Government contracts
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Contracting with the U.S. Government is based on the same principles as commercial contracting and can be very profitable, but is sufficiently different from commercial contracting to require special care. Persons entering into contracts in the commercial arena are pretty much free to do anything that they can agree on. Each represents his own interests and can obligate himself in any way he wants to obtain the benefits he perceives to flow from the contract. If one or both persons are represented by agents, usually employees, commercial contracting law allows the agents to proceed to form contracts based on generally accepted notions of commercial reasonableness. In essence, the law allows each side to rely on the other's presence to establish authority to make a binding contract. Of course there are many nuances and cases covering this, but, generally, the law favors the creation of commercial contracts in order to facilitate business.
The U.S.Government can be thought of as an agent for the American people. It acts only through the powers given to it by the people of the United States. The powers given to the Government are set forth in the Constitution. The government exercises its powers through legislation and regulations issued as prescribed in legislation. Thus, the authority of a Contracting Officer (the Government's agent) to contract on behalf of the Government is set forth in public documents that a person dealing with the Contracting Officer can review. 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 be made by a Contracting Officer with actual authority to make the contract. The Contracting Officer has no authority to deviate from the laws and regulations, and, because they are public documents, the contracting party is held to know them, even if the Contracting Officer does not. This makes contracting with the United States a very structured and restricted process.
This Article will provide a brief overview of this process for people that may be contemplating entering into a Government contract. It is not intended as a tutorial, or to make the reader an expert. This is a non-intuitive, complex subject. It is the subject of entire college programs, not just courses. There are many books written on the subject and journals covering it. In addition, there is extensive case law. The reader should be prepared to seek the advice of an expert in the field.
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[edit] The Law
[edit] The United States Constitution
The Government gets its ability to act from the powers given to it by the people of the United States through the Constitution. The Constitution gives the Government specific enumerated powers in Article 1 Section 8. While the power to purchase is not explicit in the enumerated powers, it is understood to be implied as part of the specific powers granted. For example, the powers to establish post offices and post roads; to raise and support armies; to provide and maintain a navy; and to provide for organizing, arming, and disciplining, the militia, all would be meaningless if the Government could not purchase goods and services to these ends. In addition, the Government is given the power to make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof. This clause has been interpreted extremely broadly.
[edit] The Statutes
The Government exercises its powers through legislation. We can view legislation in the acquisition arena to fall into two classes.
- First, every acquisition can be traced to legislation that permits the acquisition and that provides money for it.
These are normally covered in authorization and appropriation legislation. Generally, this legislation does not affect the acquisition process itself, although, the appropriation process has been used to amend procurement laws, notably with the Federal Acquisition Reform Act ("FARA") and the Federal Acquisition Streamlining Act ("FASA").
- Second, every acquisition must follow the rules for acquisition contained in the applicable laws.
The procurement process is subject to legislation separate from the authorization and appropriation process. This legislation may apply to specific agencies, such as the Federal Aviation Administration or the United States Postal Service, NASA or the Department of Defense, or may apply to a broad class of agencies. In addition, there is legislation that provides for the process of acquisition itself.
[edit] Federal Property and Administrative Services Act
Federal Property and Administrative Services Act
[edit] Armed Services Procurement Act
[edit] Federal Acquisition Reform Act
Federal Acquisition Reform Act of 1995 Pub. L. No. 104-106, 110 Stat. 186 (1995) Division D of the National Defense Authorization Act for Fiscal Year 1996.
[edit] Federal Acquisition Streamlining Act
Federal Acquisition Streamlining Act of 1994 (FASA) Pub. L. No. 103-355, 108 Stat. 3243; see also 10 U.S.C. § 2323 which contains language similar to FASA for the Department of Defense (DOD), NASA and the Coast Guard.
