• Jack Siney

Essential Contracts to Know If You Sell to the Government



Today’s topic is government contracting. There’s a wide array of government contracts because the government buys a wide array of products. We’re going to cover the four major contract types.


The first is Firm Fixed Price, FFP, contracts. Firm Fixed Price contracts are similar to contracts of the same name used in private industries. When the agency knows the exact product, the exact price, and the exact time they need it, they will use this contract with a vendor. It’s really simple.


Is everyone still awake? I know this can all be a bit boring.


The second type of contract is Cost Reimbursement or Cost Plus contracts. These are used these when there is uncertainty about the quantity or the specs of what the agency is buying. Sometimes if it’s a NASA project or Department of Defense project, we’re not really sure about the quantities. Some of the specs for the product could change along the way. That’s why they use a Cost Reimbursement or Cost Plus type of contract.


The third is Time & Materials contracts. Time & Materials, T&M, contracts are the riskiest for the government because it’s an hourly rate that has all the fees, all of the costs embedded in the process. Agencies would use these for example in construction projects or tech-support type projects. When they’re not a hundred percent sure how it’s going to evolve over time they will use this type of contract.


Then the last type of contract is IDIQ, indefinite-delivery, indefinite-quantity contracts.


These are contractual vehicles that are set up in advance. When the government needs to buy something really, really quickly, all the I’s are dotted and T’s are crossed and already in place. Imagine if there was a hurricane, the government would need to go buy a bunch a multitude of supplies for that type of disaster. If they don’t already have an IDIQ contract in place with vendors for this type of situation it could mean big trouble for them during that process.


Those are the four major types of contracts, there are a lot of variations and different details in between, but I wanted to give you an overview of all the contracts you might find when working with government agencies.


Here’s are four bonus insights to help you navigate this process and set-up the structure you would need to have in place to win these contracts with agencies.

  1. You need to set up a company. You have to have some kind of corporate infrastructure. Go to your state’s website and you can set up an LLC or S corp.

  2. You’ll get a W-9. You need to apply for a W-9 and that’ll be the tax ID that the government applies to your business.

  3. If you complete the first two steps you will eventually get a purchase order. It is similar to a receipt or an invoice.

  4. Now you need the ability to do the transaction so you’ll need a credit card payment system if the purchase order is small enough to go on a P-card, which is essentially just a credit card.

Those are the four things to help you start winning some government business. If you have any questions you can reach me at GovSpend!

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