Government Procurement in The United States

Government procurement in the United States addresses the federal government's need to acquire goods, services (including construction), and interests in real property. It involves the acquiring by contract, usually with appropriated funds, of supplies, services, and interests in real property by and for the use of the Federal Government through purchase or lease, whether the supplies, services, or interests are already in existence or must be created, developed, demonstrated, and evaluated. See 48 C.F.R. § 2.101 ("Acquisition" defined, as to goods and services only). Federal Government contracting has the same elements as contracting between private parties: a lawful purpose, competent contracting parties, an offer, an acceptance that complies with the terms of the offer, mutuality of obligation, and consideration. However, Federal contracts are subject to volumes of statutes dealing specifically with Federal contracts and the Federal contracting process, most of which can be found in Titles 10, 31, 40, and 41 of the United States Code. In short, while the fundamental theoretical underpinnings of Federal contracting and contracting between private parties are the same, Federal contracting is much more heavily regulated.

The powers given to the Federal Government are set forth in the U.S.Constitution. The Federal Government exercises its powers through legislation, treaties, implementing regulations, and the exercise of those authorities. The Federal Government's power to contract, is not set forth expressly and specifically in the U.S. Constitution. However, the U.S. Constitution appears to assume the continued vitality "Engagements" entered into under the Articles of Confederation. U.S. Const., Art. VI. Moreover, the power to contract was and is regarded at law as necessarily incidental to the Federal Government's execution of its other powers. An early Supreme Court case, United States v. Tingey, 30 U.S. 5 Pet. 115 (1831), recognized that the United States has in its political capacity a right to enter into a contract. It is an incident to the general right of sovereignty, and the United States, may, within the sphere of the constitutional powers confided to it and through the instrumentality of the proper department to which those powers are confided, enter into contracts not prohibited by law and appropriate to the just exercise of those powers. Scores of statutes now also expressly authorize departments and agencies to enter into contracts.

Private parties entering into a contract with one another (i.e. commercial contracts) are much freer to establish a broad range of contract terms by mutual consent than a private party entering into a contract with the Federal Government. Each private party represents its own interests and can obligate itself in any lawful manner. Federal Government contracts allow for the creation of contract terms by mutual consent of the parties, but many areas addressed by mutual consent in commercial contracts are controlled by law in Federal contracts and legally require use of prescribed provisions and clauses. In commercial contracting, where one or both parties may be represented by agents whose authority is controlled by the law of agency, the agent is usually allowed to form a contract only with reference to accepted notions of commercial reasonableness and perhaps a few unique statutes that apply. In Federal Government contracting, specific regulatory authority is required for the Government's agent to enter into the contract, and that agent's bargaining authority is strictly controlled by statutes and regulations reflecting National policy choices and prudential limitations on the right of Federal employees to obligate Federal funds. By contrast, in commercial contracting, the law allows each side to rely on the other's authority to make a binding contract on mutually agreeable terms. Of course, there are many nuances to commercial contracting, but, generally speaking, the law favors the creation of commercial contracts by a variety of agents in order to facilitate business.

The authority of a Contracting Officer (the Government's agent) to contract on behalf of the Government is set forth in public documents (a warrant) that a person dealing with the Contracting Officer can review. The Contracting Officer has no authority act outside of his or her warrant or to deviate from the laws and regulations controlling Federal Government contracts. The private contracting party is held to know the limitations of the Contracting Officer's authority, even if the Contracting Officer does not. This makes contracting with the United States a very structured and restricted process. As a result, unlike in the commercial arena, where the parties have great freedom, a contract with the U.S. Government must comply with the laws and regulations that permit it, and must be made by a Contracting Officer with actual authority to execute the contract.