5 FAR Clauses, Critical for Government Contractor Compliance

This clause establishes the fundamental rights and obligations of both the government and the contractor. FAR 52.212-4 addresses:

• Inspection and acceptance
• Changes
• Invoicing and Payment
• Assignment
• Termination for convenience or for cause
• Unauthorized Obligations

Unlike many traditional federal contract clauses, FAR 52.212-4 is structured to more closely reflect commercial business practices while still preserving important government protections.

Although contractors should be aware of all the provisions in the clause, one provision contractors should pay particular attention to is termination for convenience. This provision allows the government to terminate a contract even when the contractor has fully complied with its obligations. In such cases, the contractor’s recovery is typically limited to documented allowable costs incurred and reasonable charges resulting from the termination.

What you should do: Before performance begins, contractors should understand their termination rights and ensure their accounting systems can properly document costs in the event a termination settlement proposal must be submitted.

This clause protects contractors under fixed-price contracts when performance delays arise from causes beyond their control and without their fault or negligence. In such cases, the contractor may be entitled to a schedule extension. Excusable delays include:

• Acts of god
• Acts of the government
• Epidemics or restrictions placed because of quarantine
• Unusually harsh weather
• Strikes beyond the control of the contractor

In order to obtain relief under this clause, the contractor must:

• Prove that the delay resulted from an excusable cause
• Demonstrate that the delay impacted contract performance
• Confirm no concurrent delay exists that is attributable to the contractor

The contractor further bears the responsibility of providing timely notice to the Contracting Officer and maintaining adequate supporting documentation.

What you should do: Implement procedures to identify, document, and notify the government of delays. Keep detailed records to support claims and secure schedule extensions.

Cash flow stability is essential in government contracting. This clause implements the Prompt Payment Act and establishes the rules governing invoice submission and payment timelines.

Under this clause:

• The contractor is required to submit a “proper invoice” in accordance with contract terms.
• Payment is generally due within 30 days of the later of:
  • Receipt of a proper invoice, or
  • Acceptance of the goods or services.
• Interest penalties accrue automatically on late payments, without the need for contractor demand

A “proper invoice” is one that complies fully with contractual and regulatory requirements, including:

• Inclusion of all required data elements as specified in the contract
• Accurate line-item detail and pricing consistent with the contract schedule
• Adherence to agency-specific invoicing instructions and submission procedures

If an invoice is determined to be improper, it must be returned or rejected, and the payment period (30 days) does not commence until a corrected invoice is received.

What you should do: Ensure your billing systems are fully aligned with FAR invoice requirements and conduct regular internal audits to avoid unnecessary payment delays.

This clause requires contractors to implement a formal ethics and compliance program for contracts exceeding $6 million with a performance period of more than 120 days.

FAR 52.203-13 mandates:

• Written code of business ethics and conduct
• Internal control system
• Employee compliance training
• Anonymous reporting mechanisms, such as a hotline
• Timely disclosure of credible evidence of fraud, bribery, conflicts of interest, or violations of the False Claims Act

If credible evidence of misconduct is identified, failure to disclose may result in suspension or debarment. While contractors may conduct internal investigations, such efforts do not relieve the obligation to disclose when the regulatory threshold of “credible evidence” is met.

What you should do: Treat compliance as a core business function. Maintain thorough documentation and enforce policies to demonstrate an effective ethics program.

This clause ensures that small business contracts primarily benefit the eligible small business performing the work, rather than being passed through to subcontractors. It requires the prime contractor to perform a minimum percentage of the work, which varies by contract type:

• Services (except construction): ≤50% of the contract value can go to non-similarly situated subcontractors.
• Supplies: ≤50% of the contract value (excluding material costs) can go to non-similarly situated subcontractors.
• General construction: ≤85% of contract value (excluding materials) to non-similarly situated subcontractors.
• Construction by special trade contractors: ≤75% of contract value (excluding materials) to non-similarly situated subcontractors.

What you should do: Before submitting the proposal, calculate and validate your subcontracting percentages. Maintain ongoing compliance tracking throughout contract performance, not just at the time of award.