Blog - Archive for July 2011
Posted on Saturday, July 30, 2011 2:32:27 PM
The Court of Appeals for the Federal Circuit has said the government, acting through the contracting officer, must act impartially and judiciously when it makes decisions. Penner Installation Corp. v. United States, 89 F. Supp. 545 (Ct. Cl.), aff'd, 340 U.S. 898 (1950). The Court also has said that this duty is akin to the duty to act in good faith with due regard to the contractor's rights and to cooperate with and not interfere in the contractor's performance.
These duties are implied in every government prime contract and may well also be implied in subcontracts as well. Failure to discharge these duties clearly is a breach of contract. Even actions which strain the financial capacity of the contractor, such as delayed payments, are breaches of the government's implied duties.
Thus, it is responsible to conclude that any action of the government which interferes with the contractual rights of the contractor gives rise to breach of contract remedies such as the risky (because it invites litigation of termination for default) stopping of work and recovery of damages. Recovery of damages will not include all the incidental and consequential damages available in non government contract cases, but it does include the recovery of lost anticipated profits.
What the government risks, among many other things, when it shuts down, partially shuts down, furloughs employees and delays or stops making payments is that contractors will sue for damages.
So far so good for contractors. However, the government may assert the sovereign act defense to any claim for breach resulting from a failure to appropriate the necessary funds to make contractual payments. The failure to make appropriations to pay contractual debts may be a sovereign act. However, there is precedent for the argument that shutdown of government offices so interferes with the contractor's contractual rights that the doctrine does not defeat a claim for damages based on breach of contract.
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Posted on Tuesday, July 26, 2011 5:16:06 PM
Posted on Saturday, July 23, 2011 4:24:43 PM
The government has no right to audit your FAR Part 12 commercial contract breach of contract or termination for convenience claims. Pure and simple.
FAR 15.403-1(b)(3) and (5) prohibit obtaining cost or pricing data for commercial item contracts and when modifing a commercial contract. FAR 12.503(c)(2) says the Truth in Negotiations Act and FAR 15.403 do not apply to Part 12 buys. FAR 12.403(d)(1)(ii) says the government has no right to audit a termination for convenience settlement proposal. FAR Part 12 does not address breach of contract claims and the changes clause says changes may be made by mutual agreement only. Conclusion? The government has no right to audit a termination for convenience settlement proposal/claim or breach of contract claim.
Some may argue FAR 15.404-1(a)(2) gives the government the right to conduct a price analysis of such proposals/claims. Probably not. In any event, this regulation only permits the contracting officer to request the advice and assistance of other experts in analyzing whether the price is right. The contractor's submission of pricing information may be scrutinized in this way, but in this way only.
As you know, the onerous opinion in the Red River case has been reversed and remanded on appeal. Your termination for convenience settlement proposal recovery rights under a Part 12 termination now more closely resemble the full recovery permitted under other types of government contracts.
Posted on Saturday, July 23, 2011 2:56:47 PM
The federal common law of contracts implies the government has 5 obligations in every contract. (The obligations extend to subcontracts in many if not most cases.) The government has the duty to:
Breach of these obligations gives rise to affirmative contractor claims and each breach is an excusable cause of contractor non performance under the default clause.
On the other hand, the government can assert an absolute defense: that the contractor assumed the risk. How does the contractor assume the risk? With regard to numbers 1 through 3, the contractor loses if, upon review of the documents before bidding, a reasonable contractor would have seen the problem.
It gets a little more complicated with subcontracts. If the subcontract contains a choice of law clause referring to the federal common law of contracts or FAR clauses are flowed down, it is likely these same obligations flow down as well.
Posted on Saturday, July 23, 2011 2:30:17 PM
Just what does the Antideficiency Act say? It prohibits:
The government may not make payments or commit the United States to make payments in the future for goods or services if it does not have the money available. There are both administrative and penal penalties for violations.
What does not having the money available mean? The prevailing interpretation is that it means money appropriated. But what does "or funds" in the statute mean? What if the money is appropriated, but it is not "in the bank"? What did Congress intend?
Posted on Saturday, July 23, 2011 1:25:36 PM
GAO takes the position that it generally will not review protests of an agency decision to perform work in house because that is a matter of executive branch policy. However, GAO recognizes that the Competition in Contracting Act allows it to decide protests involving alleged violations of procurement statutes or regulations.
GAO will review decisions to cancel solicitations if the solicitation involves a cost comparison between contracting out and performing the work in house, where a statute or regulation requires such a cost comparison and where the rationale for canceling a solicitation is a mere pretext for going in house. As to the latter situation, GAO once sustained a protest because it determined the excuse for going in house was flimsy.
I asked a government official today about the fact that I could not find contract/acquisition management opportunities on FedBizOps. I told him my firm is looking for contract work to help the federal workforce handle some of its contract administration workload. The official told me to forget about it. All that work is being "insourced".
We have prepared a webinar/seminar on "How to Deal with Insourcing." We've sent the 36 presentation slides out to our clients and friends. Let us know if you would like to hear and see the presentation.
Posted on Saturday, July 23, 2011 1:11:23 PM
Abraham Lincoln once said: "It is as much the duty of the Government to render prompt justice against itself, in favor of citizens, as it is to administer the same between private individuals." This statement is emblazoned over the entrance to the Court of Federal Claims and Court of Appeals for the Federal Circuit building not far from the White House.
In 1950, the Court of Claims (predecessor to the present Court of Appeals for the Federal Circuit) said:
Some contracting officers regard themselves as representatives of the defendant charged with the duty of protecting its interests and of exacting of the contractor everything that may be in the interest of the Government, even though no reasonable basis therefor can be found in the contract documents; but the Supreme Court has said that in settling disputes this is not his function; his function, on the other hand, is to act impartially, weighing with an even hand the rights of the parties on the one hand and on the other. (The emphasis is mine.)
Posted on Friday, July 22, 2011 1:53:05 PM
We all know about the Obama Administration's emphasis on fixed price contracts. We've heard this repeated by Dan Gordon and all the executive agency acquisition chiefs. The government has gone through these exercises before (DOD's Robert McNamara, for example) with very mixed results (some would say very bad results). In this era of fixed pricing and attempts to negotiate the lowest possible price, we have what some call a perfect storm brewing. In the heat to get the work, contractors may be tempted to underbid costs and hope to get well with changes. Yes, that is always the risk, but now it is perhaps more pronounced than ever.
The trend away from best value and toward technically capable, lowest price is part of the equation. Best value in its worst application may provide too much opportunity for favoritism. But technically capable, lowest price will almost certainly lead to bidding wars, most experienced acquisition leaders agree.
One of the often overlooked realities is that changes claims are part of the federal acquisition scheme. Contracts of adhesion (where the government dictates the terms and conditions), and regulations more complex than the tax code, countenance protests and claims as part of the process of making things fair.
My purpose here is to remind you that on April 1, 2002, Angela Styles, Administrator of OFPP (Dan Gordon has that job now), issued a memorandum from the Executive Office of the President to all agency procurement executives which stated:
"The filing of protests, the filing of claims or the use of ADR must not be considered by an agency in either past performance evaluations or source selection decisions." She specifically said: "Contractors may not be given 'downgraded' past performance evaluations for availing themselves of their rights by filing protests and claims or for deciding not to use ADR." (The emphasis is mine.)
The key words are "their rights". In the federal acquisition scheme, contractors have the right to avail themselves of their remedies.
Posted on Thursday, July 21, 2011 3:02:00 PM