Wednesday, April 18, 2018

COMMERCIAL ITEM CHANGES CLAUSE

It's time to revisit the commercial item changes clause.  That clause says changes only can be made by written agreement of the parties.  The government cannot make unilateral changes.  A unilateral change is a breach of contract, just as it is in the commercial world.  The clause does not mention the contracting officer and certainly does not give the contracting officer the authority to order unilateral changes.  In fact, the concept of constructive changes does not apply to commercial item contracts.

Prior to the Contract Disputes Act (CDA), the Boards did not have jurisdiction to hear breach of contract claims.  So, the Boards developed the theory that breaches of contract could be characterized as constructive changes under the standard Changes clause.  They took breach of the duty to provide a specification free of errors, conflicts and omissions and made it the constructive change called defective specifications.  They took other breaches such as the duties to cooperate and not interfere and made them constructive changes.   Thus, the Boards have had a long history of recognizing breaches of contract as constructive changes.

The CDA gave the Boards jurisdiction to hear breach of contract claims.  Commercial item contracting eliminated the unilateral right of the government to make changes by introducing the requirement that changes be made only by written agreement of the parties.  In breach cases such as defective specifications and the duty to cooperate and not interfere (based on the obligation of good faith and fair dealing), the Boards have recognized that a government employee writing a defective specification or an inspector interfering in the contractor’s performance can cause a breach of contract giving rise to a breach of contract claim.
 
The commercial item changes clause requires a written agreement of the parties to effect a change.  Thus, if the government wants a change, it must negotiate the change and enter into a bilateral agreement with the contractor.  Constructive changes, which are unilateral changes, are breaches of the contract entitling the contractor to damages which will be measured in the traditional way of actual costs plus profit on those costs.
 

Thursday, April 5, 2018

CONTRACT MANAGEMENT REVISITED

Indulge me in a personal note.  The purpose is to leave you with a word of advice based on 50 years of experience in government contracting.

I began at Boeing as a contract administrator reviewing contract actions.  Then to Itek Corporation as a contract manager with daily contact with the contracting officer.  From there, I moved to the Martin Marietta (now Lockheed Martin) legal office where I was trial counsel in ASBCA appeals.  I moved to Washington, D.C. in 1972 to join the Gil Cuneo firm where I engaged in government contract litigation for 10 years before forming my own firm, Spriggs & Hollingsworth, where I practiced government contract law for 27 years.  For the last 8 years, I have continued in government contract counseling and litigation as Spriggs Consulting Services and Spriggs Law Group.

My ambition always has been to be a contract manager.  Hence, a consulting firm.  Alas, however, I have continued to engage in litigation.  Although I enthusiastically enjoy litigation, I am sorry that I have not been called upon often enough to engage in day to day contract management.

Now to the word of advice.  The salient thing I have learned over the years is that my clients have failed to see a contract problem early enough and failed to engage the contracting officer immediately upon recognizing the problem.  Too often, clients have not imaginatively created procedures to prevent problems.  But the bigger point is that they have not acted promptly by contacting the contracting officer when problems arise.  Too many of the litigation matters I have handled involve a client's failure to promptly contact the contracting officer and pursue an appropriate response in a timely manner.

So, read my post entitled "Good Contract Management" and undertake to resolve issues with the contracting officer promptly.

bill@spriggsconsultingservices.com  

GOOD CONTRACT MANAGEMENT

Good contract management starts with knowing what is in the contract.  "When all else fails, read the contract."  Then, know the regulations and contract common law.  You cannot function effectively without daily building your knowledge of the law applicable to government contracts.  Every day, you must add to your understanding of the contract terms and the law applicable to your government contract.  You must also be aware of all of the recent developments in case law.  You should read recent decisions from GAO and the boards and courts.

Next, what ever happened to management by walking around?  You must know what is going on with performance on your contracts.  You must communicate with the people performing the work.  Fortunately, email helps.  It can help you reach out when physically getting around is difficult.

Stay in close touch with the contracting officer.  You must keep track of the contracting officer who has the authority to change the contract.  Hopefully, you can visit the contracting officer often in person.  Email also is effective.  When there is a problem requiring direction from the contracting officer, send a letter attached to an email.  When you think a change has occurred, immediately notify the contracting officer in writing (letter attached to an email).  Make the contracting officer your friend.

