Common Government Contracting Terminology and Their Definitions 

A new firm entering the government contracting sphere can encounter a dizzying array of new terminology and acronyms while navigating direct-proposal or subcontracting processes. The journey has been compared to learning a new language, and that’s probably not far from the truth.

For example, it’s possible that a newcomer could be faced with this proposition:

“What if your organization is poised to respond to a GWAC RFP, but your ICE submission isn’t DCAA-ready or your PCO hasn’t clarified the latest CAS requirements? Before a single invoice can be processed through WAWF or your first CLIN is funded, you’ll need to ensure your entity is not only registered in SAM, but also equipped with an accounting system that meets both FAR Part 31 and DFARS 252.242-7006 standards.”

This article seeks to help define government-specific contract terminology you might encounter.

The 8(a) Business Development Program certifies socially and economically disadvantaged small businesses, including women- and minority-owned firms, giving them access to “set-aside contracts”—or contracts designated explicitly for their use. Under this certification, qualifying firms also receive training and mentorship to support their success in federal procurement.

Allowable costs are expenses that are eligible for reimbursement under a government contract, as defined by FAR and agency-specific regulations. Only costs deemed reasonable, allocable and compliant are permitted—and they generally don’t include entertainment, alcohol and certain types of travel costs, among others.

A Basis of Estimate (BOE) is a detailed narrative that justifies the cost and resource assumptions underlying a proposal bid, creating pricing transparency and compliance with government requirements.

Business to Government refers to commercial transactions between businesses and government agencies. It includes all activities where private firms provide goods or services directly to federal, state or local governments.

Capture planning is the strategic process of assessing and preparing to win specific government contract opportunities. It involves researching the market, analyzing competitors and determining realistic resources to maximize win probability.

The Cybersecurity Maturity Model Certification (CMMC) is a unified standard for implementing cybersecurity protocols across the defense industrial base. Contractors must meet the appropriate CMMC level (1, 2 or 3) to be eligible for Department of Defense (DoD) contracts, ensuring project-related, sensitive data is protected.

Competitive bidding is a procurement method where multiple vendors submit offers for a government contract outside of a formal proposal process. An agency can select the best-value offeror through open competition and a transparent evaluation process.

These contracts are agreements that enable multiple government agencies to use a single contract vehicle, streamlining procurement processes and reducing administrative costs. 

Cost Accounting Standards (CAS) is a set of 19 standards designed to ensure consistency and uniformity in cost accounting practices for government contractors, including the maintenance of an auditable accounting system. For all contracts, this kind of compliance is mandatory. CAS helps ensure that the government pays a fair price for goods and services while protecting taxpayer dollars from fraud and abuse.

Cost-plus contracts reimburse contractors for allowable costs incurred during contract performance, plus an additional fee or incentive. These contracts are common for R&D or projects with uncertain requirements, such as experimental technology contracts.

Cost-reimbursement contracts allow contractors to recover allowable costs incurred during contract performance plus a negotiated fee. They’re used when the project scope is variable, yet close cost tracking and compliance are still required. Here, the government agency involved assumes some level of risk.

A Contractor Purchasing System Review (CPSR) is a government audit that evaluates a contractor’s purchasing system to be sure it complies with federal regulations and supports efficient and compliant procurement processes.

The Defense Contract Audit Agency (DCAA) conducts audits of DoD-related government contracts to ensure their compliance with accounting regulations, cost principles and contract terms. As a result, these audits encourage fiscal responsibility and transparency among contracting firms.

The Defense Contract Management Agency (DCMA) oversees government contracts for the DoD, ensuring contractors meet on-time delivery of goods and services, performance quality expectations and compliance requirements throughout their respective contract lifecycles.

Department of Defense (DoD) contracts are agreements between private companies and the DoD for the provision of goods, services or research. As these contracts aim to protect the U.S. in a military context, most have rigorous compliance, security and reporting requirements.

Fair and reasonable pricing ensures that a contractor’s proposed prices during a government bid reflect market conditions, are not excessive and deliver the government the best value for taxpayer dollars, as determined by analysis and negotiation.