In this legislation, Congress extended the affirmative action authority granted DOD by 10 U.S.C. § 2323 to all agencies of the federal government. See 15 U.S.C. § 644 note. Regulations to implement that authority were delayed because of the decision in Adarand Constructors v. Peña, 515 U.S. 200 (1995). See 60 Fed. Reg. 48,258 (Sept. 18, 1995). See 61 Fed. Reg. 26,042 (May 23, 1996) (proposed reforms to affirmative action in federal procurement) for the basis for the regulations to implement this provision of FASA. See 62 Fed. Reg. 25,648 (May 9, 1997) for government response to comments on the proposal, and 62 Fed. Reg. 25,786 (May 9, 1997) (proposed rules), 63 Fed. Reg. 35,719 (June 30, 1998) (interim rules), and 63 Fed. Reg. 36,120 (July 1, 1998) (interim rules), Federal Acquisition Regulations, Reform of Affirmative Action in Federal Procurement addressing the General Services Administration (GSA), NASA, and DOD.
[edit] AntiDeficiency Act
The Anti Deficiency Act provides that no one can obligate the Government to make payments for which money has not already been authorized.
[edit] The Regulations
The acquisition process is governed by regulations issued pursuant to the statutory authority given by the acquisition statutes. These regulations are included in the Code of Federal Regulations ("CFR"), the omnibus listing of Government regulations, as Title 48. Chapter 1 of Title 48 is commonly called the Federal Acquisition Regulation ("FAR"). The remaining chapters of Title 48 are supplements to the FAR for specific agencies.
As with any other regulation, the FAR has been promulgated through the legal regulatory process. This includes publication of proposed rules in the Federal Register and receipt of comments from the public before issuing the regulation. The FAR is considered to have the force and effect of law, thus Contracting Officers have no authority on their own to deviate from the FAR. The supplements to the FAR have been issued following the same process and must also be followed without deviation.
This does not mean that preparation of a contract is a simple matter of cut and paste. The regulations attempt to provide for every possible situation and acquisition from the purchase of paperclips to the acquisition of battleships. As a result, the FAR and its supplements permit a substantial variation. The Contracting Officer and the contractor must seek to achieve their sometimes conflicting goals while following the specific requirements of the regulations. As with any complex document (in book form, Title 48 of the CFR requires several shelves), the FAR and its supplements can be interpreted differently by different people. The reader is cautioned that, as stated above, this is a non-intuitive, complex subject, and the advice of someone knowledgeable in the field will often be required.
[edit] FAR
Chapter 1 of Title 48 of the CFR contains the FAR. These regulations provide the basic statement of purchasing practices by the Government. The FAR was established to codify uniform policies for acquisition of supplies and services by executive agencies. It is issued and maintained jointly, pursuant to the OFPP Reauthorization Act, under the statutory authorities granted to the Secretary of Defense, Administrator of General Services and the Administrator, National Aeronautics and Space Administration. Statutory authorities to issue and revise the FAR have been delegated to the Procurement Executives in DOD, GSA and NASA. This chapter is issued by the General Services Administration, Department of Defense and NASA. The FAR applies to all executive agencies of the Government, and some of the independent agencies. Other independent agencies, such as the Federal Aviation Administration or the United States Postal Service, have their own statutes and regulations. However, they are generally similar to the FAR.
Titles 1 to 51 of the FAR contain the substantive regulations specifying how a procurement is to be handled and what contract clauses are to be used. Title 52 contains the contract clauses that are to be included in solicitations and contracts. The numbering of the clauses relates back to the Part of Title 1 that governs the subject of the clause. Thus Title 1, Part 47 of the FAR will have clauses in Subpart 52.247. Because of the numbering system, Subparts are generally identified by "FAR" followed by the Subpart number. For example, FAR 52.227-1, refers to Title 48 of the Code of Federal Regulations, Chapter 1, Part 52, Subpart 52.227, clause 1.
