What is Government Procurement?

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Government procurement is simply the acquisition of goods, services, and construction by or on behalf of a public authority. That is the definition.

Now let’s take a more detailed look into what it’s all about.

There are numerous federal, state, county, and city government agencies which have similar as well as additional needs that the private sector has. Almost everything that any individual uses in day-to-day life is something that any government agency also uses.

When you think of individual needs, things like toothpaste, toilet tissue, clothing, food, the use of vehicles, fuel to run those vehicles, the use of buildings, utilities to power those buildings, emergency response services, and so on may come to mind. 

Government agencies use all of these and more...

On a more grand scale they use rockets, rocket launchers, sophisticated security and tracking devices, as well as battleships, armored tanks and specialized forces (people). Everything that an agency doesn’t provide for itself must be acquired in support of that agency’s mission.

With 10% - 20% of the U. S. gross domestic product (GDP), government procurement accounts for a substantial part of the global economy.

GDP is a monetary measure of the value of all final goods and services produced in a period of time and is used to determine the economic performance of a country in order to estimate that country’s international standing.

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Authority to make purchases

The power to enter into contracts is regarded as necessary incidental to the federal government’s execution of its other powers. 

The federal government’s authority to enter into contracts is derived from the U.S. constitution, which defines its power. Although the power to enter into contracts is not expressly and specifically set forth in the constitution, Article VI is where the authority is found.

The U. S. Congress passes legislation that defines the process and additional legislation that provides funds to pay for the acquisitions. When disputes arise, there are strict administrative processes within agencies to resolve the disputes. 

Contracting officials use procedures that conform to the Federal Acquisition Regulation (FAR). The FAR is a standardized set of regulations used by all federal agencies in making purchases. It provides procedures for every step in the procurement process, from the time someone in the government discovers a need for a product or service to the time the purchase is complete.

To address the many rules imposed by congress and the courts, a body of administrative law has been developed throughout the FAR. This 53-part regulation defines the procurement process, including special preference programs and gives specific language to be used in most of the contract clauses found in government contracts.

Government contracts are governed by federal common law, a body of law which separate and distinct from the bodies of law applying to must businesses.

It’s called the Uniform Commercial Code (UCC) and applies to the purchase as well as to the sale of goods and to the contracts granting a security interest in property other than land. The UCC is a body of law passed by the U.S. state legislatures and is generally uniform among all U. S. states and territories.

The general law which applies when the UCC does not, is common law, which is also similar across all U. S. states and territories.

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How are purchases made

A contract is a formal document signed by a legal agent representing the buyer and a legal agent representing the seller.

Contracts between the government and its contractor (prime contracts) are governed by federal common law. Contracts between the prime contractor and its subcontractor are governed by the contract law of the respective state.  

Each agency has a department dedicated to acquiring goods, services, and construction for the agency. The terms acquisition shop, contracting department, or purchasing department commonly refer to the agency’s staff who are delegated with authority to make buys for the agency.

Individuals given authority to make the buys are often called buying agents, purchasing agents, contract specialists, or contracting officers (COs).

The main regulation applicable to federal acquisition, the FAR is usually also adhered to somewhat by state, county, and city governments as well. With specific regulatory authority, delegated in writing and for COs accompanied by the agency’s certification, agents bargaining authority are strictly controlled by statutes and regulations.

The federal government uses designated forms approved for the specific purpose of laying out all necessary requirement to secure goods, services, and construction for the government agency. When a contractor follows directions spelled out within the contract, payment is usually made within thirty (30) days after the government acknowledges receipt. 

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How are problems handled

There are also regulations to address deviations from the normal process. 

The constitutionally mandated oversight of the use of public funds is associated with the principle of checks and balances. The Anti-deficiency Act (ADA), provides that no one can obligate the government to make payments for which money has not already been appropriated and prohibits the government from receiving gratuitous services without explicit statutory authority.

An Anti-deficiency Act violation can occur several ways:

1.  When money appropriated for one purpose is used for a different purpose.

2.  When a contract uses funds in a period that falls outside of the time period the funds are authorized for use under what is known as the Bona Fide Needs rule (31 USC 1502).

3.   When a government payment office fails to make payment to a contractor in the time-frame allotted.

Sometimes an individual, within the government agency, who doesn’t have the “delegated” authority, may approve acquisition of goods or continuation of services. This is called an unauthorized commitment and when it occurs, a ratification must be processed in order for the contractor to get paid for the goods or services that the government will have received.

Ratifications are governed by FAR 1.602-3, Ratification of Unauthorized Commitment, which defines a ratification as the act of approving an unauthorized commitment by an official who has the authority to do so.

To sum it up…

Government procurement is somewhat similar to any other acquisition when looking at what is being acquired. There's only a slight difference when you consider the unique items or services necessary for the government to function properly and carry out its mission.

However, when you consider how a purchase is made and paid for, it’s a totally different process.

Associated with any government acquisition we find numerous rules and regulations, which must be followed before an agreement to exchange the item or service for funds can be finalized. After the product and/or service has been delivered to the government, payment to the provider should not be expected before 30 calendar days following delivery.