Federal Government Contract Overview
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You recently retired from government contracting work and established a consulting company (fully consistent with government ethics laws and rules, of course) with the primary focus of advising potential government contractors and subcontractors. Mr. Johnny Jones, of The Johnny Jones Flooring and Construction Company has approached you with a question. Jones and his company are potential subcontractors (they, obviously, specialize in flooring) on a federal construction contract worth a little over two million dollars ($ 2,000,000.00) recently awarded to the Jimmy Smith Construction Company (Jimmy Smith, the prime contractor). Neither Johnny nor his company have ever been part of a government contract before. He wants to know the ramifications associated with being a subcontractor on such a contract. His specific concerns are with protecting his ability to directly protest issues and concerns through the various courts and agencies able to handle such protests. He is specifically concerned that he may be left with only the option of suing Jimmy Smith if anything goes wrong on the contract. He would also like to have some assurance that he will get paid if the prime contractor becomes insolvent. You have agreed to steer Johnny in the right direction. What do you tell him? Include the rationale for your advice.
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Solution Summary
This solution gives students insight into the rules and regulations associated with obtaining, bidding, and seeking federal contracts.
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As a former proprietor of government contracts I have detailed knowledge that I can share with Johnny to alleviate his fears as well as steer him in the right direction for his interactions with Mr. Smith. Johnny will need to first understand the issues that may arise causing the contract to become insolvent and his rights regarding several important clauses on this matter. The federal government may initiate 3 different clauses that can nullify a government contract including (1) Termination for Convenience, (2) Changes, and (3) Default (Vacketta, 1999).
(1) the "Termination for Convenience" clause: The Government has the autonomy to terminate the contract at any juncture without cause for the best interest of the Government. If this occurs Mr. Smith will have to terminate all subcontracts related to the terminated portion of the prime ...
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