Sunday, April 30, 2017

THE REAL ART OF NEGOTIATION

There is a lot of fiction about how to negotiate settlements of government contract claims.  In reality, there are a few principles which are immutable, unassailable and nearly universal in application.  Here are my favorite few.

Bargaining position.  Know your bargaining position and enhance it.  Don't enhance it by bluffing (see below).  Know the opposing party's strengths and weaknesses and be equally circumspect about your own.  Get outside help.  Listen to others about the relative positions.  Set a realistic goal based on your position.  Don't negotiate if your position is demonstrably weaker than that of the other side.

Preparation.  Prepare, prepare, prepare.  Hire experts to help.  You can significantly increase your bargaining position by intensive preparation.  Exhaust this one.  The side that is the best prepared will always come out with a good result.  To win the battle of the experts, document, document, document.  Rehearse, do mock negotiations and hire a mediator to critique your approach.

Bluffing.  Don't.  Two problems.  You probably are lying and the other side most likely will think so.  And, the other side may well call your bluff or completely ignore it as if you have not made it.  Taking an extreme position is nonsense.  A reasonable person on the other side will just ignore you.  You must have integrity and nothing kills that like bluffing.

Splitting the difference.  This is time honored.  But there is a time and a place for it.  Always split the difference when the positions are close.  Never even think about it when the positions are far apart.  This is always the last resort.  Offering to split the difference must be made when the negotiations have been exhausted.

Honesty and sincerity.  At the foundation of the real art of the deal is a negotiator who has a reputation for honest and sincerity.  You have to be believable.  The other side must know that you tell the truth and that you are candid and forthcoming.  This also means you are not given to game playing and tricks commonly associated with used car salesmen.

In the end, success may well include other factors.  But you are unlikely to succeed without following these five fundamental principles.

bill@spriggsconsultingservices.com 

Monday, April 24, 2017

RULES OF CONTRACT INTERPRETATION


The first rule of contract interpretation is to examine the plain meaning of contract language giving reasonable meaning to all parts of the contract.  LAI Services, Inc. v. Gates, 573 F.3d 1306, 1314 (Fed. Cir. 2009).  See also, Coast Fed. Bank, FSB v. United States, 323 F.3d 1035 (Fed. Cir. 2003); Philadelphia Authority for Industrial Development v. United States, 114 Fed. Cl. 519 (2014). 

A contract must be construed in its entirety “so as to harmonize and give meaning to all its provisions.”  Thanet Corp. v. United States, 219 Ct. Cl. 75, 82, 591 F.2d 629, 633 (1979).  The entire contract clause, not just a portion of it, must be analyzed to ascertain the clear meaning of the clause.  See, e.g., Tri-O, Inc. v. United States, 28 Fed. Cl. 463 (1993). 

When construing a contract, the rule is to read the contract as a whole so as to give meaning to each of its provisions.  Hol-Gar Mfg. Corp v. United States, 351 F.2d 972 (Ct. Cl. 1965).  Proper contract interpretation gives meaning to all provisions and makes sense.  McAbee Constr. Inc. v. United States, 97 F.3d 1431, 1435 (Fed. Cir. 1996).  Proper contract interpretation requires a review of all relevant language in a contract schedule to resolve the meaning of language in the specification.  Boyajian v. United States, 423 F.2d 1231 (Ct. Cl. 1970).  The rules on contract interpretation seek to avoid ambiguity.  C. Sanchez and Son, Inc. v. United States, 6 F.3d 1539, 1543 (Fed Cir. 1993); Beta Systems, Inc. v. United States, 838 F.2d 1179, 1185 (Fed. Cir. 1988).

If the words are ambiguous, the second step in contract interpretation is to examine the conduct of the parties at the time to determine if that conduct resolves the ambiguity.  If so, the ambiguity is resolved in favor of the party arguing for that meaning.  KDI Development, Inc. v. Johnson, 495 Fed. Appx. 84 (Fed. Cir. 2012).  The intended interpretation of the parties often can be gleaned from their actions prior to the time the dispute arose.  Evidence of this behavior has been given controlling weight.  Macke Co. v. United States, 467 F.2d 1323 (Ct. Cl. 1972). 
If the language is latently ambiguous, and the contractor’s interpretation is reasonable, the contractor’s interpretation will prevail over the one advanced by the government.  Input/Output Tech, Inc. v. United States, Fed. Cl. 65, 72-73 (Ct. Cl. 1999).  A latent ambiguity usually becomes evident when two conflicting interpretations appear reasonable.  Id.  The contractor is not required to prove the ambiguity. If the contractor’s interpretation is reasonable, the government’s reasonable alternative interpretation demonstrates the ambiguity which results in interpretation against the government.  United States v. Turner Constr. Co., 819 F.2d 283 (Fed. Cir. 1987).

bill@spriggsconsultingservices.com

Monday, April 17, 2017

HOW TO WRITE A REQUEST FOR EQUITABLE ADJUSTMENT REVISITED

Since we wrote How to Write a Request for Equitable adjustment, June 24, 2012, the note has received 7,427 page views.  There is no regulatory guidance on what needs to go into this document.  There is, however, a 6 page outline of what can be called the anatomy of a request for equitable adjustment.

I have offered to send this outline to anyone who asks.  Sadly, I must apologize to those of you who have asked and I have not responded.  The best way to contact me is to send an email to bill@spriggsconsultingservices.com and I will send you the outline.

Do not make your presentation a long discussion of legal theories in search of the facts.  Also, do not tell a long story in search of a theory.  Keep the legal theories in mind, but concentrate on a logical, detailed statement of facts with supporting documentation.

