Federal Contract
A legally binding agreement between the U.S. government and a private company to provide goods or services — from fighter jets to IT consulting.
How It Works
Federal contracts are the primary mechanism through which the government purchases goods and services from the private sector. The Federal Acquisition Regulation (FAR) governs how contracts are awarded, managed, and closed out. Contracts specify deliverables, timelines, pricing structures, and performance standards. The government spent over $700 billion on contracts in fiscal year 2023, with the Department of Defense accounting for roughly two-thirds of that total. Contract data is publicly available through USASpending.gov.
Related Terms
- Federal Grant — Government funding awarded to state/local governments, nonprofits, or institutions for a specific public purpose — unlike contracts, grants are not purchases of goods or services.
- Obligation — A legally binding commitment by the government to spend money — the point at which funds are formally committed to a contract, grant, or other agreement.
- Contracting Officer (CO) — The government official with legal authority to enter into, administer, and terminate federal contracts — the only person who can obligate the government.
Explore Federal Spending
About This Definition
This definition is part of the TaxDollarData Federal Spending Glossary — 31 terms explaining how the U.S. government spends taxpayer money. All definitions are written in plain language for taxpayers, journalists, contractors, and researchers.