Government Contracting

An enhanced understanding of government contracting provides insight for this

qualitative case study. In order for the government contracting process to function,

authority to acquire goods and services must exist. Government contracting involves

purchasing goods and services from sources outside of the company (GSA, 2005).

Government procurement of goods and services benefits everyone without exception,

meaning that each stakeholder benefits individually (Rufin & Rivera-Santos, 2012).

Government contracting employees use contracts to purchase goods and services. The

FAR contains guidelines for government contract administration as well as ethical codes

of conduct for employees responsible for contract administration (Acquisition Central,

2014). The terms contracting out and outsourcing are used interchangeably throughout

this study. Understanding the standard competition process when administering

government contracts provides guidelines in the government contracting organization’s

interaction with private suppliers.

Government contracting organizations must be open to competition. To execute a

standard government contracting competition process, employees must make public

announcements giving suppliers opportunities to compete for government contracts

(Acquisition Central, 2014). Figure 1 displays the standard competition process as

outlined by the FAR. Competition offers private companies opportunities to compete in a

public sphere for government contracts (Ohemeng & Grant, 2014). FAR Part 15

established requirements regarding supplier choice for government contracts (Acquisition

Central, 2014). Selecting a reputable contractor is necessary for contract management

success (Bradshaw & Chang, 2013). Government contracting employees can consider a

supplier’s past performance and reputation to determine if the supplier’s actions may

adversely affect the outcome of the contract (Acquisition Central, 2014).

In 1994, Congress passed the Federal Acquisition Streamlining Act authorizing

government contracting organizations to consider a supplier’s past performance when

evaluating determination of future contract actions (U.S. Department of Labor [DOL],

2014b). Ignorance concerning vendors’ past performance contributed to high risk in

contracting (Bradshaw & Chang, 2013). Without adequate contractor past performance

information, government contracting organizations risk duplicating contract failures

(Bradshaw & Chang, 2013). FAR Part 15 directs government contracting employees to

ensure that government contracts are competitive. Government contracting employees

must deliberate a contractor’s past acts when deciding if the supplier is eligible for a

government contract. Knowing how to manage a government contract may offer each

government contracting employee appropriate guidelines to work within the confines of

stringent government contracting regulations.

Employees who understand the requirements of government contract management

may do their job effectively. Contract management promulgates relationships between

each government contracting organization, government contracting employees, and

suppliers (SBA, 2014). Government contracting organizations might demonstrate

consistency when assessing a supplier’s eligibility for a government contract (Bradshaw

& Chang, 2013). Suppliers may help government contracting employees with processes

of contract administration provided the actions do not alter or affect other suppliers

(Acquisition Central, 2014). Government contracting organizations might develop an

understanding towards appropriate economic, social, democratic, and legal considerations

as highlighted by organizational requirements and civil law (Yang & VanLandingham,

2012).

The use of private suppliers to execute government contracts has increased in the

past decade (Schick, 2011). Government outsourcing affords private sector companies

opportunities to provide goods and services to government organizations (U.S. Office of

Management and Budget [OMB], 2003). Government contracting organizations posited

that outsourcing to private companies provides cost savings in the delivery of services

(Kidalov & Snider, 2011). The government contract is an agreement that stipulates

business communications between qualified private companies and the government

(SBA, 2014).

Since its foundation in 1953, the SBA has advocated small companies in the

United States (SBA, 2014). Small businesses are vital to the economy since they can

provide stability in economically distressed areas (Servon, Fairlie, Rastello, & Seely,

2010). Due to small businesses’ value to the economy, the SBA initiated policies and

programs to maximize small business development (Servon et al., 2010). Due to recent

financial crises, the government established public policies to support small business

concerns (Dennis, 2011). Due to the creative and innovative nature of small businesses,

economic recovery in the United States may occur (Monahan, Shah, & Mattare, 2011).

