Compliance is essential for all federal contracting jobs, yet new contractors can easily make mistakes as they are learning the ropes. With that in mind, it’s important to note that federal oversight has increased significantly, with agencies requiring contractors to provide extensive documentation to verify compliance.
On December 5, 2025, the Small Business Administration (SBA) ordered all participants of its 8(a) Business Development Program to provide an abundance of financial records, dating back to the previous three fiscal years, as part of a “comprehensive effort to protect taxpayers and legitimate small businesses by rooting out fraud, waste, and abuse.”
The 8(a) Business Development Program, often informally called 8a certification, is a designation for small disadvantaged businesses, and, if certified, you are eligible to bid on special federal government contracting jobs that are set aside specifically for 8(a) program participants.
SBA manages several of these programs, each of which is known as a small business set aside. Additional set-asides include the Woman-Owned Small Business (WOSB) set aside, the Veteran-Owned Small Business (VOSB) set aside, and HUBZone certification, to name a few. Given the current emphasis being given to the 8(a) program, it’s not unlikely that other set-asides will be audited, as well.
What Is Compliance in Government Contracting?
Compliance means you must carefully adhere to all laws, regulations, contract terms, and program requirements that apply to your contract. If you are new to the world of federal contracting, winning a contract is just part of the equation.
Once you earn a contract, you must be able to continuously prove that your company:
- Meets eligibility requirements
- Follows all contract performance rules
- Uses government funds appropriately
- Maintains proper documentation
- Operates ethically and transparently
In theory, you likely are entering the world of government contracting with the best of intentions, excited to be helping the government while expanding your business and boosting your profitability. Committing fraud is typically the last thing most business owners intend to do. However, government regulations and procedures can be very complicated, and it’s easy to make mistakes.
Here are some of the most common mistakes government contractors make that can raise red flags during an audit, and issues that can cause contract termination, payment withholding, suspension from the System for Award Management, and even civil penalties.
- Improper Documentation & Recordkeeping
This is very common, which is why it is so crucial that you keep all records organized and easily at hand. It’s important to understand that contract requirements don’t just pertain to the actual work itself, but also to proving compliance with records before, during and at the end of a contract. Some common issues include:
- Missing payroll or timekeeping records
- Poor subcontractor documentation
- Lack of cost tracking by contract
- Incomplete contract deliverable records
- Missing eligibility or certification documentation
- Ownership & Control Compliance
This is especially common with set-asides. Small businesses in these special certification programs must be able to prove that qualifying owners truly control a company. For instance, for a Service-Disabled Veteran-Owned Small Business, or SDVOSB, a service-disabled veteran must own 51% of the business and be responsible for making major decisions for the company. If these requirements are not met, then the business is not in compliance and may face penalties or removal from the SDVOSB program.
- Failure To Maintain Certification
In order to bid on federal contracting jobs, all contractors must have an active listing in the System for Award Management (SAM). This is the main database for government contracting, and you must complete SAM registration before you can bid on any contracts.
This registration expires annually, so you also must complete your SAM renewal every year. If your SAM listing expires, your account becomes inactive, and you no longer can bid on any contracting jobs, and if you are in the middle of a contract and the SAM registration expires, the government must halt the contract, because you are now out of compliance.
There are many additional certifications or designations you may be required to have, as well as specific registration requirements. For instance, you may need to complete an annual SBA review in order to maintain eligibility for a contract, and if you fail to complete the review, this can cause your business to fall out of compliance.
- Inadequate Accounting & Cost Controls
When you earn a government contract, you are essentially being paid by the taxpayers of the United States, and federal contractor jobs require accurate financial tracking and cost allocation. Some common issues include contractors that have inadequate timekeeping systems, improper billing practices, or even charge unallowable costs to contracts. If these issues are noticed, this can trigger an audit.
- Labor Law Violations
Many contracts require strict compliance with wage and labor regulations, and common problems include:
- Incorrect wage classifications
- Failure to follow prevailing wage laws
- Missing certified payroll reports
- Misclassifying employees as contractors
- Failure to provide required fringe benefits
How To Maintain Compliance
Staying compliant with government contracts requires ongoing attention, strong internal systems, and clear documentation practices. Business owners who prioritize compliance early often avoid costly audits, payment delays, and contract risks. The following tips can help contractors build a strong compliance foundation.
- Establish Internal Compliance Procedures
Compliance should never be an afterthought, it should be treated as a core business function. Create a written policy that outlines how your company tracks everything from labor hours to billing to maintain required records.
- Ensure Thorough & Organized Documentation
Government agencies often require their contractors to provide compliance, as we showed above with the recent 8(a) program audits. Document everything and keep organized records of payroll, contract deliverables, invoices, certifications, and correspondence with your contracting officers.
These records should always be easy to access. With the 8(a) audit, program participants were given just 30 days to provide three years’ worth of documentation, and staying organized can ensure you don’t scramble if you need to prove compliance.
- Keep Registrations & Certifications Current
Administrative requirements such as maintaining SAM registration, updating representations and certifications, and completing annual program reviews are essential for continued eligibility. Missing deadlines or allowing registrations to lapse can place contracts and future opportunities at risk.
- Implement Reliable Accounting & Timekeeping Systems
Accurate financial tracking and labor reporting are essential components of compliance. Use accounting and timekeeping systems that allow you to track costs by contract, properly allocate indirect costs, and maintain clear audit trails.
- Conduct Regular Internal Compliance Reviews
Periodic internal reviews can help identify compliance gaps before they become serious issues. Many successful contractors perform annual or semiannual compliance checks to verify that documentation, reporting, and performance requirements are being met.
- Stay Informed About Regulatory Changes
Government contracting regulations and program requirements evolve regularly. Staying informed about updates from agencies such as the SBA, Department of Labor, and contracting offices can help businesses remain proactive rather than reactive.
Additionally, keep your staff informed about these changes and ensure that all employees involved in contract performance are well-trained regarding applicable compliance requirements.
How FCR Can Help
At Federal Contractor Registry, we can help with one facet of compliance – ensuring an accurate and active SAM registration. We handle hundreds of registrations every year for all types and sizes of companies, and our team can complete your SAM registration or SAM renewal quickly and 100% accurately.
If you are new to government contracting, we also offer several value-added features in our registration fee. For instance, we will help you procure your Unique Entity Identifier, or UEI number, which is a new requirement when registering in SAM.
We also will help you complete your SAM notarized letter, which lists the Entity Administrator for your SAM account. This letter is required for anyone who is completing their first SAM registration.
If you qualify as a small business, we can help you get started with the SBA and determine which set-asides fit your business and ensure that your SBA account is linked to your SAM account. Prime contractors and procurement agents often recruit from SAM.gov, so it’s crucial that your SAM account include your set-asides and any important certifications that can set you apart from other similar companies.
Federal contracting jobs can be an amazing source of income for any business, but compliance is mandatory. We can help you with the SAM requirements, but we also highly encourage business owners to create internal systems that ensure you will always be following the federal rules and regulations. If an audit comes your way, you will be prepared and ready to show the government any requested documentation as quickly as possible.