When two commercial entities have entered in a contractual relationship, the contracts they make is automatically regulated by the UCC or Uniform Commercial Code and common law of the relevant state to which the contract is applied. So long as the contract isn’t violating public policy and following the law, these commercial firms are allowed to get into a contract.
Even so, there will be a totally different set of rules to be applied and there are varieties of regulatory statutes and requirements that do exist. These things are setting the parameters for the contractual relationship.
How Come Government Contracts are Different?
Whenever a contract is set by two private firms, they spend money or sometimes, the money of their shareholders. Of course, there are laws that are protecting the shareholders which include the requirements that the executives and the board members act in the best interests of the firm.
The private contracts that take place between commercial entities are made as per the decisions of the business which is influenced by free-market principles.
Even if the contract made goes south and the shareholders or business lose money on the process, this is a risk that they partake as part of business operation or the investment they made.
But when the federal government has entered a contract, the money they’re using has come directly from taxpayers. In comparison to investors in public company, taxpayers don’t have a say or power to decide whether to invest their tax money in a project or not. It is the people in the government who makes the final decision.
On the other hand, between the two, they have a common denominator. It’s the fact that both commercial firms and the federal government utilizes contract management system to ensure a smooth sail of every contract they get into.
Government Contracts, Cause…
With government contracts, these are subject to laws to which private contracts aren’t. To give you an example:
- Federal Property and Administrative Services Act of 1949 which governs non-land property as well as construction company acquisition by government agencies
- Armed Services Procurement Act of 1947 that regulates the acquisition of non-land property and construction services by the defense agencies
- Competition in Contracting Act or an act that seeks open competition before awarding a contract except in limited circumstances