A recent GAO decision addresses two important issues. Will GAO review terminations where an agency terminates a contract in response to a successful agency protest by another contractor? And, will GAO review a protest alleging an agency failed to give the contractor the required debriefing? The answer to the first question is yes and the answer to the second is no. AutoFlex, Inc., B-415926, April 19, 2018.
AutoFlex argued the agency unreasonably terminated the contract it had been awarded and in turn awarded the contract to another contractor. The agency took corrective action as a result of an agency level protest. GAO denied the protest on the merits, but GAO reiterated the rule that such actions may be challenged in a protest.
GAO stated that it generally will decline to review termination of contracts because such actions are a matter of contract administration. However, GAO will review terminations if they result from a defect in the award process. In such cases, GAO will review the protest to see if the initial award was improper. If so, GAO will scrutinize whether the corrective action taken was appropriate to "protect the integrity of the competitive procurement system." GAO most likely will defer to the agency if there were in fact flaws in the initial award. However, the corrective action must be an appropriate remedy for the improper award.
The decision is a reminder that if a contractor receives an award but finds its contract terminated, the contractor may seek relief at GAO by challenging the propriety of the corrective action.
The same decision reminds us that there just is no remedy if the agency fails to provide a required debriefing. GAO considers debriefings "procedural" matters that do not involve the validity of an award and therefore beyond GAO's jurisdiction. Not good. There needs to be some teeth in the debriefing requirement.
bill@spriggsconsultingservices.com
Thursday, April 26, 2018
"UNCLEAN HANDS" APPLIES TO CLAIMS
The Armed Services Board of Contract Appeals (ASBCA) recently reaffirmed the doctrine of "unclean hands" as it applies to contractor's claims. The doctrine, which has long been a staple of the common law in equity, is described by the Board as "one who seeks equity must do equity." The doctrine prevents the contractor tainted with inequity or bad faith from obtaining the relief sought.
The recent case arose on the issue of whether the government could amend its Answer to the contractor's Complaint to include the affirmative defense of unclean hands. We expect we may see more of this approach from government attorneys. The Board concluded, however, that there was insufficient evidence for the Board to decide whether the government had a reasonable basis for its allegation. Appeal of Raytheon Company, ASBCA Nos. 60448, 60785, April 9, 2018.
The government alleged Raytheon tried to sell more missiles to the government than otherwise would be paid for by the fund amount available for the contract when signed, in violation of the Anti-Deficiency Act. Raytheon contended the government had not submitted its position in the form of a claim. The Board rejected the argument saying the government was not seeking money or an adjustment of the contract terms.
To us, the articulation of the unclean hands doctrine in this case is just another way of alleging bad faith on the part of the contractor.
You might think the unclean hands doctrine might work the other way when the government takes unreasonable positions on contractors' claims. However, keep in mind that it is hard wired in government contract law that there is a presumption that government officials act in good faith and that presumption may be overcome only by clear and convincing evidence.
bill@spriggsconsultingservices.com
The recent case arose on the issue of whether the government could amend its Answer to the contractor's Complaint to include the affirmative defense of unclean hands. We expect we may see more of this approach from government attorneys. The Board concluded, however, that there was insufficient evidence for the Board to decide whether the government had a reasonable basis for its allegation. Appeal of Raytheon Company, ASBCA Nos. 60448, 60785, April 9, 2018.
The government alleged Raytheon tried to sell more missiles to the government than otherwise would be paid for by the fund amount available for the contract when signed, in violation of the Anti-Deficiency Act. Raytheon contended the government had not submitted its position in the form of a claim. The Board rejected the argument saying the government was not seeking money or an adjustment of the contract terms.
To us, the articulation of the unclean hands doctrine in this case is just another way of alleging bad faith on the part of the contractor.
You might think the unclean hands doctrine might work the other way when the government takes unreasonable positions on contractors' claims. However, keep in mind that it is hard wired in government contract law that there is a presumption that government officials act in good faith and that presumption may be overcome only by clear and convincing evidence.
bill@spriggsconsultingservices.com
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.
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
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
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
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
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