Differences Between Federal Government Contracts and Contracts Between Commercial/Business Firms

When two commercial firms enter into a contractual relationship, their contract is governed by the Uniform Commercial Code (if applicable) as well as by relevant state common laws that apply to contracts. As long as a contract does not violate public policy and is in accordance with these and other laws (i.e., protecting shareholder interests in public companies), private parties are permitted to make any contractual arrangements they wish. When the federal government enters into a contract, however, there are very different rules that apply and there are a variety of regulatory requirements and statutes that exist that set parameters on the contractual relationship. When two private entities create a contract, they are spending their own money or, in some cases, the money of shareholders. When two private entities create a contract, they are spending their own money or, in some cases, the money of shareholders.

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When does the federal government use a federal grant or a cooperative agreement?

When the federal government of the United States wants to buy goods or services from the private sector, it uses a procurement contract. In a similar fashion, when the federal government wants to support the activity of a non-profit organization or a lower level of government (state, county or municipality), it can do so by awarding a grant or entering into a cooperative agreement.

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