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