Government Contracting Glossary | NextStar Procurement

Bid bond: A guarantee, usually from a surety company, that a bidder will sign the contract and provide any required bonds if it wins. If the bidder walks away, the buyer can claim against the bond.
BidBuy: The State of Illinois's online purchasing system. Suppliers register there to receive bid notifications and submit responses to State solicitations.
Business Enterprise Program (BEP): An Illinois program for businesses owned by minorities, women and persons with disabilities, run by the Commission on Equity and Inclusion. The State's goal is to award 30% of State contracts to qualified BEP businesses.
CAGE code: A five-character identifier assigned to a business that does work with the federal government. It is issued as part of the SAM.gov registration process.
Capability statement: A one-page summary of what your business does, your codes and identifiers, your past performance and your contact details. It is your business card for government buyers.
Contracting officer: The federal official with legal authority to enter into, change and end a contract on behalf of the government.
Debriefing: An explanation of why you did or did not win an award. Ask for one after every loss. It is the cheapest market research you will ever get.
IDIQ: Indefinite delivery, indefinite quantity. A contract that sets prices and terms in advance, then lets the buyer place orders over time as needs arise. The contract itself guarantees only a minimum amount.
IFB (Invitation for Bid): A sealed-bid solicitation. The award normally goes to the lowest-priced bidder whose bid meets every requirement and who can perform.
Illinois APEX Accelerator: The Illinois program, formerly called the PTAC, that helps businesses sell to local, state and federal governments. It offers counseling, registration help, bid reviews and bid matching.
Illinois Procurement Gateway (IPG): The Illinois system where vendors file the disclosures that accompany solicitation responses, and the route to certification for the Small Business Set-Aside Program.
Incoterms: Standard international trade terms, such as FOB, CIF and DAP, that set who pays for transport and insurance and who carries the risk at each stage of a shipment.
Liquidated damages: A fixed amount per day, written into the contract, that the supplier pays if it delivers late. It is agreed in advance as the price of delay.
Micro-purchase threshold: The federal amount under which agencies can buy, often with a government card and without formal competition. It is $15,000 since October 1, 2025.
NAICS code: A six-digit code from the North American Industry Classification System that classifies a business's activity. Federal solicitations carry a NAICS code, and size standards depend on it.
NIGP code: A commodity code used by many state and local governments, including Illinois's BidBuy, to classify goods and services and to match suppliers with bids.
Option year: A right, held by the buyer, to extend a contract for another period on the terms already agreed. A contract with a base year and four options can last five years.
Past performance: Your record on earlier contracts. Buyers use it to judge whether you can deliver. State and local work counts.
Performance bond: A guarantee that the contractor will complete the work as agreed. If it fails, the surety may step in or pay the buyer.
Prime contractor: The company that holds the contract directly with the government and is accountable for all the work, including work done by subcontractors.
Purchase order (PO): A buyer's document that orders goods or services at stated prices and terms. For smaller purchases it can be the whole contract.
Responsive and responsible: A responsive bid meets all the requirements of the solicitation. A responsible bidder has the capacity, record and integrity to perform. A bid has to be both to win.
RFI and sources sought: Notices the buyer uses to research the market before a solicitation. They are not requests to bid, but a good reply gets you noticed.
RFP (Request for Proposal): A solicitation in which price is only one factor. The buyer scores your approach, experience and price against published evaluation criteria.
RFQ (Request for Quote): A request for a price on a defined need, usually for smaller purchases.
SAM.gov: The official U.S. government site where businesses register to be paid on federal contracts and where federal contract opportunities are posted. Registration is free and must be renewed every year.
Set-aside: A solicitation reserved for a particular group, such as small businesses, so that only they can compete.
Simplified acquisition threshold: The federal amount below which buyers can use simplified purchasing procedures. It is $350,000 since October 1, 2025.
Small Business Set-Aside Program: An Illinois program run through the Chief Procurement Officer's office that shelters Illinois small businesses from competing against large ones. The State's goal is to award 10% of State contracts to qualified small businesses.
Subcontractor: A company that does part of the work for a prime contractor under a separate agreement. The government usually has no contract with it.
UEI (Unique Entity ID): The identifier you receive during SAM.gov registration. It replaced the DUNS number as the federal government's identifier for businesses.
Veterans Business Program (VBP): An Illinois program, run by the Commission on Equity and Inclusion, that helps businesses owned by qualified veterans and service-disabled veterans win State contracts.

Government contracting terms, explained in plain English

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