government contracts

government contracts

The Impact and Implications of Government Contracts in Modern Society

1. Introduction to Government Contracts

As long as a country is committed to a particular level of national security, most of the goods and services procured by the government are produced by private industry. In a modern society, the government cannot build ships, planes, guns, or independent thoughts. Defense procurements are an essential ingredient of a market economy and the system of private enterprise. Consequently, whenever the government buys from private industry, it is making an investment in that industry. The investment can take many forms, such as the high cost of plant and equipment required to undertake the job or the actual skill, know-how, and the ability of the labor force. However, the actual basis of the investment in a particular concern is that firm’s commitment to fulfill the particular contract. It indicates the government’s reliance on that agency for the production of specified items and its ability to meet the schedules. An examination of contracts previously awarded by the various government agencies demonstrates the extent of this investment. Incentives and other such instruments are the key to the government’s program to persuade firms to make the necessary investments, particularly at the margin, to meet its specific needs in step with the national progress.

When two private parties enter into a contract, the terms are usually spelled out in detail, and one party pays money to the other as consideration. A contract with the United States (or any other government) is different. The buyer does not intend to make a profit, but to obtain value for money. The purchase may consist of goods or services that are consumed immediately and cannot be stored for later use (as with defense spending or police protection). Alternatively, the government can make major acquisition expenditures designed to increase the economy’s productive capacity. In the first case, the expenditure is a current account transaction, affecting the level of income by consumption in the period the expenditure is made. In the latter case, the expenditure is a capital account transaction, increasing the income producing capacity by an equivalent amount. Whether the government is buying a capability for future consumption or a present good or service, it is spending money for the people who are using the benefits.

2. Benefits and Challenges of Government Contracts

However, the complex allocation of resources by the government can also undermine democracy, promote compliance traps, and restrict the intellectual capacity and administrative capacity of government functions. Behind national sovereignty and market power is the institutional goal of the government, characterized by the features of separation of powers, division of federal level, federal, state, and local boundaries and branches of the organization. The importance of the institutional arrangement is not only a matter of economic capacity but also a matter of social legitimacy. The public’s focus on the nature and content of government contracts should be placed on supervising key elected officials, reducing the shadow cost of participation, and making the administrative decision-maker’s trade-offs transparent, in order to benefit a cause larger than the administration.

Government contracting, while a source of new market opportunities for private businesses, is also a way in which a society can meet its social and economic needs in the areas of national defense, infrastructure, education, public welfare, environmental protection, security, and space exploration. Public procurement activities can provide various benefits to the public by stimulating economic growth, innovation, competition, capacity expansion, job creation, workforce development, spill-over effect, transfer of high-tech, promoting vital societal or international values, and increasing productivity and cost savings. Public procurement may contribute to public-private partnerships by implicitly supporting industrial operations and R&D on dual-use technologies. Contracts may also influence certain societal norms and business developments, including ethical and environmental considerations. It is evident that government contracts have influenced a wide range of national, regional, and municipal policies.

3. Ethical Considerations in Government Contracting

There should be no misunderstanding. Every contractor must be long-winded in presentation—vocal or printed—to the effect that his product or service is of the greatest national importance. Some of these claims are greatly exaggerated. The need for ventilation and rapid publication of such facts is recognized. What is frequently not recognized is that claims in this area of confessed subjectivity are often no more supportable than when they relate to more tangible evidence. The contractor, like Cassandra, should learn the wisdom of selective exposition of such facts. As in the case of delineating technical problems, the element of judgment and degree of support for any claim will be among the matters of consideration in employing these principles.

With precious taxpayer money at stake, ethical considerations assume added weight. Decision-makers in government contracting bear a heavy ethical responsibility in expending public funds that must be allocated among numerous national priorities – maintaining forces adequate to ensure national survival, improving the environment, curing diseases. The very largeness of the sums involved, often more than $2 billion per day, dulls the senses of those involved, reducing the ethical issue to one of choosing between good and better. But it is not that easy. Doing the immediate good often conflicts sharply with the long-term objective of constantly providing and improving defense capabilities at a cost which the taxpayers can afford. The interests of the government thus extend beyond the immediate buy of specific products and services at minimum cost; the long-term health of the defense industry, some of which operates in the red, and equitable treatment of contractors are also valid areas of concern. Failure to care for these can also threaten national survival by making the production of items essential to national survival unduly costly or perhaps even impossible.

4. Innovations and Future Trends in Government Contracting

Government purchases of goods and services from the private sector have reached unprecedented levels due to the imposition of substantial new regulatory and reporting requirements on U.S. businesses. The long-term trend in new contracts and new legislation suggests that these requirements, driven largely by executive policies relating to affirmative action, may have broadened rather than narrowed in scope. As a result, the government contracting field exerts an ever-growing influence on U.S. society and its business community. The unique political and regulatory environments in which government contracts are formed and performed, as well as the complexity of the procurement process, present daunting challenges to the government procurement officer. These government contracting challenges are continually growing more pronounced as the pace of technological and organizational change increases.

Agencies have utilized various technological innovations in their procurement efforts to improve the accuracy, efficiency, and effectiveness of the procurement process. Some of the technologies utilized include the following: e-business gateways for contracting opportunities, advanced notification systems from multiple government sources, reverse auctions, and secure transactions. In particular, the development of electronic commerce has significantly affected the federal procurement process. Over the past several years, the federal government has accelerated its efforts to utilize various technologies as a means of reforming and improving federal procurement. Through the use of modern information technology systems, agencies can enhance full and open competition, as well as small business contracting.