How government buying works — federal and state
Whether you're a government entity trying to spend public money correctly or a company trying to win government business, procurement law shapes every step of the transaction. It determines how contracts are awarded, who can bid, what process must be followed, and what happens when something goes wrong.
The rules are designed to ensure that public funds are spent fairly, competitively, transparently, and consistently. The practical reality is that procurement law is highly fragmented. Federal agencies follow one framework, each state follows its own procurement code, and local governments often add another layer of regulation and procedure.
Procurement rules are also heavily dependent on both the type of purchase and the dollar amount involved. Construction contracts, professional services, technology procurements, emergency purchases, and cooperative purchasing arrangements are often governed by different rules and procedures, even within the same jurisdiction.
The most important concept in procurement law is the dollar threshold, meaning the amount that determines how much competition, documentation, and approval a purchase usually requires.
At the federal level, procurement generally operates in three tiers:
Micro-purchase: Generally up to $15,000. Agencies may buy directly using streamlined procedures if the price is reasonable and agency rules are followed.
Simplified acquisition: Generally above the micro-purchase threshold and up to $350,000. Agencies may use simplified procedures, but competition and documentation requirements still apply.
Above the simplified acquisition threshold: Procurements generally require more formal competitive procedures unless a statutory or regulatory exception applies.
States and local governments follow the same general logic, but the actual thresholds vary significantly. Some jurisdictions require formal competition at relatively low dollar amounts, while others allow more flexibility.
Thresholds also change periodically through legislation, inflation adjustments, or agency rulemaking, so they should always be verified against the current procurement manual, statute, or agency guidance. For example, Texas increased several local government competitive procurement thresholds from $50,000 to $100,000 effective September 1, 2025.
Once the thresholds are met and the statutory requirements are triggered, government entities typically publish a solicitation describing the goods or services sought, the submission requirements, timelines, evaluation criteria, and contract terms. Vendors then submit bids or proposals in accordance with the published procedures. Depending on the jurisdiction and procurement method, responses may be sealed until a designated opening date, publicly opened, evaluated against predetermined criteria, or scored using a best-value framework. The core contract terms may be included in the bidding documents, or the contracts may be negotiated with the winner. The exact process depends on the jurisdiction, type of product or service, and dollar amount.
To combat the time and money involved in the solicitation and bidding process, many government entities use cooperative purchasing programs to avoid running a separate solicitation for every purchase. These cooperatives can provide a significant advantage to companies registered with them. Under this model, one public entity competitively solicits and awards a contract that other eligible entities may also use, subject to state and local law.
Cooperative purchasing can reduce administrative costs, speed up procurement timelines, and increase purchasing leverage. National programs such as NASPO ValuePoint and BuyBoard are widely used, but many states, counties, school systems, and regional agencies also operate their own cooperative purchasing vehicles.
Whether a public entity can use a cooperative contract, and under what conditions, depends on the applicable procurement statute, local rules, and the terms of the cooperative agreement itself.
Procurement laws are undergoing significant modernization and revision. It is important to confirm that any resources used in planning are up-to-date.
This overview is for informational purposes only and does not constitute legal advice. Procurement laws and thresholds change frequently. Always verify current requirements with the relevant procurement office, statute, or agency guidance before acting.
Federal procurement operates as a layered framework. The Federal Acquisition Regulation (FAR) is the main rulebook for how civilian executive-branch agencies buy goods and services. The Defense Federal Acquisition Regulation Supplement (DFARS) layers on additional rules specific to Department of Defense procurements. Specialized statutes address narrower concerns: the Bayh-Dole Act (35 U.S.C. ch. 18) governs patent rights in inventions made with federal research funding; SBIR/STTR programs set aside R&D contracting for small businesses; the Stevenson-Wydler Act promotes federal technology transfer; GSA Multiple Award Schedules provide pre-negotiated contract vehicles agencies can use without running a new competition; and FAR Subpart 27.4 governs technical data and computer software rights in federal contracts.