Federal contractors providing services to the U.S. Government. Federal contracting is when the government hires private companies to provide goods or services, like building roads or running IT systems. These companies bid on contracts, and the government chooses the best one to complete the job within budget. A federal contractor employee is someone who works for a private company that has been hired by the government to do specific jobs or projects. They don’t work directly for the government but, help fulfill government tasks through their company.