Fact Checked

What are Procurement Regulations?

Staci A. Terry
Staci A. Terry

Procurement regulations are rules that local, state, and federal governments must follow when they award contracts for services to private companies. The purpose behind procurement oversight is to ensure that governments act in a fair and cost-efficient manner in awarding these often lucrative contracts. Public procurement regulations operate to avoid the perception of any impropriety in awarding government contracts and to make certain the government is wisely spending taxpayer funds.

Different procurement regulations govern the process various government bodies must go through when they make contracts available to private companies. A separate set of procurement regulations guides federal governments in public procurement activities, and state law — in the form of a state procurement act — dictates the steps state and local governments must take to guarantee that they are awarding government contracts in a fair and evenhanded manner. Unfortunately, these procurement regulations set forth processes that can be quite complex and time-consuming for private companies to follow. Although governments have attempted to simplify these procedures, procurement regulations still tend to be fairly burdensome for private companies, especially for those companies that have never before bid on government contracts.

Government purchasing activity has a huge impact on the local economy, due to the sheer size and variety of impact.
Government purchasing activity has a huge impact on the local economy, due to the sheer size and variety of impact.

Competition for government contracts, predominantly at the federal and state government levels, can be quite intense. As a result, companies often limit their attempts to obtain such contracts to a certain number each year. Companies also often employ outside consultants to assist with their government contract bids; the goal is to reduce the expense of seeking these contracts and maximize their chances of receiving these contracts.

Procurement laws, particularly at the federal level, contain a number of very specific criteria for awarding government contracts to private companies. For instance, companies that qualify as small businesses must receive a certain percentage of federal government contracts, and other demographics of business owners, such as minorities and women, also are present in procurement regulations. Additionally, the federal government must award certain contracts solely to traditionally disadvantaged businesses, such as those owned by minorities or businesses in areas with high unemployment rates.

Likewise, a certain state procurement act also may require that government officials on the state or local level award contracts based on certain eligibility requirements of businesses or their owners. Each state’s procurement regulations differ according to state law, so a trait that qualifies a business for a government contract in one state may disqualify that same business for a government contract in another state. That makes it tricky for those trying to win a contract.

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Discussion Comments


@Monika - You must live under a rock if you think that women and minorities aren't discriminated against anymore! I think it's great that a certain amount of government procurement contracts have to go to them. I don't see how this is any different from awarding a certain number of contracts to areas with a high unemployment rate.

However, I didn't realize how expensive it was for companies to try to win these contracts. It definitely seems like that would put some of the companies out of the running in the first place!


I think it's great that some of the regulations require the government to award contracts to areas where the unemployment rate is high. As long as the company is qualified, of course.

It seems like it solves two problems-it gets the government the goods and services it needs, and creates jobs for a certain area. This is definitely sensible.

That being said, I'm not sure that I agree with having to give contracts to a certain number of minorities and women. This doesn't seem like it's really necessary anymore, now that discrimination isn't such a big deal.

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    • Government purchasing activity has a huge impact on the local economy, due to the sheer size and variety of impact.
      By: Monkey Business
      Government purchasing activity has a huge impact on the local economy, due to the sheer size and variety of impact.