Government Procurement in The United States - Law

Law

Government contracting involves the expenditure of public funds and as such it requires a great deal of transparency and accountability. The authority to enter into contracts begins with the authority given to the federal government through the constitution. All three branches of the government have a role. Congress passes legislation that defines the process and additional legislation that provides the funds. The executive branch, through all of the various agencies, then enter into the contracts and expend the funds to achieve their Congressionally defined mission. When disputes arise there are administrative processes that can be used within the agencies to resolve them, or the contractor can appeal to the courts.

The procurement process for executive branch agencies (as distinguished from legislative or judicial bodies) is governed by two primary laws - The Armed Services Procurement Act and the Federal Property and Administrative Services Act. To address all of the various rules imposed by Congress (and occasionally the courts), a body of administrative law has been developed through the Federal Acquisition Regulation. This regulation, all 53 parts, defines the process, provides guidance, implements special preference programs, and includes the specific language for many of the clauses found in a government contract. Most agencies also have supplemental regulatory coverage contained in what are known as FAR Supplements. These supplements appear within the Code of Federal Regulations (CFR) volumes of the respective agencies. For example, the Department of Defense (DOD) FAR Supplement can be found at 10 CFR.

Government contracts are governed by what is known as the federal common law. This body of law is completely separate and distinct from the body of law familiar to most businesses, namely the Uniform Commercial Code (UCC) for contracts covered by the UCC (such as contracts for the purchase and sale of goods or contracts granting a security interest in property other than land) and the general law of contracts for other contracts. The UCC is a body of law passed by the legislatures of the various states and is generally uniform among the states. The non-UCC law of contracts is mostly common law, which is also relatively uniform among states, whose courts regularly look to each other's decisions in the absence of in-state precedent. Common law can diverge between states, however, and can be modified by legislation. Interestingly, most government contracts involve subcontractors. The prime contract (i.e. the contract between the government and its contractors) is governed by the federal common law while the contracts between the prime contractor and its subcontractors are governed by the contract law of the respective states. This can, on occasion, squeeze the prime contractor due to the differences in the laws.