FAR clauses are specific provisions incorporated into federal contracts that detail the requirements and rights of both contractors and agencies. These ensure compliance, consistency and risk mitigation on both sides of a contract.

The FAR is the primary set of rules governing federal procurement. It standardizes processes, ensures fair competition and outlines requirements for contractors and government agencies throughout the acquisition lifecycle.

Federal government contracting is the process by which private-sector businesses provide goods or services to U.S. federal government agencies through formal, bid-based contracts, governed by the FAR, DFARS and other regulations.

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FedBizOpps, now part of SAM.gov, was the federal government’s primary portal for posting contract opportunities worth more than $25K, empowering contractors to search, track and respond to contract solicitations from federal government agencies. Contractors now do all of this through Sam.gov.

The Federal Risk and Authorization Management Program (FedRAMP) is a standardized approach to securing, authorizing and monitoring cloud products and services used by federal agencies—and often supplied by contracting firms. FedRamp ensures that cloud deliverables can mitigate the risk of data breaches and cyber threats.

Fixed-price contracts establish a predetermined price for a defined amount of work. In these contracts, contractors assume a greater risk, while agencies experience more budget certainty, as requirements are typically clear and stable.

The Federal Procurement Data System (FPDS) is the government’s central repository for federal contract data, and is a transparent lens into spending, purchasing trends and contractor performance across agencies.

A government bid is a formal offer submitted by a contractor in response to a government solicitation, outlining pricing, capabilities, and compliance with requirements, to potentially win a contract award.

Government compliance entails adhering to federal, state and local regulations, policies and standards necessary to conduct business with government agencies. Compliance bodies that act as watchdogs include the Federal Acquisition Regulation (FAR), the Defense Federal Acquisition Regulation Supplement (DFARS), and the Defense Contract Audit Agency (DCAA).

Government consulting is the career choice of professionals who provide expert advice and support to government agencies or contractors, covering areas such as compliance recommendations, process optimization and strategic planning for public sector projects.

A government contract award is the official notice from a government agency Contracting Officer (CO) to a contracting firm, stating that the contractor has been selected to deliver goods or services under specified terms, following a competitive or negotiated procurement process.

Government contract pricing involves a contracting firm developing cost estimates and labor rates during a proposal process that are reasonable and comply with regulations. The end goal is to support agency missions at a great value while still maintaining contractor profitability.

These are official online platforms, such as SAM.gov and GSA Advantage, where contractors can find, bid on and manage government contracting opportunities, as well as access compliance resources and procurement information. Other solutions available for purchase, such as Deltek GovWin IQ, help you target best-fit contracts early on with powerful AI technology and validated insights from government decision-makers.

Government procurement is the process by which government agencies acquire goods and services from external suppliers, governed by strict rules to ensure fairness, transparency and value in the use of taxpayer dollars.

GSA Advantage is an online government purchasing portal managed by the General Services Administration (GSA), offering federal agencies access to pre-approved products and services from vetted suppliers. Contracting firms undergo a rigorous GSA certification process, which typically lasts between six months and a year or more.

The Historically Underutilized Business Zone (HUBZone) program supports small businesses in economically distressed geographic areas by providing special contracts and price preferences to promote job creation.

IDIQ contracts offer agencies the flexibility to order an unspecified quantity of goods or services to be delivered over a predetermined time period, satisfying recurring government needs without multiple procurements.

The International Traffic in Arms Regulations (ITAR) govern the import and export of U.S. defense-related products and services, requiring contractors to comply with stringent licensing and security requirements.

MOSB refers to small businesses owned by individuals from recognized minority groups, such as Native Americans and Pacific Islanders, who are often eligible for targeted opportunities and programs that foster inclusion in government contracting.

Open government contracts refer to publicly available contracting opportunities that allow any qualified vendor to compete. This promotes transparency and competitive access for small and diverse businesses.

