How are federal government contracts different from contracts between commercial firms?

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Jeffrey Johnson is a legal writer with a focus on personal injury. He has worked on personal injury and sovereign immunity litigation in addition to experience in family, estate, and criminal law. He earned a J.D. from the University of Baltimore and has worked in legal offices and non-profits in Maryland, Texas, and North Carolina. He has also earned an MFA in screenwriting from Chapman Univer...

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UPDATED: Aug 18, 2012

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Federal government contracts have many similarities to private commercial firm contracts, but there are some distinct differences, too. Namely, contracts for federal government organizations contain several highly-specialized regulations and requirements that are much stricter and more precise than any language found in a typical commercial contract. This is because, quite simply, a government group is acting not on its own behalf, but on behalf of the public (with public funds and public interest at stake), and thus its actions must be held to a high standard so that they can stand up to possible scrutiny.

There are many differences between government contracts and commercial contracts. Commercial firms, by definition, are in business to profit, and contracts between these firms can basically be dictated by whatever they want. The terms of commercial contracts, as long as they aren’t illegal or against public policy, do not need to satisfy anyone except those engaging in the contract. The federal government, on the other hand, is answering to a much larger and less personal audience, so government contracts reflect this.

The specific regulations in government contracts are not just there to create a high standard of behavior. Government contracts are also designed to create transparency, meaning they attempt to make actions–and the reasoning behind those actions–blatant and clear to anyone who is familiar with the agreed upon terms. This is to discourage suspicion of other motives and to show the public, who is funding the government’s actions, how their money is being spent.

Further, the special rules for government contracts prevent government personnel from engaging in wasteful or inefficient practices, while directing private firms to be fair in their dealings with the government.

Government contracts are complex, so if you are entering into a government contract, it’s imperative that you follow guidelines closely in order to ensure your interests are protected. As such, it’s a good idea to consult with a lawyer before signing any government contract.

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