And I again say I am sorry for those who missed getting the outline.  Send me an email and I will respond with the anatomy of a request for equitable adjustment.

bill@spriggsconsultingservices.com

LPTA AND PAST PERFORMANCE EVALUATIONS

Past performance need not be evaluated in lowest price, technically acceptable (LPTA) procurements if the contracting officer documents the reason past performance is not an appropriate evaluation factor.  If the contracting officer decides to use past performance as an evaluation factor in LPTA selection, a comparative assessment does not apply.  FAR 15.101-2(b)(1).

If the contracting officer determines that a small business' past performance is not acceptable the issue must be referred to the Small Business Administration for a Certificate of Competency in accordance with FAR subpart 19.6.

In our experience, technical acceptability in LPTA procurements have been pass/fail determinations.  A comparative analysis means the proposals will be rated on some type of scale, relative to each other.  However, LPTA most often is used to determine whether the proposal is acceptable or not and part of the technical evaluation includes past performance acceptability.

Past performance has been considered by GAO to be a responsibility factor.  GAO views past performance as the ability of the contractor to perform the contract.  Responsibility factors may be used as technical evaluation factors only when comparative evaluation is used.  GAO has cautioned an agency that it cannot disqualify a small business under the guise of using relative assessment of responsibility technical factors.

If there is no real comparative evaluation, and the assessment is based on pass/fail, the decision really is one of nonresponsibility.  An "unacceptable" rating on a technical criterion involving past performance really is a determination of nonresponsibility.  If a small business' past performance is not acceptable, then under FAR 15.101-2(b)(1), the matter must be referred to the Small Business Administration for a  Certificate of Competency.  GAO consistently views past performance as a responsibility criterion where it is used as pass/fail.

bill@spriggsconsultingservices.com

Sunday, April 9, 2017

T FOR D DEFENSE: ABUSE OF DISCRETION

There are, of course, many defenses to a termination for default.  Acts or omissions of the government in its contractual capacity is among them. 

One of the more esoteric defenses is known as abuse of discretion and involves failure to respond to requests for equitable adjustment (REA's).

In a case known as Ryste & Ricas, Inc., the Armed Services Board of Contract Appeals (ASBCA) reiterated the rule that a termination for default could not be based on materially erroneous information as to the contractor's responsibility for delay or materially erroneous information as to the effort and time required to finish the work.  The government owes the contractor an assessment of all of the relevant circumstances when it exercises its discretion to terminate for default.

In Ryste, the contracting officer did not adequately consider whether time extensions were appropriate.  The contractor had requested time extensions as part of REA's.  These requests were not adequately addressed by the contracting officer.  The contracting officer did not analyze the contractor's problems and did not consider whether the contract could have been substantially completed if the time extensions had been granted.  In the end, the ASBCA determined the contracting officer abused his discretion by terminating the contract for default.

The ASBCA concluded the government had not met its burden of proof.

The lesson to be learned is that REA's must be fully considered.  FAR 49.402-3(f) requires contracting officers to consider, among other things, the terms of the contract and applicable law and regulations in determining whether to terminate for default.  The terms of the contract usually include the changes clause.  The changes clause permits the contractor to submit an REA for equitable adjustment in price and schedule.  FAR 43.204(b) states that contracting officers shall negotiate equitable adjustments resulting from change orders in the shortest practicable time.

If a contractor believes the contract has been changed, constructively or otherwise, and submits its REA, the contracting officer is obliged to consider it.  It would seem, from a fair reading of Ryste, and the regulations, that the contracting officer also is obliged to adequately respond to the contractors REA before terminating for default.  The contracting officer owes the contractor an assessment of the REA.  Failure to respond altogether could well be argued as a breach of contract.

The defense to a termination for default which can be characterized as an abuse of discretion is hardly in the mainstream of defenses.  However, one of the main defenses to a termination for default is acts of the government in its contractual capacity (constructive changes, breaches, etc.).  Therefore, many of the defenses involve an abuse of discretion to one degree or another.

bill@spriggsconsultingservices.com



Saturday, April 8, 2017

THE JUDICIAL ROLE OF THE CONTRACTING OFFICER

It's time we reminded ourselves of the judicial role of the contracting officer in government contracts.  Contracting officers are required by law to act impartially and function in a judicial role when resolving disputes.  The history is clear but very often overlooked.

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."  In 1912, the United States Supreme Court, in addressing the duties of the contracting officer, said:  "But the very extent of the power and the conclusive character of his decision raised a corresponding duty that the agent's judgment should be exercised not capriciously or fraudulently, but reasonably, and with due regard to the rights of both contracting parties."

The most resounding pronouncement, however, was made by the Court of Claims in a 1950 opinion when, after referring to the 1912 Supreme Court opinion, the Court of Claims said the contracting officer must not represent either side but must "act as an impartial, unbiased judge."  The Court of Claims went on to say the contracting officer's function was "to act impartially, weighing with an even hand the rights of the parties on the one hand and on the other."  The court recognized the obligation of the contracting officer to represent the government's interests in procurement matters, but it went on to state clearly that "in settling disputes this is not his function." 

This is pretty clear.  So why are there so many complaints about contracting officers failing to act judicially when disputes arise?

It's time to get back to basics and take heed of judicial precedent.  And just to bring all this up to date, read FAR 1.602-2(b) again.  "Contracting officers shall ensure that contractors receive impartial, fair and equitable treatment."  It's mandatory.  Impartial, fair and equitable treatment.  Sounds like something Abraham Lincoln might say.