An Introduction to Federal Government Contracts
| Publication year | 1980 |
| Pages | 470 |
| Citation | Vol. 9 No. 3 Pg. 470 |
1980, March, Pg. 470. An Introduction to Federal Government Contracts
© The Colorado Lawyer 1980
As a general proposition, when the government "comes down from its position of sovereignty, and enters the domain of commerce, it submits itself to the same laws that govern individuals there."(fn1) While this statement is true in the broadest sense, the field of federal govenment contracts is controlled by highly specialized laws, regulations and contract provisions.
These laws and procedures pose special challenges to the attorney who, although accustomed to dealing with commercial contracts, is unfamiliar with the federal system of contracting. The purpose of this article is to provide the private practitioner with an introduction to this arena of federal contracts and to serve as a starting point for further research concerning specific questions.
As the sovereign, the United States has inherent power to enter into contracts even though this power is not expressly authorized by the Constitution.(fn2) In the exercise of its constitutional powers under Article 1 of the Constitution, Congress has passed several laws which provide general, and sometimes very specific, guidance with respect to federal acquisition policy. Because the expenditure of public funds is involved, the methods and procedures used in contracting by the federal government are designed to insure against misappropriation of funds and to promote various socioeconomic policies.
The general powers of the government to contract have been delegated to various agencies, which are represented by contracting officers. The government is only obligated to the extent that its agent (contracting officer) has actual or implied authority, and cannot be bound by the actions of persons with apparent authority.(fn3)
Individuals contracting with the government are charged with notice of all limitations upon the contracting officer's actual authority, even though their actions are in good faith or due to a misrepresentation.(fn4) Despite this fact, however, an unauthorized contract may be later ratified by a contracting officer having actual authority.(fn5)
Although there are a large number of current statutes affecting acquisition actions of the federal government, the two main statutes that govern a majority
Of more practical importance than the statutes are the regulations promulgated under those statutes which govern federal contracting actions. There are two basic regulations: (1) for the Department of Defense, the Defense Acquisition Regulation ("DAR") is the bible;(fn8) and (2) the Federal procurement Regulation ("FPR"), which governs the procurement functions of most other agencies.(fn9) Individual agencies may also have implementing regulations, although the basic framework is contained in DAR and FPR. At the present time, the Office of Federal Procurement Policy is attempting to combine DAR and FPR in a single acquisition regulation entitled the "Federal Acquisition Regulation," which has not yet been promulgated.
There are two basic methods of contracting used by the federal government. The first and preferred method is formal advertising, and the second is negotiation. Under formal advertising, bids are solicited and award is made to the lowest responsible, responsive bidder. Formal advertising is used where the government is sufficiently able to describe its needs in an invitation for bids ("IFB"). Negotiated contracts, on the other hand, are used where formal advertising is not feasible or practicable. Because of the preference for formal advertising, there are specific criteria governing those situations in which negotiated procurement may be used. The number of contracts issued under formal advertising is far greater than those entered into under negotiation procedures, but because formal advertising is impractical for many very large contracts, the dollar volume of negotiated contracts is higher.
Under formal advertising, the specifications for the item or service required must be stated precisely. In order to be awarded the contract, the bid submitted by the potential contractor must be responsive to the invitation for bids in all material aspects.(fn10) The test to be applied in determining the responsiveness of a bid is whether the bid as submitted is an offer to perform without exception and in exact accordance with the provisions of the invitation.(fn11)
In order to be eligible for award of a contract, a bidder whose bid has been determined to be responsive must also be determined to be responsible.(fn12) This means that the contracting officer must affirmatively establish that the prospective contractor has the ability to perform the contract in all respects, including having adequate financial resources.
One of the basic goals of federal procurement is to insure maximum competition. This is accomplished in several ways. The specifications for an item to be procured must only set forth the minimum needs of the government, thus maximizing the number of products which will be responsive to an IFB.(fn13) In order to insure extensive dissemination regarding prospective procurements, IFB's are distributed through the use of bidders lists, and synopses of major procurements are published in the Commerce Business Daily.
The invitation for bids is an invitation to submit an offer. A bid submitted in response to an IFB is an offer which becomes a binding contract upon acceptance by the government. Unlike most commercial situations in which a bid may be withdrawn or modified prior to the time of acceptance, bids submitted to the government under formal advertising cannot be withdrawn after bid opening.
Where there is evidence of a mistake in
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