Table 1

Summary of 2008 and 2009 Small Business Procurement Scores at the SBA

2008 2009

Achievement 2009 Goal Achievement

Small business 21.50 23.00 21.89

Women-owned small business 3.39 5.00 3.68

Small Disadvantaged Business 6.76 5.00 7.57

Service-disabled veteran-owned small

Business

1.49

3.00

1.98

HUBZone

2.34

3.00

2.81

Note. The above data refer to information retrieved from http://www.sba.gov.

The SBA’s socioeconomic program monitors the following concerns:

servicedisabled veteran-owned, small disadvantaged, women-owned, HUBZone, and 8(a)

business development programs (SBA, 2014). The SBA established a list of small

business size requirements to assist companies in determining their small business status

(Acquisition Central, 2014). Under Title 13, Code of Federal Regulations, Part 121, the

SBA assessed the standards for small companies doing business with the federal

government (Government Printing Office [GPO], 2011). The SBA tracks small business

procurement status annually. As noted in Table 1, the SBA surpassed their 2008

achievements; however, in three of five socioeconomic groups, the SBA’s achievements

did not meet 2009 set goals (SBA, 2014).

Some organizations may struggle to find their place in the realm of the small

business zone. Minority owned companies might at times struggle to connect with

government organizations (Ram, Woldesenbet, & Jones, 2011). To equalize small

business growth in government contracting, the federal government created the

SmallDisadvantage Business (SDB) certification program and the Section 8(a) program

(as cited by Smith & Fernandez, 2010). These two programs allow minority-owned small

businesses to obtain government contracts.

In 2008, the SBA began enforcement of policies governing Small-Disadvantaged

businesses (SBA, 2014). To qualify as a Small-Disadvantaged business, socially or

economically disadvantaged individual must 51% or more retain the business (SBA,

2014). Under the Section 8(a) program, the government contracting agency can

distinguish contracts for certified Small-Disadvantaged companies (Smith & Fernandez,

2010). The SBA (2014) provided eight eligibility requirements for Section 8(a) program

eligibility including American citizenship, 51% or above minority-owned and displayed

an expectation for success.

The federal government developed Microenterprise Development programs

(MED) to capitalize on the entrepreneurship of Small-Disadvantaged businesses

(Monahan et al., 2011). The majority of MED businesses are women and minority owned

businesses (Monahan et al., 2011). Title VII of the Civil Rights Act of 1964 governed

minority-owned businesses. Under Title VII, minority-owned businesses might make a

disparate-impact civil rights lawsuit if a business practice adversely affects the minority

business (Biddle & Biddle, 2013). Small businesses offer ethnically diverse organizations

competitive advantage (Smallbone, Kitching, & Athayde, 2010). Ethnically diverse

organizations may increase competition in the small business arena (Smallbone et al.,

2010).

Competition in minority owned small businesses enables organizations to segment

their strategies to reduce costs and increase profits (Collins, 2011). Small businesses are

imperative to the United States economic growth. As such, the SBA created programs to

give particular groups economic advantages. The Microenterprise Development programs

allowed qualified companies to compete as Small-Disadvantaged business. As with all

other government contracting regulations, the legislative branch of the United States

government determined a need to update the requirements for small business concerns.

In 2007, the U.S. Supreme Court updated the rules as applied to Title VII. Based

on the court’s ruling, Title VII incorporated equal employment practices related to

discrimination (Bradbury, 2011). The SBA influences the moral attitude of government

contracting regarding socio-economic businesses by offering ethical recommendations to

government contracting employees and supplier (SBA, 2014). FAR Part 19 includes

regulations related to government contracting organizations working with small

businesses (Acquisition Central, 2014). To help small businesses in understanding and/or

registering to do business with government contracting organizations, the SBA provided

systems and guidelines. The FAR – Federal Acquisition Regulations; SAM –System for

Award Management; FPDS – Federal Procurement Data Systems; GSAM – General

Service Administration Manual; and ESRS – Electronic Subcontracting Reporting

System. For a small business to obtain a government contract, a small business must

ensure it is competitively ready in a global marketplace.

