Government Contracts: A Study of Methods of Contracting
| DOI | http://doi.org/10.1111/j.1468-2230.1968.tb01186.x |
| Published date | 01 May 1968 |
| Author | C. C. Turpin |
| Date | 01 May 1968 |
THE
MODERN LAW REVIEW
Volume
31
May
1968
No.
3
GOVERNMENT CONTRACTS: A STUDY
OF
METHODS
OF
CONTRACTING
THE
purpose of this article is the examination of the principal types
of contract employed by agencies of the central Government in the
procurement of goods
or
services. Although such contracts are in
principle governed by the ordinary law of contract,’ the scale of
Government procurement has led to the emergence
of
special devices
and techniques in contracting,
of
which the function is to safeguard
the public interest while assuring adequate reward for the con-
tractor. The identity between the interests
of
Government and the
public interest invests the study of Government contracts with a
special importance.
It
is doubtless true that most contracts of Government depart-
ments are of a straightforward business sort, by which the depart-
ment procures generally available goods
or
services at prevailing
prices. But the Government also places many major contracts
for the development
or
production
of
highly specialised equipment,
and for equally specialised construction, repair, maintenance
or
other
work,
in which considerable expenditure of public money is
involved. These Government contracts, by means of which many
of the community’s needs are satisfied, cannot be equated with
ordinary commercial contracts, concluded between parties at arm’s
length and with an exclusive view to immediate
or
eventual profit
for
both parties. The contractors to the Government seek profit,
but they are also carrying out a public function in supplying the
requirements of the state.a
It
may
be
thought that the conditions
1
Mitchell,
The
Contracts
of
Public
Authorities,
p
.
5-6. 22-23,
226
et
seq.
and
passim.
Nevertheless, there is a need
for
the fevelopment of legal principles
especially applicable to Government Contracts, which will be appropriate
to
the unique relationship existing between the Government and its major
contractors.
a
Cf.
the obscrvations
of
Mr.
Houghton, member
fyf
Sowerby, in
a
debate in
the House
of
Commons on December
11,
1963:
I
can only conclude that
what is needed in this situation is
a
reappraisal by private industry of its
relations with the Government, who will become an ever bigger buyer
as
the
years
go
by.
We
need
a
frank and meaningful acceptance by industry,
suppliers and contractors that the public interest
is
at
stake and that the public
are
footing the bill.
The?
are
engaged in
a
service and not
a
commercial
enterprise in this respect
Cf.
too
the thesis
(H.C.Deb.
Vol.
686,
col.
426).
YOL.
31
Z41
9
242
TEE
MODERN
LAW REVIEW
VOL.
81
of a competitive market should enable the Government, like any
other purchnser, to get value for its money, but if there is
('
an
area, too large to be comfortable, in which the market economy
does not automatically look after the public interest," Govern-
ment contracts undoubtedly are located in that area. The relation-
ship between the Government and its major contractors is, then,
of
a special kind, and is characterised by a mutual dependence which
is not typical of ordinary commercial transactions. While the
Government depends upon the willingness and capacity of private
contractors to supply many
of
its needs, the prosperity of some
industries is largely sustained by Government contracts.'
The Government's object in contracting is to procure its require-
ments as cheaply as possible, consistently with securing the desired
quality of goods
or
service. The Government's interest in cheap
procurement has to be reconciled with the contractor's interest in
profit, and also with the need to keep in existence a suffi-
cient number of
firms
with the willingness and capacity to do the
Government's work. The delicate balance that must be struck
between the provision of reasonable profits to contractors and the
limitation of cost
to
the Government calls for the use
of
different
forms of contract that are appropriate to different contracting
situations. The difficulty of achieving this balance, and also the
lack of appreciation that still exists in some quarters
of
the special
nature and function of the Government contract, are illustrated in
an extreme form by the Ferranti Bloodhound missile contracts.s
In
1056
the Ministry
of
Aviation placed contracts with Ferranti
Ltd. for the production and supply of components and equipment,
previously developed by Ferranti Ltd. at Government expense,
for
thc Bloodhound Mark
I
missile system.
No
fixed price was agreed
at this stage, but
it
was a term of the contracts that the prices to
be agreed must be
''
fair and reasonable."
'
Work began at once,
but prices were not agreed until October
1960,
when production was
far advanced and substantial deliveries had already been made.
A
previous overestimation of costs
of
production by the Ministry's
of
DuprJ and Qy,stafson
in
"
Contracting
for
Defense: Private Firms and the
Public Interest
(1862)
77
Po1.Sc.Q.
161,
that in defence procurement
in
the United States
"
public and private functions have become interwined.
Business is
no
longer merely a
suppliei,
but a participant in the management
and administration
of
a public function
3
Catherwood,
The
Christian
in
Industrial
Societv,
2nd
ed.
(1966),
p.
35.
4
This is true, in different degrees,
of
the electronics, computer, aircraft and
5
buch
of
the inquiry snd discussion relating to Qovernment contracts centres
upon the procurement
of
weapons, but it is emphasised that the modes
of
contracting
here
examined have no necessary
or
exclusive application
to
investment in the arms
race.
6
A
contract for the fiale
of
goods
at
a
"
fair
"
or
"
reasonable
"
price
is
valid
:
Cannan
v.
Fowler
(1859)
14
C.H.
181;
Morgan
v.
Mtlman
(1859)
3
De
O.M.
&
0.
24
fit
p.
94;
Cumberland
v.
Bowes
(1854)
15
C.B.
348;
Wenning
V.
Robinson
[1901-05]
N.S.W.R.
614.
The Ferrnnti contract, which
WJR
one
for
the
manufacture aftd sale
of
goods
at a
I'
fair and reasonable
"
rice to be
''
fixed
by agrcernent between
the
parties, was within this principye.
(p.
176).
harmaceiitical industries.
To continue reading
Request your trial