA
  • CSO
  • Dual-use SBIR
  • BPA

BAA (Broad Agency Announcement)

The government releases a BAA when they have a broad need and inadequate current solutions. These requests can stay open for years, and usually have evolving needs that are updated quarterly. The government funds the project, as a significant amount of research and development (R&D) is required. BAAs offer opportunities for open communication between government and industry due to the evolving nature of needs.

BAAs do not necessarily have to be associated with an RFP, and generally ask businesses to provide white papers instead of proposals.

Cons of BAAs

With BAAs, the government may not, in the end, award a contract to anyone. As a result, businesses may spend a lot of time responding to a BAA and receive no feedback or award.

Pros of BAAs

Due to the nature of BAAs, there is more leeway for communication between the government and vendors. Vendors can discuss changing needs that arise from R&D to see whether their solution is a good fit. 

BAAs define who the government customer is and what they are looking for. This helps businesses know which government officers to contact, and makes it more likely that vendors will get a response.

Which businesses can benefit from BAAs?

Businesses that specialize or are interested in R&D excel in BAAs. Typically, these are university-derived teams or technology-focused product teams. BAAs are an excellent opportunity for new entrants with high-tech solutions to break into the government market. STEM-centric teams tend to perform well, and benefit from the open-forum structure. BAAs also allow groups to build relationships with their government customers. 

BAAs are safe from an administrative point of view, and offer room for in-depth discussions about the future direction of the industry. BAAs are not beneficial for service companies or product reselling-based businesses.

CSO (Commercial Solutions Opening)

CSOs have many of the same qualities as BAAs; however, solutions for CSOs need to be more mature and closer to being developed. Products under a CSO generally require more modification due to the particular nature of government, as government will have more unique use-cases than other customers.

Pros of CSOs

CSOs require immediate ready-to-use solutions, as opposed to the longer-term, less-developed ideas targeted by BAAs. CSO arises when the government cannot find vendors or solutions from their current market research. Requests can be for a hybrid or customization of projects already in place.

Cons of CSOs

CSOs tend to have a lower dollar value due to the shorter R&D process compared to BAAs.

 

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Which businesses can benefit from CSOs?

Companies that build and manufacture their own products excel. These businesses tend to have some engineering leads on their teams. 

CSOs are not beneficial for services companies or product resellers. However, product resellers may find CSOs worthwhile if they are able to heavily modify or customize their products.

GWACs (Government-Wide Acquisition Contract)

GWACs are the second-broadest type of government contract. GWACs are operationally similar to GSA schedules and IDIQs. The government pre-vets their vendors in all these contracts, allowing them to accelerate contracting and thereby decrease their overall effort. GWACs prioritize pricing structures to determine whether the product or service offered is reasonable. 

Vendors are required to submit extensive pricing information and explain why their rates are fair. GWACs, GSA schedules, and IDIQs all have a competitive application process that determines what parts of the acquisition process can be pre-vetted.

Pros of GWACs

GWACs are managed by the GSA (General Services Administration), meaning GWACs are universally accepted by most agencies in the government. All government agencies use GWACs when they need to purchase commodity products or services. This makes it easier for vendors to approach government customers.

Cons of GWACs

Government agencies must pay an internal chargeback system before they can issue a GWAC, resulting in  higher costs. This may deter customers from paying a GSA schedule fee (a contracting agency that handles customers’ contract acquisitions) to handle their contracting. GWACs also tend to be more broadly scoped, which means there is more competition among vendors.

IDIQs (Indefinite Delivery, Indefinite Quantity)

IDIQs are usually owned by specific government agencies. Larger IDIQs are managed by non-GSA agencies, but operate similarly to agency-based IDIQs. In general, the agency that originates the IDIQ is the one that uses it. The U.S. Air Force, U.S. Navy, and U.S. Army all use one another’s IDIQs interchangeably due to their similar needs.

Similarities between GWACs and IDIQs

Large IDIQs and GWACs release RFPs often, garnering a lot of competition among vendors.

Both have short proposals and shorter turnaround times, and the chances of winning are thus higher than they are for RFPs on SAM.gov.

Single -Award IDIQs

Single-award IDIQs are typically created in response to a unique circumstance with extraordinary needs, such as natural disasters or war. Single-award IDIQs allow the government to establish rapid, ongoing, and flexible contracting relationships.

