Key Legal Considerations When Selling Software to Government Agencies

Government agencies are among the largest buyers of software in the world. Contracts tend to be long, renewals are common, and a single successful deal can open doors across other departments. For growing software companies, the public sector can become a stable and valuable source of revenue.

However, selling to government is very different from selling to a private business. Agencies must follow strict purchasing rules, and they pass many of those obligations on to their vendors. A company that treats a government bid like any other sales opportunity can face rejected proposals, delayed payments, or serious legal exposure. Understanding the key legal requirements early helps software providers compete with confidence and avoid costly mistakes.

Registration and Eligibility

Before a software company can bid on most U.S. federal contracts, it must register in the System for Award Management at SAM.gov. Registration assigns the business a Unique Entity ID, which agencies use to identify vendors and process payments. The process is free, but it can take up to 10 business days to become active, so it should not be left until a bid deadline is close.

Registration is not a one-time task. It must be renewed every 365 days, and an expired registration can delay awards or payments. During registration and renewal, businesses also make formal representations and certifications about their size, ownership, and compliance status. These statements carry legal weight, so it is important to review them carefully rather than treating them as routine paperwork. State and local agencies often run their own vendor portals, which means companies selling across several levels of government may need to manage multiple registrations.

Security and Data Compliance

Security is often the biggest hurdle for software vendors. Cloud products that create, collect, process, or store federal information on behalf of an agency generally fall within the scope of FedRAMP, the federal program for assessing cloud security. The program has changed significantly in recent years. Under its 2026 rules, the familiar “FedRAMP Authorized” label has been replaced by “FedRAMP Certified,” and a newer, more automated path known as FedRAMP 20x is now available alongside the traditional process. Vendors should check which route fits their product before committing time and budget.

Defense work adds another layer. Contractors handling Controlled Unclassified Information must protect it under existing defense acquisition clauses, and the Cybersecurity Maturity Model Certification (CMMC) program was designed to verify that protection. In July 2026, the Department of Defense suspended the planned second phase of CMMC pending a review, but it did not repeal the underlying rules. Software companies in the defense supply chain should keep their security programs on track, since the core safeguarding obligations still apply and the timeline could change again.

State and local agencies may also have their own frameworks, such as GovRAMP. A single, well-documented security program makes it much easier to respond to these overlapping requirements.

Accessibility Requirements

Accessibility is a legal requirement in public sector technology, not a nice-to-have feature. Under Section 508 of the Rehabilitation Act, federal agencies must buy information and communication technology that people with disabilities can use. Government solicitations for software typically specify which accessibility requirements apply, and buyers use vendor documentation to assess products during market research and proposal reviews.

The standard document for this is the Accessibility Conformance Report, or ACR. It is created using the Voluntary Product Accessibility Template, known as the VPAT, and it explains how a product meets the Revised 508 Standards. GSA recommends that vendors prepare an ACR for any technology they plan to market to the federal government. Because buyers rely on these reports when comparing bids, accuracy matters. Many companies work with independent specialists who offer vpat services, which usually combine a manual accessibility audit with the finished report. An independent review can also give development teams a chance to fix issues before the report is issued.

State and local buyers are moving in the same direction. The Department of Justice’s 2024 rule under Title II of the Americans with Disabilities Act adopts WCAG 2.1 Level AA as the technical standard for public entities’ websites and mobile apps. Its compliance dates were extended by one year in April 2026, to April 2027 for larger entities and April 2028 for smaller ones. The rule also covers content provided through vendors, so public agencies are likely to ask software suppliers for proof of accessibility.

Contract Terms, Licensing and Intellectual Property

Most software companies rely on standard license agreements and terms of service. Government contracts can accept many commercial terms, but not all of them. The federal clause for commercial products and services may be tailored to reflect customary commercial practice, except for certain paragraphs that implement statute, such as disputes, payment, and unauthorized obligations. The unauthorized obligations rule exists to prevent violations of the Anti-Deficiency Act, so license terms that commit an agency to open-ended payments or indemnities will generally not bind the government.

In practice, vendors should review their standard agreements before bidding. Clauses on automatic renewals, governing law, unlimited indemnification, and unilateral changes to terms are common sticking points. Intellectual property also needs attention. Companies should be clear about what the government is licensing, what data it will own, and what rights it receives in any custom development work.

The rules themselves are also changing. The FAR Council is rewriting the Federal Acquisition Regulation through the Revolutionary FAR Overhaul, and in June 2026 it published a series of proposed rules to streamline the regulation. Working with an experienced government contracts lawyer helps ensure agreements reflect the current requirements.

Pricing, Audits and False Claims Act Exposure

Government buyers expect fair and reasonable pricing, and many contracts give the government the right to examine a vendor’s records. Software companies should keep clear, consistent documentation of how they price their products, including discounts offered to commercial customers. Inconsistent pricing or poor records can create problems during an audit or contract review.

The most serious risk comes from the False Claims Act. The law allows the government to recover up to three times its losses, plus a separate civil penalty for each false claim. Because every invoice can count as a claim, exposure can grow quickly over a long contract. Importantly, liability is not limited to billing errors. The Department of Justice has increasingly applied the Act to inaccurate compliance statements, recovering more than $52 million across nine cybersecurity-related settlements in fiscal year 2025.

This is why every representation a vendor makes matters, whether it concerns security controls, accessibility conformance, or business size. Companies should only certify what they can support with evidence, keep their documentation current, and review statements with legal counsel before submitting a bid.

Closing

The public sector can be a rewarding market for software companies, but it comes with legal obligations that commercial buyers rarely impose. Registration, security, accessibility, contract terms, and accurate certifications all need attention before the first bid goes out. Like the issues covered in our guide to legal considerations when scaling an e-commerce business, these are easier to manage early than to fix later.

By building compliance into their products and sales processes from the start, software providers can compete for government contracts with confidence and create long-term relationships with public sector clients.