Government Contracts are Different from Contracts between Ordinary Parties

By:  Coleman Jackson, Attorney, CPA
March 10, 2016

Government Contracts are Different from Contracts between Ordinary Parties

Contracting with the United States Government is different from contracting with an ordinary party.  Government Contracts differ from normal contracts in a number of ways.  The U.S. government has the exclusive right to decide who the government will do business with.  In government procurement law, the term ‘government contract’ is defined as any agreement or modification thereof between any entity, individual or person and the U.S. Government for the purpose of providing goods or services.  This definition of government contracts covers parties contracting directly with the government and those supplying goods and services indirectly to the government; such as, subcontractors and sub-sub contractors.  Government contracts do not have to be in writing to be enforceable.

Most importantly, the terms and conditions applicable to a government contract do not have to be agreed to by the parties

Most importantly, the terms and conditions applicable to a government contract do not have to be agreed to by the parties.  In fact the contracting party may not even be aware of all the regulations, executive orders and government policies and rules that are applicable to their government contracts.   For example, Executive Order No. 11246, Sec. 202(1) mandates that every nonexempt government contract contain a clause under which the employer agrees not to discriminate in employment on the basis of race, color, religion, sex or national origin.  All nonexempt government contractors must comply with this Executive Order and others that require government contractors to affirmatively put in place policies and procedures to comply with affirmative action employment policies, maintain suitable compliance records, and make them available for audit and inspection by U.S. Department of Labor investigators.  The very first Executive Order concerning equal protection of all U.S. citizens in government procurement was enacted by President Franklin D. Roosevelt.  President Roosevelt prohibited discrimination by government contractors and all Presidents since him have followed his example with respect to government procurement.

Affirmative Action and equal employment policies in government procurement are only one example of how the government achieves social and economic national policies through the U.S. government’s procurement of goods and services.  The President and governmental agencies run the government by enacting executive orders and writing and enforcing regulations.  In 1952, the U.S. Supreme Court ruled that President Truman’s executive order seizing the steel mills were unlawful.  The basic rule established by the Court in Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 72 S. Ct. 863, 96 L. Ed. 1153 (1952) is simple, if the executive acts pursuant to congressional authority, the executive action is lawful; and if the executive acts against congressional authority, as President Truman did in seizing the steel mills, the executive action is unlawful.  In Youngtown, Congress had expressly refused to authorize seizure of the steel mills.  The actual implementation of this rule can be extremely nuanced and complicated as to determining whether an executive order or administrative regulation is -with or without- congressional authority.

Contracting with the U.S. Government is different from contracting with ordinary parties.  Compliance with applicable governmental policies, rules and regulations are extremely important.  Ignorance of government regulations and executive orders can destroy your business because executive orders and regulations apply to government contracts even if the actual contract never mentions them.  Agency regulations and Executive Orders have the full force and effect of law if they do not conflict with an express Congressional statute.  Maryland Cas. Co. v. United States, 251 U.S. 342, 349 (1920).

 Government Contractor’s ignorance of the law is no valid excuse. 

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This government contracting law blog is written by the Taxation | Litigation | Immigration Law Firm of Coleman Jackson, P.C. for educational purposes; it does not create an attorney-client relationship between this law firm and its reader.  You should consult with legal counsel with respect to any specific contract issues impacting you, your family or business.

Coleman Jackson, P.C. | Taxation, Litigation, Immigration Law Firm | English (214) 599-0431 | Spanish (214) 599-0432 

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