Pros of Single-Award IDIQs

There are a lot of single-award IDIQs, which means there is more opportunity for business. Companies have complete control of their prices, as they are only bidding against themselves. Companies that are already pre-vetted for a product or service can also refer contracts to similar companies in the industry. The pre-vetted vendors can charge a fee for providing the lead.

Cons of Single-Award IDIQs

Single award IDIQs are not favored by government customers. There is less public trust in single-award IDIQs due to the lack of competition in their acquisition process. Businesses need to market their single-award IDIQ constantly to remain top of mind with government officers. Most officers default to SAM.gov, buying through GSA schedules, GWACs, or their agency’s IDIQs.

Who can benefit from single-award IDIQs?

Single-award IDIQs are excellent options for well-established vendors that have records of extensive prior performance and a robust administrative structure. Vendors must establish a trust-based relationship with the government customer. IDIQs are available in any industry.

We do not recommend new companies apply for single-award IDIQs.

 

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GSA Schedule

GSA schedules are for bulk government purchases. When you first apply, the government will scrutinize and negotiate your prices. However, this reduces conflict, as future government buyers will know your GSA schedule rates have been pre-vetted and are fair. Generally, GSA schedules only contain items that have commercial analogs.

Pros of GSA Schedule

The pre-vetting requirements allow vendors to finalize their pricing and compliance-related processes, such as accounting procedures, before getting on to the GSA schedule. A GSA schedule is an efficient contracting agency that handles customers’ contract acquisitions.

Cons of GSA Schedule

GSA schedule pricing rates do not take into account context, such as the years of experience a business has compared to the quality of the product offered. The pricing only offers insights as to whether the company’s products or services are available at market value. GSA schedules are also only for products and services that can be sold in the commercial market.

SBIR (Small Business Innovation Research)

SBIRs and STTRs (Small Business Technology Transfer) are similar, with a few small differences. An SBIR is a one-time, well-defined request for technology development that will result in a contract. The application process is competitive and requires R&D services from vendors. The winner of an SBIR award needs to research and design a solution to the problem at hand.

Who can benefit from SBIRs?

SBIRs are for STEM-driven teams. They can also be great for new businesses looking to gain entry to the market as they tend to be for smaller dollar amounts. SBIRs have a 500-employee size limit; bigger competitors thus do not pay attention to them. SBIRs can offer new businesses the opportunity to create a product that an agency needs.

Dual-Use SBIR

Similar to the CSO, a dual-use SBIR operates on the assumption that it is seeking an already-existing relatively mature technology that requires only minimal changes. Businesses define their own topic, which is the key differentiating factor from well-defined traditional SBIRs.

Who can benefit from dual-use SBIRs?

Dual-use SBIRs are more open-ended and flexible than traditional SBIRs, making them really good for smaller businesses and new entrants. However, companies still need some tangible commercial traction to have a chance at winning these SBIRs.

Phase 3 SBIR

Here, the government can reach out to your company to buy directly or negotiate prices. Phase 3 SBIRs need to be marketed constantly to remain top of mind, similar to single-award IDIQs. Phase 3 SBIRs offer more flexibility for businesses to add ancillary products or services to the original funding scope of their award.

OTA (Other Transaction Authority)

OTAs are favored in the defense and intelligence communities, but are not very common in civilian agencies.

 

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BPA (Blanket Purchase Agreement)

BPAs are used when the government needs to fill repetitive orders for supplies and/or services. The government customer’s repeat buying power allows for quantity discounts. BPAs also save on administrative time and reduce paperwork for both parties.

Our Advice For Government Contracting

The most favoured government contracts are RFPs released on SAM.gov, GSA schedules, and GWACs. Sole-source and single-award IDIQs tend to be disfavored by those awarding government contracts to vendors. In these two cases, vendors are circumventing the competition processes that are in place to protect the government.

Hundreds of thousands if IDIQs already exist. This volume of vendors makes it tricky for government customers to find the right solution. Many IDIQs have overlapping frameworks, making it difficult to sift through them. Depending on what stage your business is at, you may apply for different types of government contracts. If you’re not sure where to start, the FedScout app can help you, from finding the right NAICs codes to notifying you of new opportunities.