Government Contracts & Procurement
Like any business entity or enterprise, the government needs to hire many different services and obtain goods from a variety of sources in order to operate. Government procurement is the process that the government uses to enter into contracts with service providers and vendors. These contracts can also include real estate purchases or leases. A contract between the federal government and a private or public service provider or vendor is subject to the same contract laws that apply to non-government entities.
Since public funds are used to pay for the contracts, government procurements are subject to more regulations and statutory laws than regular contracts. Whereas private contracting parties have broad discretion to craft the terms of their agreements, federal law provides a host of provisions and clauses that must be included in government procurements. Agencies are required to produce Federal Procurement Reports that provide data about their respective government procurement contracts. Many of these contracts amount to billions of dollars in federal appropriations spending. The Department of Defense, Department of Energy, and the Department of Health and Human Services are among the top contract-procuring agencies in the federal government.
Authority to Enter Into Contracts
The federal government’s authority to enter into government procurements arises from the United States Constitution. Although the text of the Constitution does not specifically discuss the government’s right to contract, the Constitution has been interpreted as presuming the continued pursuit of “Engagements” entered into prior to its creation. The federal power to contract has also been deemed necessary and incidental to the administration of the federal government’s powers and responsibilities. Additionally, in 1831, the Supreme Court case United States v. Tingey, 30 U.S. 5 Pet. 115, acknowledged that the United States government has authority to enter into contracts.
Federal statutes and regulations place many controls on how a contracting officer can go about obtaining government procurements. Congress enacts statutes that define the specific procedures that must be followed and identify the source of the funds that will be used to pay the contract price. First, the government agency or entity must have statutory authority to execute the contract. The person negotiating the agreement on behalf of the government has limited power to bargain over the price of the goods and services and the nature of the agreement. Statutes and regulations that reflect certain government polices and place prudent limitations on a federal employee’s ability to spend federal funds control the contracting officer’s bargaining power.
The document that outlines the contracting officer’s authority to enter into an agreement on behalf of the federal government and the scope of the agreement to be made is called a warrant. The contracting officer may not act outside the scope of the warrant or deviate from the laws and regulations that apply. A private party that seeks to contract with the government is presumed to know the nature and scope of the contracting officer’s warrant. As a result, entering into a government procurement can be a highly detailed and restrictive process.
The Federal Acquisition Regulation
In order to address the plethora of rules that apply to government procurements, a body of administrative law has been created through the Federal Acquisition Regulation System, known as the Federal Acquisition Regulation or FAR. Codified in the Code of Federal Regulations, this set of rules covers how the government goes about purchasing goods and services in three separate phases:
- Need recognition and acquisition planning
- Contract formation
- Contract administration
Each time that a government agency solicits bids for a government procurement, it must specify the FAR provisions that authorize the contract. Private companies interested in bidding on the contract must comply with these provisions and demonstrate that they will continue to comply with any FAR requirements or that they are eligible to claim an exemption from the rules. For example, certain exemptions are provided for small businesses.
The most substantive FAR provision is Part 52, which provides contract provisions and solicitation provisions. If a government procurement omits one of the required contract provisions, case law provides authority for courts to interpret the missing clause into the agreement in some situations. This is known as the Christian Doctrine, which was derived from the principle that government regulations have the force and effect of law and that government officials cannot deviate from the law without authorization.