Prepare a daily report on your activities, like a diary.  After the day is done, when you have advanced your education, informed yourself on the performance of the contract, maintained contact with the contracting officer and sent out any necessary emails and letters, hit your computer and write up the events of the day.  We used to call these "memos to file."  Periodically index these daily reports by subject matter. 

When all is said and done, contract management is the most challenging job in government contracting.  Government contracts are the most highly regulated instruments in the world.  Becoming an expert on all of the legal implications is a constant challenge.  Making sure your employer is protected and earns a profit requires your constant vigilance, attention to detail and communication with the contracting officer.

bill@spriggsconsultingservices.com

Wednesday, April 4, 2018

BETTER DEBRIEFINGS REVISITED

On December 24, 2017 we announced that better debriefings are coming.  Finally, for DOD agencies and contracts, they are here.  We have been suggesting for years that better debriefings will reduce frivolous and so-called blind protests where a protester just wants to see the record.  A contractor now has the opportunity on DOD procurements to ask questions after the debriefing and the debriefing is held open for purposes of protest and automatic stay of performance until the agency answers.

This has to do with FAR 15.506(d).  FAR 15.506 contains a list of things a contractor should insist the agency provide in the debriefing.  That list includes answers to pertinent questions.  That has always been in the regulation.

Now, however, the contractor has the opportunity, after the debriefing, to ask questions within two days.  The DOD agency then has 5 days to respond.  The debriefing is deemed to be open (for purposes of protest) until the DOD agency responds.  Once the DOD agency responds, the contractor has 5 days in which to protest to GAO and obtain the CICA automatic stay of performance.

DOD applies the class deviation to FAR which permits this new procedure to all DOD agency contracts.

We applaud this move by DOD.  Better debriefings ensure better procurements all around.  The only thing missing now is a requirement that the source selection decision be released immediately upon request.  Most questions can be answered in that decision.  There is no good reason to withhold it (carefully redacted to prevent disclosure of confidential and proprietary information). 

bill@spriggsconsultingservices.com 

Thursday, March 1, 2018

HOW TO WIN A GAO PROTEST

A recent GAO decision (B-415497) provides a roadmap for how to win a GAO protest.  The solicitation provided for award on a best value basis with technical factors more important than price.  The protester complained that the award was made to the offeror with the lowest price, essentially converting the best value evaluation scheme to lowest priced, technically acceptable (LPTA).  The solicitation also provided that the agency would evaluate strengths and weakness of the various proposals.

(The case reminds us of the importance of parsing the language of the evaluation factors in a solicitation.  The first thing a contractor should do when receiving a solicitation is examine the evaluation factors.  If there are errors, omissions or ambiguities, raise them with the contracting officer and if they are not corrected, protest.  Then, build the response to the solicitation on the framework of the evaluation criteria.)

GAO's roadmap to a successful protest starts with the often repeated rule that in reviewing an agency's decision, GAO will examine the supporting  record to determine if it was reasonable and consistent with the solicitation's evaluation scheme and applicable law.  Then the evaluation of proposals must be based on a qualitative assessment consistent with the evaluation factors. Where a solicitation provides for a tradeoff, even where price is the least important factor, an agency may select the lowest priced, lowest rated technically if the agency reasonably concludes that a price premium is not justified.

However, if the tradeoff analysis fails to provide a meaningful explanation as to why a higher rated proposal does not offer technical advantages or why those technical advantages are not worth the price premium, the agency has not sufficiently documented and therefore justified awarding to the lowest priced, technically inferior offeror.  The rule is of particular importance where price is less important than the technical factors.  Finally, the source selection decision must be robust.  It must provide a substantive analysis and comparison of the offerors' proposals and a thorough rationale for the determination that the higher rated, higher priced proposal is not worth a price premium.

