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The first purchases made through government contracts date back to the late 1700s. There have been a number of notable high-profile failures in government contracting since then. Today, the term shoddy describes something of poor quality, and it originates from a failed government contract during the Civil War. Shoddy was the name of a company contracted to manufacture wool coats for Union (that is, Northern) soldiers. The coats fell apart as soon as they got wet because they were made of cheap, used, low-quality wool.

Today, the U.S. government buys about half a trillion dollars in goods and services annually through contracts. Prices and rates are negotiated, a vendor’s administrative structure is pre-vetted, and important details like the timeframe for delivery are finalized. Since all government activity is publicly funded, agencies must ensure they are buying the highest-quality products at the lowest possible market rate. This fuels the bid process for government contracts.

• Government contracts must be published because they are publicly funded.
• Publicly funded government purchases result in unique requirements from vendors.
• The competitive bid process ensures purchases are of the highest quality and offered at a fair market rate.

How Different Governments of the World Acquire Goods and Services (Models)

In continental Europe, there is a stronger inclination on the part of the state to engage directly in industry. For example, the British government once nationalized parts of the automotive industry, such as Jaguar and Landrover. In the communist era, the Soviet Union and parts of Eastern Europe had different approaches to meeting the government needs. The government operated factories that made everything from boots to aircraft. In these situations, there was no separation between industry and government, but rather a centrally planned ethos. The U.S. government prefers to contract industry professionals to cater to our vast array of needs.

Why America Outsources Government Contracts

Distrust in Government Processes

There is deep skepticism around government and its processes in the United States. The American ethos is that private industry is more trustworthy and efficient

Trust In The Market

Americans trust private industry and markets when it comes to supplying goods and services. Government needs overlap with industry needs by 75 percent.

Competition and Capitalism

Buying from private vendors means dealing with competition and free markets and the energy that that gives industry to innovate. Many Americans believe this results in better products than government could develop on its own.

Main Reasons Why the U.S. Government Needs Contractors

There are two main reasons why contractors are beneficial in this context: human resources fluidity, and government savings on lifetime employment costs.

HR Fluidity

There is a reluctance to hire people into government positions because it is nearly impossible to terminate them without a solid reason. If the government hires a contractor at a private company, however, it can terminate the contract and thus retain more control from an HR perspective. 

Lifetime Cost

Hiring contractors is a lot cheaper for the government in the long run than retaining permanent employees. Federal employees are paid a reasonable wage while in service, but they also have an excellent benefits package that adds up really quickly. The lifetime cost of hiring contractors is thus a lot lower. 

Lobbying and American Exceptionalism 

There is a deep-rooted belief among Americans that exceptional individuals in society are going to go where they are recognized and well-compensated. Public service officers are suspect because the popular belief is that if they were truly exceptional they would be in the private sector – which is what most Americans perceive as the highest professional calling. 

The Bid Process

Government contracts use a competitive bidding process because federal purchases are publicly funded. This ensures customers are getting the best products or services at a fair rate. 

Democracy dictates that every American should have a fair opportunity to bid and all government contract opportunities should be made public. This is why companies need to respond to RFPs and bid on federal contracts or grant opportunities.

Government Contracts Reduce Risk Factors 

Government contracts lessen the level of risk for both government agencies and vendors. Publicly funded government purchases demand unique requirements from vendors. Customers dictate their specific needs in detail in their proposals. This reduces confusion for vendors when applying for contracts, and ensures the customer receives only relevant solutions.

Getting into the right contract vehicles is the first step in becoming a customer’s preferred vendor. Businesses can build long-term, trusting relationships with government officers once they win their first contract.

Find the Right Government Contract for Your Business

Searching through RFPs on SAM.gov and other databases can be tiresome and time-consuming. FedScout helps teams filter for opportunities in their industries and offers insight into your P-win. Save time by searching for your next government contract with FedScout on the web or mobile app.