A contracting authority has the power to commit funds to a project before they are available. Government agencies are the most common entities with contractual authority, and they can exceed promised funding commitments if necessary. It is important to confirm the limits of someone’s contractual authority before entering into agreements.
A contracting authority is a person or agency authorized to commit funds to a project before those funds are made available. With that power, people can enter into contracts and initiate projects with the assurance that funds are on the way. Once the contract is signed, it is a formal obligation and the funds must be produced within the time frame stipulated in the contract.
Government agencies are the most common entities that can act with contractual authority. These agencies need to be able to conduct business before funds are appropriated and distributed, in order to address pressing issues or fulfill mandates, and they are supported by the government in securing the funds. They can use past allocations as a guide to determine how much money will be made available, and in addition to committing funds before budgets are approved, they can also exceed promised funding commitments if necessary.
When budgets are being developed and approved, agencies submit funding requests with detailed breakdowns of how the funding will be used. Agencies may indicate that they have used their contractual authority to commit to funding and that resources will be needed to cover these obligations. They also try to anticipate spending needs so that adequate funds are appropriated when the budget is approved.
In the private sector, someone with contractual authority is authorized to negotiate and sign a contract on behalf of a parent company or person. As a government agency preparing a contract, civilians with contract authority cannot personally produce the funds at the time the contract is negotiated, but as they act with legal authority, the contract will be funded. If there is a dispute, it usually involves the scope of authority. A company might argue, for example, that it has given someone limited contractual authority and that it rejects the negotiated contract because it does not meet its needs, is too costly, or has other problems.
When negotiating and entering into agreements with persons who have contractual authority, it may be advisable to obtain information about the limits of that authority to confirm that the contract will be valid. It should not be assumed that because someone claims to have contractual authority that he or she actually does. In the case of civilians making agreements on behalf of employers or clients, documentation to prove authority must be produced.
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