Government contracts are issued by the government for various purposes such as construction, IT projects, manpower supply, management, etc. Whenever the central and the state government issue any contract they become government contract, the individual who facilitates the execution of the contract is called contractor.
The government contracts are tenders floated through sealed bids and for which proposals are invited. GST registration needs to be satisfied along the compliance with eligibility criteria, to apply for government contracts.
Here are few types of government contracts-
Fixed price contracts
It is type of contract in which the price is not fixed based on time and resource, the cost is generally fixed beforehand. These contracts contain provisions such as economic pricing, defective pricing or contract change.
Cost reimbursement contracts
These contracts are opposite of fixed price contracts, here all the costs related to contract get reimbursed and also extra claims for securing profit. In this contract the government might face losses due to price escalation during the continuation of the contract.
Incentives contract
These contracts were introduced by the government to provide rewards to the contractors, mostly they were monetary benefits. It included performance incentives, cost plus incentives contracts, multiple incentive contracts, etc.
Indefinite delivery contract
In these types of contracts, the duration of the contract is known but the exact time of the delivery of the contract is unknown. This contract allows the government to avail unlimited services from the contractor in a fixed period. It is beneficial when the government is unsure about the about the amount of services to be undertaken.
Time and material contract
This type of contract is used issued when there is an absolute absence of knowledge of time and cost to be incurred. The contract requires government surveillance to adjudicate the contract and work undertaken. This contract is only made when no other contract can be made.
Article 298 of the Indian Constitution grants power to state and the centre for conducting trade and business. Any government contract to be brought into force, needs to satisfy the conditions elucidated under Article 299 of the Constitution. The conditions elucidated under Section 299 are-
- All the government contracts should be in the name of President of India or Governor of State, if a contract is not in the name of the president or governor then it would not be a government contract.
- The president or the governor shall not be personally liable with respect to the contract issued nor any person issuing on their behalf of them.