Competition is a basis for government contracting (Wydler et al., 2013); however,

competition for government contracts is uncertain (Johnston & Girth, 2012). Government

contracting employees anticipated that suppliers would provide services as specified in

the contract (Keeler, 2013). Therefore, government contracting employees must ensure

there is clarity in each contract (Kidalov & Snider, 2011). If provisions of the contract are

ambiguous, suppliers may apply their interpretation to the contract. Therefore,

transparency in contracting is important in assuring that contractors perform the contract

requirements as specified (Keeler, 2013).

Government contracting employees must offer clearly defined protocols that

establish criteria for a contract (Yang & VanLandingham, 2012). The SBA provided

guidance to assist small businesses desiring to do business with government

organizations. FAR Part 19 outlines to each government contracting employee precise

rules and regulations associated with doing government contracting business with small

companies. Although the FAR provides guidelines for doing business with a government

contracting organization, a concern noted is a lack of adherence to the government

contracting guidelines by contractors and government contracting employees.

As with all business ventures, government contracting employees may encounter

apprehensions and misgivings while administering government contracts. A recurring

concern regarding contracting out of government services is the integration of contractor

priorities with the responsibilities of contract administration (Keeler, 2013). Opportunism

may occur in the form of unethical conduct (Maser & Thompson, 2013). Government

contracting employees can monitor a supplier’s implementation of the contracting

requirements (Kidalov & Snider, 2011); suppliers may occasionally receive government

contracting funds but provide lackluster service (Yang & VanLandingham, 2012).

Another issue regarding contracting out of government services is a lack of

oversight (Lamothe & Lamothe, 2013). Government contracting employees must develop

strategies when offering government contracts to private suppliers. To ensure that

suppliers provide the goods or service as outlined in the contract, it is important that

government contracting employees and suppliers know the requirements of the contract.

The lack of accountability and transparencies of government outsourcing services may

require reforms to the current guidelines regarding the implementation of contracted

services (Costantino et al., 2012). A problem may exist in defining core competencies in

government contracting; political and ideological factors may affect core competency

decisions (Yang and VanLandingham, 2012).

Government contracting organizations must ensure that government contracting

employees have the tools needed to complete contracting functions (Sebastian &

Davison, 2011). When inadequate core competencies exist, there may be a rise in

customer complaints. Knowing steps to deal with a customer’s complaints may ensure

that the government contract requirements are satisfied. Customers should make

complaints regarding unfulfilled features of the contract to the government contracting

organization and not directly to the vendor (Keeler, 2013). Customer service and

customer satisfaction encompass the administration of government contracts (SBA,

2014). Ensuring customer satisfaction with all aspects of the contract must be a priority

for both the supplier and government contracting employee (SBA, 2014). Customers who

are unsatisfied with the scope of the contract may submit complaints to supervising

authorities (Keeler, 2013). A customer’s complaints of ethical violations of the agreement

might introduce liquidated damages against the supplier.

Ethical violations found when administering government service contracts contain

prohibited solicitation or acceptance of gratuities. Government organizations required

ethics when outsourcing government contracts since society expects government

contracting employees to serve the public trust by ensuring that only approved suppliers

receive government contracts (Schick, 2011). Political and economic factors may affect

government contracting out; however, government contracting employees may use

standard laws to enforce ethical management of contracts (Yang & VanLandingham,

2012). Transparency is necessary during the contracting process (Maser & Thompson,

2013). Whatever factors influence government contract administration, ensuring that

government contracting employees provide suppliers with clearly written contracts is

necessary and proper.

