Saturday, March 16, 2013

THE TILTED PLAYING FIELD

Sean Stackley recently called our acquisition system the most "complex, chaotic, over regulated and overseen process in the world."  We may disagree with him.  We are not so sure about the chaotic part.  But it is time to remind ourselves that the federal procurement system is by design a tilted and uneven playing field.  The government writes the rules.  How many of us participate in any way in the rule making process?  The best we can do is join a trade association.  But how many of us actively participate in the efforts to affect the rules?  And with what result?  What influence does industry really have in how the game is played?  We elect our representatives to Congress.  But how many of us sit with the staff members to suggest less micromanagement or changes to the statutes?

It is high time to remind ourselves that federal procurement is based on contracts of adhesion.  What are contracts of adhesion?  In this context, and in the legal sense, they are contracts in which the government dictates the terms and conditions.  Our mentor, Gil Cuneo, was fond of reminding all of the audiences before which he spoke that one must start with the understanding that when you enter the government marketplace, you must be prepared to deal with contracts of adhesion.  The closest commercial counterpart is the insurance contract, to which we all can relate.  The insurance company dictates the terms and conditions.  How many times has each of us negotiated the terms of our insurance policies?

Yes, government contract terms and conditions are dictated by the government.  And if the term or condition is not written in the contract, chances are it will be read into the contract by operation of law.  See our article on the Christian doctrine.  There are no changes or termination for convenience clauses in the commercial marketplace contracts.  Making changes unilaterally and terminating for convenience would be breaches of contract there.  But, like it or not, the government contract will contain these clauses whether they are written in the contract or not.  (Of course, if the contract is for a "commercial item", the unilateral change is eliminated in government contracts.)  Here, we've picked but two of the hundreds of clauses dictated by the government that will be found in government contracts.  In most every case, the contractor has no control over whether the clause is included or not.  And in many instances, it is there even if you can't see it.

So, what do we make of these contracts of adhesion?  Contractors play on a tilted and even uneven playing field.  Tilted in the sense that the government controls the entire system, from clauses to remedies.  Uneven, in the sense that the professional contract administration staff for the government often does not understand the rules and applies them unevenly and even unfairly.  Is it any wonder that in order to invite contractors into its marketplace the government employs ombudsmen?  That's a warning to let the seller beware.

What's the point of all this?  The government owes its contractors a special duty.  It's known as the duty of good faith and fair dealing.  It's know as the obligation to cooperate, communicate, not interfere and disclose information vital to performance.  We've written about these corollary duties over and over again.  Some accuse us of taking sides.  But put all this in the proper perspective.  The contracting party with this unusual control occupies a position of special trust.  And since it is public contracting, that trust is owed to all citizens, all taxpayers, but including all contractors.  That position of trust brings with it certain obligations.  Our trustees should not be driving unreasonably hard bargains and bullying contractors into submission.  They should be assisting contractors to succeed.

bill@spriggsconsultingservices.com                 www.spriggslawgroup.blogspot.com

3 comments:

  1. William - possibly one of the best statements regarding Government contracting ever put on paper. I would strongly recommend that this be cited by any consultant to commercial companies looking to foray into the public marketplace.

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  2. Small businesses who not understand this principle are lost. I always have to chuckle at comments from procurement officials that believing in this fact is simply "industry paranoia."

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  3. When it comes to Federal Construction Contracts remember this. The 13 or so Clauses that can modify a contract are written in a way that protects the contractor from unforeseen conditions on the project. If you read them carefully, you will find that they help (or some will say hurt) a contractor from bidding needless contingencies that you would find yourself bidding in private industry. The Changes and Differing Site Condition Clauses were rewritten after 1968 to allow Eichleay Costs which had not been allowed prior to that. So, when a contractor is thinking of adding that 5% in case things do not go as planned read these two clauses.

    Rick Seufert - Seufert Consulting

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