The government contract defense is an affirmative defense that shields a manufacturer from liability if the product causing injury complied strictly with design specifications set forth in a government procurement contract. The defense was first used by public works contractors to bar claims against them for damage to land and other property. However, in recent years, product manufacturers have invoked the government contract defense to avoid liability to third parties for defectively designed products supplied to the government.

Despite widespread judicial acceptance of the government contract defense in products liability litigation, a number of issues are still being hotly debated. One controversy involves whether the government contract defense should be limited to military equipment or whether it might apply to other products such as vaccines supplied to the government under contract. Another question is whether the government contract defense should be allowed when the contractor participates extensively in the design of the product. In addition, the courts disagree about whether the government contract defense is controlled by state law or federal common law.

This article takes the position that the real objective of the government contract defense is to protect governmental decision-making against collateral attacks in the courts. This concern is similar to the interest promoted by the discretionary function exception to the Federal Tort Claims Act. The discretionary function exception prevents litigants from bringing tort suits against the government in order to challenge the correctness of policy decisions by members of the executive branch; the government contract defense bars tort actions against suppliers in a similar manner when such litigation would threaten the exercise of discretion by government officials in the procurement area.

Part I of this article introduces some of the principles that have influenced the modern government contract doctrine and provides an overview of significant recent decisions. Part II analyzes the policies which underlie the concept of strict products liability and examines the rationale for the government contract defense. Finally, Part III discusses some aspects of the government contract defense that have not been completely resolved by the courts.