Congress retains required and proper authority over the government contracting

regulations. Under Article I, Section 8, Clause 18 of the Unites States Constitution,

Congress can delegate powers to the Executive Branch of the federal government (OMB,

2003). Congressional delegation of authority can change contract management; each

branch of the government connects to the other, sometimes making the lines between

politics, and public administration blurred (Rosenbloom, 2013). The Executive Branch of

the U.S. government established laws central to government contracting organizations

and entities (Acquisition Central, 2014). The laws enacted by the Congress summarized

processes for competitiveness in government contracting.

Competitive sourcing permits public/private companies to do business with the

federal government organizations (Johnston & Girth, 2012). The relationship among

public/private businesses and government entities is essential to public service

contracting (Witesman & Fernandez, 2013). Competition in government contracting

authorizes public/private companies to compete and supply of goods and services while

affording government organizations opportunities to reduce spending (Lamothe &

Lamothe, 2012). Lamothe and Lamothe (2012) assessed that competition provides

incentives to companies to provide the best products and service to the government.

Figure 2 indicates the degree of annual government spending on contracts from 2005

through 2009. As noted in Figure 2, annual government contract spending steadily

increased from 2005 through 2009.

DLA is an entity of the Department of Defense (DoD) and as such, DLA’s budget

falls within the parameters of this table. DoD spent billions of dollars each year. Based on

information listed in Figure 2, government contracting employees exercised control over

billions of dollars to administer government contracts. Government contracting spending

increase provided opportunities for government employees to do unethical business when

administering contracts. The value of a government contract may determine the amount

of spending on that contract. The greater the value of the contract, the more profit a

supplier may receive. There can be prerequisites that guide government contracting

employees when administering a large monetary value contract such as an operational

contract.

Annual Spending on Contracts ($B)

Figure 2. Summary of the U.S. Department of Defense annual contract spending from

100

200

300

400

500

600

2005 2006 2007 2008 2009

2005 through 2009. The above information was retrieved from

http://csis.org/files/publication/120524_DIIG_Defense_Service_Contract_Trends.pdf.

Members of various branches of the United States military often embark on joint

operations globally. As such, these operational units need emergency funds to purchase

goods and services contingent upon mission essentiality. Threats to the national security

of the United States’ afforded the Congress the opportunity to establish guidelines for

issuing operational contracts (Acquisition Central, 2014). Under a joint capabilities

determination, government contracting organizations use operational contracts to provide

goods, services, and support to joint forces of the United States during contingencies

(Acquisition Central, 2014).

Due to the spending that may occur when administering an operational contract,

Johnston and Girth (2012) assessed the prerequisites of operational government contracts

by attempting to explain why competition was not the norm with some government

contracts. Lamothe and Lamothe (2012) maintained that competition must be a

prerequisite to satisfactory contract performance. Competition drove value and efficiency

in government contracting (Johnston & Girth, 2012). Efficiency analyzes the use of

resources during a process (Gardenal, 2013). The FAR instructed that all government

contracting employees seek out competition prior to issuing government contracts (Cohn,

2011). Knowing the status of a global marketplace may offer suppliers competitive

advantages.

Organizations realize that using websites for market research when conducting

business to government transactions is advantageous (Kotler, 2011). The proliferation of

the internet with the ability to identify companies electronically surpassed traditional

exchanges (Kotler, 2011). Market research when administering government contracts

offer government contracting employees a suitable acquisition method of finding relevant

suppliers (SBA, 2014). Market research supports government contracting efforts by

providing government contracting employees with the ability to identify and utilize hard

to find information business customers and their buying behaviors (SBA, 2014).

The use of the internet to conduct market research in government contracting

organizations may create a feeling of efficiency (SBA, 2014). Web sites of professional

companies qualified to conduct business with government contracting organizations vary

significantly. Market research began with an emphasis on finding qualified suppliers to

meet government contracting organizations’ demand for commercial products (SBA,

2014). A rise in instances of government contracting scandals compelled the Congress to

established government contracting reforms that changed how government contracting

employees conduct market research (Mothershed, 2012).