In sum, most protests are won if the protester can show the evaluation factors were not followed and the source selection decision was inadequate.  All the more reason to release the source selection decision at the debriefing stage.

bill@spriggsconsultingservices.com

Thursday, January 25, 2018

HOW TO RESPOND TO A CURE NOTICE

Paragraphs (a)(1)(ii) and (a)(1)(iii) of the standard Default clause for supply and services contracts refer to failure to make progress endangering performance or failure to perform a provision of the contract other than delivery on time.  The government's right to terminate under these two provisions of the clause, however, only exists if the government issues a cure notice and gives the contractor at least 10 days to cure the failure.  The 10 days may be extended in writing by the contracting officer.

The format for the cure notice is in FAR 49.607(a).

In preparing the cure notice, the government must specify the failures, provide a reasonable time for the contractor to cure them and suggest what the contractor needs to do to accomplish the cure.  The contractor, on the other hand, may use the failure to provide the cure notice or its inadequacy as an absolute defense in its termination for default appeal.

So, how should a contractor respond to the cure notice?

The first rule is that this is serious business and the response must be robust, thorough, complete, detailed and persuasive.  Now is the time to treat the matter very seriously and devote all the resources the contractor can muster to prepare a convincing response.

The contractor must show that the failure to perform arises from causes beyond control and without its fault or negligence.  Show in detail.  Among the listed possible causes are acts of the government in its contractual or sovereign capacity.  Eight other possible causes are listed in the clause.  But just asserting a cause from the list is not enough.  Not by far.  Each cause must be fully documented and supported.  This is the time to put together every document the contractor can find to support its response.

Acts of the government in its contractual capacity often form the basis of a successful response to a cure notice.  Now is the time to look for changes for which the government is responsible.  Among these are defective specifications, failure to disclose vital information, lack of cooperation, interference from government personnel, commercial impracticability and lack of good faith and fair dealing.  In other words, if the contractor has a request for equitable adjustment (REA) under the changes clause, now is the time to assert it in defense of the threat to terminate for default.

A valid REA defeats a termination for default.  But the contractor has not finished its response by merely asserting a just cause for its failure.  The contractor must go on to lay out a plan for how to cure the problems raised by the government.  This may be the most difficult part of all because it may well involve the cooperation of the government.  In the final analysis, a strong REA may carry the day and force the government to reconsider the propriety of termination for default.

bill@spriggsconsultingservices.com      bill@spriggslawgroup.com 

Friday, January 19, 2018

GOVERNMENT WAIVER OF CONTRACT TERMS

The government can specify contract requirements even if they seem ill-advised.  In fact, the government can require contractors to perform work which, by any reasonable standard, may be unnecessary and even stupid.  It has long been held that the government "can engage a contractor to make snowmen in August, if [it spells] it out clearly."  Rixon Electronics, Inc. v. United States, 536 F.2d 1345, 1351 (Ct. Cl. 1976).

Moreover, if the contractor fails to perform the work believing it to be unnecessary or ill-advised, the contractor may be terminated for default or the government may make a downward equitable adjustment under the Changes clause  and deduct from payments owned the contractor the cost that the contractor would have incurred if it had complied with the contract.  When all else fails, read the contract.  Then, follow it.

However, the government may waive compliance with the contractual requirements through its actions or inactions and thereby be prevented from enforcing the requirements.  We all are familiar with the doctrine of waiver of due date in default termination cases.  However, the waiver doctrine has broader application and can shield a contractor from liability for failure to follow contract requirements which, by the government's action or inactions, appear to be unnecessary.

"There can be no doubt that a contract requirement for the benefit of a party becomes dead if that party knowingly fails to exact its performance, over such an extended period, that the other side reasonably believes the requirement to be dead."  Gresham & Co. v. United States, 470 F.2d 542- 554 (Ct. Cl. 1972).

Breaking the rule down, the contractor must show the government acts "knowingly".  Then there must be an extended period of time such that the contractor reasonably believes the government is not going to enforce the requirement.  Because it is dead.  Each case turns on its facts.  So contractors are well-advised not to pronounce the requirement dead until it appears from the government's actions or inactions that the government knows of the requirement, has considered it and let sufficient time go by that a reasonable person would presume the requirement is dead.

The doctrine of waiver, akin to the doctrine of estoppel (preventing enforcement of an apparent right) is alive and well.  It may also be true that a contract requirement is dead.

bill@spriggsconsultingservices.com   bill@spriggslawgroup.com