Tuesday, December 18, 2012

OUT OF SCOPE CHANGES

When is a change out of the scope of the contract?  Judge Marian Horn of the Court of Federal Claims (COFC) has just written the definitive treatise on the subject of the rules used to decide when a change exceeds the scope of the original contract. Two types of facts are implicated.  The first is when a contractor on an awarded contract complains the change is beyond the scope of the contract.  The other is when a competitor complains that the change is beyond the scope of the original contract and therefore should, under the Competition in Contracting Act (CICA), be open for competition.  Judge Horn had before her the latter complaint.  In either case, however, the central question is whether the contract, as modified, calls for essentially the same performance.

The rule has always been that modifications of an existing contract are permissible as long as the modification is within the scope of the original competitive procurement.  (The same rule applies to the scope of the changes clause.)  Since the Federal Acquisition Regulation (FAR) is no help here, the judicial tribunals have relied on the "cardinal change" doctrine to test whether the modification or change is in-scope or violates the competition requirements of CICA.  The cardinal change doctrine addresses whether a change or modification exceeds the scope of the contract changes clause.  In the case before Judge Horn, the issue was whether the modification was within the scope of the original competition.

What is a cardinal change?  A cardinal change occurs when the government alters the work so drastically that it effectively requires the contractor to perform duties materially different from those originally required.  Just as the cardinal change doctrine prohibits an agency from compelling a contractor to perform beyond the scope of the original bargain, the CICA prevents an agency from ordering work materially different from the contract for which the competition was held.

What is "materially different"?  Lack of resemblance to the original work. Substantial changes in the type of work, performance period and cost of the work. It's a question of fact for which there is no mechanical or arithmetical answer.  So, guess what.  It's in the eye of the beholder.

But in the bid protest arena, there is another factor to consider.  Did the solicitation for the original contract adequately advise the bidders of the potential for the type of changes that in fact occurred?  Is the modification of a nature which potential bidders would reasonably have anticipated?  Is it something potential bidders would have expected to fall within the contract changes clause?

If the court concludes as a matter of law that the modification was contemplated in the original procurement and the type or work, quantity, performance period, and costs have not substantially changed, CICA is not implicated and the protest will be dismissed.  Which is exactly what Judge Horn did.  Case dismissed.

The cardinal change doctrine articulates a firm set of rules.  Whether you are a disgruntled bidder or a contractor tearing out your hair over the nature or size of a modification, you can avail yourself of the argument that you have encountered a cardinal change.  As a contractor, you don't have to perform such a change.  It's a breach of the contract.  As a disgruntled bidder, you can protest under CICA your right to compete for the work.  The problem is just what particular set of facts meet the legal test.  It can be expensive to be wrong.

bill@spriggsconsultingservices.com

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