[edit] FAR Supplements
While all agencies must comply with the FAR, there is provision for variations to meet specific agency requirements. For specific acquisitions, or a class of acquisitions, FAR 1.4 provides for "deviations". For requirements that an agency wishes to provide across all its acquisitions, FAR 1.3 provides for issuing supplemental regulations.
Agency supplements are contained in the remaining chapters of Title 48 of the CFR. However, they are usually referred to as a supplement to the FAR rather than by chapter number. For example, the Department of Defense supplement to the FAR is the DFARS. Also, the numbering system for each supplement follows that of the FAR, with the chapter number prepended to the number. For example, the Department of Defense supplement to FAR 15.404 is DFARS 215.404.
The requirements in the supplements are generally similar to those in the FAR, but they can differ in important ways. The differences can be critical to a contractor. Applying the FAR when a supplement exists, or applying the rules from the supplement for a different agency can result in contract obligations vastly different from those intended. This is especially true in the area of protection of data and software. A contractor must comply with very specific rules in order to protect its data and software. While the FAR and DFARS may have end results that are almost the same, the rules to get to those results are vastly different, and an inattentive contractor could end up giving the Government the right to do anything it wants with the data and software, including give it to the contractor's competitor without restriction.
[edit] The Warrant
A Contracting Officer has only the authority granted pursuant to law and agency procedures. This authority is set forth in the Contracting Officer's warrant and the authority for the warrant can be traced to the enabling legislation. Unlike in commercial contracting, there is no doctrine of apparent authority applicable to the Government. Any action taken by a Contracting Officer that exceeds the authority of the Contracting Officer's warrant is not binding on the Government, even if both the Contracting Officer and the contractor desire the action and the action benefits the Government. The contractor is considered to know the scope of the warrant and can not rely on any action or statement of the Contracting Officer to the contrary.
[edit] See also
The following are a minuscule selection of the materials available and are included only as examples. Their listing does not result from an endorsement or preference.
[edit] Governmental resources
- Acquisition Central or just acquisition.gov- official US Federal Government website of the Integrated Acquisition Environment, functioning under the auspices of OMB's Office of Federal Procurement Policy and the Chief Acquisition Officers Council
[edit] Programs
[edit] Courses
[edit] Books
- Nash, Ralph Jr.; & Cibinic, John Jr. (1993). Formation of Government Contracts, 2nd edition, George Washington University. ISBN 0-935165-07-X.
- Nash, Ralph Jr.; & Cibinic, John Jr. (1995). Administration of Government Contracts, 3rd edition, Commerce Clearing House, Inc. ISBN 0-935165-32-0.
- Tiefer, Charles; & Shook, William A. (2003). Government Contract Law, 2nd edition, Carolina Academic Press. ISBN 0-89089-437-X.
- J. Edward Murphy (2005). Guide to Contract Pricing: Cost and Price Analysis for Contractors, Subcontractors, and Government Agencies. Management Concepts. ISBN 1-56726-153-1.
- Darrell J. Oyer (2005). Pricing and Cost Accounting: A Handbook for Government Contractors, 2nd edition, Management Concepts. ISBN 1-56726-164-7.
- Bednar, Richard J.; Braude, Herman M.;&Cibinic, John Jr. (1991). Construction Contracting. George Washington University. ISBN 0-935165-18-5.
- Manos, Karen L. (2004). Government Contract Costs & Pricing. Thomson-West. ISBN 0-314-11621-4 & 0-314-11708-3.
[edit] Journals
- Public Contract Law Journal
- CCH Government Contract Reports
- West Briefing Papers
[edit] Case Law
- Supreme Court Decisions
- Court of Claims (Claims Court) Decisions; West Federal Claims Reporter
- Courts of Appeals Decisions; West Federal Reports
- Federal District Court Decisions; West Federal Supplement
- Boards of Contract Appeals' Decisions; CCH Contract Appeals Decisions
- West Controller General's Procurement Decisions
- West Government Contracts Citator
