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Government Contracting

The Pros and Cons of Government Contracting

The United States has spent over 797 billion dollars on contractual services in 2022. If your company wants to access some of that money by becoming a government contractor, you should first be aware of and understand the potential advantages and disadvantages that come with the job. Here are three of the pros and cons of being a government contractor.

Pros of Being a Government Contractor

Good Compensation

If you do business with the government, you’re going to be paid well. The government wants things to be done correctly and thoroughly, meaning they’re willing to pay more money for work to be done right. Contractors are even likely to get paid more than full-time government workers doing similar jobs. The only thing the government doesn’t provide to contractors is benefits.

Good Reputation

The government always makes their payments on time. Everything they spend money on (as long as it’s not a national security issue) is public information, so they’re more inclined to make sure their payments go to their respective destinations on time.  Plus, if a company does not get paid within the contracted terms, the government pays additional interest on the amount owed.

Long Contracts

It may be a tough process to become a federal contractor, but once a company is chosen, they often are contracted for a long time. Most of the service contracts proposed by the government have contractors working anywhere from one to three years minimum. If a contracted company does well during their initial signed period, the government will often return to them with other jobs that need to be completed.

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Cons of Being a Government Contractor

Lots of Rules

Applying to work as a government contractor takes lots of paperwork. Businesses have to apply for special qualifications and codes to be able to work with the government.

Companies also have to strictly follow the Code of Federal Regulations and various other labor standards. As mentioned before, everything the government spends money on is public information. If the job isn’t completed correctly or does not follow the set rules, it will be documented. That documentation is then available for the public to see at any time.

Businesses need to keep their paperwork in order too. At any time, the government can put in a request for its contracted companies to be audited.

No Stability

While working with a federal contractor can lead to a long-term work contract for some companies, there is still little stability in the industry. The government can decide to stop working with a certain business at any time with little to no warning.

Slow Payment

The government is a notoriously slow-paying customer. Contracted companies definitely get paid well, but the government can take upwards of 60 days to pay for completed services. Government contracted businesses often turn to government invoice factoring to ensure they have a steady cash flow while working the job – operational costs have still need to be covered and payroll still has to be made.

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