Procurement models are structured approaches agencies use to acquire goods and services—including typical sealed-bidding proposals, negotiated procurement methods and multiple award schedules that require special contractor certification—each with unique processes and mandates.

Public sector sales encompass all activities related to selling products or services to government agencies, requiring specialized knowledge of procurement processes, compliance and agency relationship management.

An RFP is a formal document issued by a government agency seeking competitive proposals for goods or services. It outlines project requirements, evaluation criteria and submission instructions for prospective contractors, enabling them to submit qualified bids.

The SBA Mentor-Protégé program pairs small businesses with experienced mentors to enhance their capabilities and improve competitiveness in government contracting. Knowledge transfer and supportive teaching are key components of the program.

The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs encourage small businesses to conduct R&D on products and services that have the potential for success in both government and commercial markets. The desired result? Foster innovation in the federal marketplace.

The SBA as a federal agency that supports small businesses through counseling, capital and contracting assistance, including offering certifications—beneficial membership designations— and advocacy for government procurement opportunities.

An SDB is a small business that is at least 51% owned by socially and economically disadvantaged individuals—such as those who have been subject to racial or minority prejudice—making the firm eligible for certain federal contracting preferences and programs.

Service-Disabled Veteran-Owned Small Business (SDVOSB) contracts are set aside for businesses owned and operated by veterans disabled in service of U.S. defense. Five percent of government contracts are designated annually to these entrepreneurs, boosting their participation in federal procurement.

The Standard Form (SF) 1408 determines whether a contractor’s accounting system is adequate for cost-reimbursement contracts—agreements that cover a contractor’s costs accrued plus a negotiated profit—focusing on criteria such as adequate segregation of costs and proper timekeeping controls.

Small business government contracts are specifically designed to promote participation by businesses with fewer than 500 employees, with the goal of creating economic growth and diversity within the government contracting community.

Small business set-asides reserve specific contracts exclusively for small businesses, ensuring these firms have opportunities to grow within the federal contracting landscape. For Fiscal Year 2026, the goal is to award 23% of all federal prime contracts to small businesses. 

Source-to-pay refers to the end-to-end procurement process, encompassing the entire buying cycle—from identifying suppliers and negotiating contracts to ordering, invoicing, and payment—with efficiency and compliance always the ultimate goals.

SLED refers to state, local and education government entities, which represent a significant portion of the public sector market for contractors beyond federal opportunities. The SLED market is substantial, with an estimated annual government spend of around $1.5 trillion, compared to $773.68 billion for federal contracts in fiscal year 2024. 

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Subcontracting occurs when a prime contractor outsources part of its contract work to another company, typically to meet specialized needs or fulfill small-business participation goals of a contract. 

A teaming agreement is a formal partnership between two or more companies to jointly pursue a government contract, combining their resources and expertise to enhance competitiveness.

Time and materials contracts pay contractors based on actual labor hours worked and materials used. They offer flexibility for projects that may evolve in scope, but require strong oversight to manage costs effectively.

The Truth in Negotiations Act (TINA) requires contractors to submit cost or pricing data that is current, accurate and complete to begin negotiations for specific government contracts. TINA ensures transparency and helps the government achieve fair and reasonable pricing, particularly in sole-source or non-competitive procurements. Violations of TINA, commonly referred to as “defective pricing,” can result in penalties, civil liabilities or even criminal charges for contractors.

The U.S. federal budget is the government’s annual financial plan, which determines funding priorities and allocations for agencies and programs, directly impacting the focus of available contract opportunities and the amount that can be spent on each type. 

WOSB certification is an SBA program that recognizes small businesses owned and controlled by women, providing them access to set-aside contracts and resources to promote gender diversity in federal procurement.

WOSB grants are funding opportunities available to women-owned small businesses, enabling them to pave the way for greater participation and innovation in government contracting. 

A wrap rate is the fully burdened cost of employing a worker, which includes direct salary, pro-rated overhead and payroll tax, general and administrative (G&A) expenses, benefits and potential profit earned. It helps contractors estimate total costs when pricing government contracts and proposals.