With the passage of the Federal Acquisition Streamlining Act of 1994 (FASA) and

the Federal Acquisition Reform Act of 1996 (FARA), Congress changed procurement

policies for government contracting organizations (SBA, 2014). An adoption of FASA

and FARA enabled government contracting organizations to implement commercial

regulations when procuring goods and services (Lansiti, 2012). Market research permits

government contracting employees to gather information about target markets. Knowing

the target market can assist government contracting employees in determining fair and

reasonable pricing for government contracts. Although plans exist to govern the

administration of individual contracts, barriers may prevent the government contracting

employees from successfully doing their jobs.

When faced with obstacles when administering government contracts,

government contracting employees must have the tools needed to overcome the barriers.

Barriers to efficient government contracting may emerge through misunderstanding

market dynamics, government service delivery, and responsibility to society (Johnston &

Girth, 2012). Government contracting managers may intervene to improve or reduce

barriers by conveying to suppliers improvement required in contractor performance;

therefore, maximizing the scope of the contract (Johnston & Girth, 2012). An additional

barrier to efficient government contracting may be the policy of outsourcing or

contracting out government services (Smirnova & Leland, 2014). A lack of perceived

competition, when contracting out government services, reduces implementation by

government organizations (Smirnova & Leland, 2014). Contracting out of government

services made public procurement relevant to the economy (Costantino et al., 2012).

Government contracting organizations use outsourcing to seek government

services through private companies (Payton & Kennedy, 2013). Government

contractingout stresses outsourcing provisions for services such as transportation

services, garbage collection, janitorial, and similar services (Smirnova & Leland, 2014).

Contracting out government services can provide an economic benefit (Chanson &

Quelin, 2013). Given the heterogeneous nature of these services, it may be useful for

government organizations to contract out those services. Private companies can compete

for government service contracts (Johnston & Girth, 2012).

Occasions may exist for government contracting employees to manage service

contracts unethically (Curry, 2010). Government contracting employees sometimes

administer service contracts with minimal supervision (OPM, 1983). If the government

contracting employees assign quality control responsibilities to vendors, the employees

relinquish oversight of government contracting out services (Lamothe & Lamothe, 2013).

Government contracting employees must incorporate the requirements, compliance with

the law, and customer satisfaction related to the contract; these services should be

conducted ethically (Witesman & Fernandez, 2013). Through the power of the purse,

Congress authorized funds needed to manage government contracts (Manuel & Yeh,

2010).

Government contracting policies must provide clear guidelines on ethical

standards (Kidalov & Snider, 2011). Federal Acquisition Regulations contain procedures

that govern government contracting (Cohn, 2011). OMB Circular A-76 detailed the

processes for contracting out of goods and services with commercial or private interests

(OMB, 2003). Although government contracting employees may encounter barriers to

efficient government contracting, they must ethically administer government contracts to

authorized suppliers. Contracting out a requirement for goods or services to commercial

entities may entice government contracting employees to offer unapproved contracts to

unauthorized suppliers in exchange for money. However, employees must consider their

actions and the effect on all stakeholders. A government contracting manager’s

intervention may or may not be beneficial to controlling barriers in government contract

administration.

Civilians/civil servants control large sectors of the government contracting entity.

The Federal Procurement Data System – Next Generation [FPDS] (2014) revealed that

the federal government contracting organizations employ approximately 1.8 million

civilians or 16% of their workforce. Civilian control of some government contracting

may strip the organizations of the discipline required to maintain ethical standards

(Witko, 2011). The G.A.O. [U.S. GAO] (2009) reported an increase in cases of some

government contracting employees influenced to make unwarranted contracts to suppliers

in exchange for cash, gifts, and other nonmonetary awards. Reports of incidents of

mismanagement of public funds have alerted Congress to enact new laws and prompted

calls for oversight (as cited by Manuel & Yeh, 2010). To ensure suppliers’ compliance

with government contracts, government contracting employees can conduct proper

oversight. Politics may affect the distribution of government contracts. Suppliers may