Government Contracts

Government procurement in the United States is the process by which the Federal Government of the United States acquires goods, services (notably construction), and interests in real property. Contracts for Government procurement usually involve appropriated funds spent on 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 legal 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 much more heavily regulated, subject to volumes of statutes dealing with Federal contracts and the Federal contracting process, mostly in Titles 10, 31, 40, and 41 of the United States Code.

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.

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