UNCONSCIONABILITY IN GOVERNMENT CONTRACTING

The Uniform Commercial Code addresses unconscionable contracting.  Back in 2013, we encountered a contractor who was distressed that because of sequestration at the time, he had been asked to reduce his price by 10%.

Yes, believe it or not, one of our government employees, with a warrant, who is supposed to be the conscience of our system, asked a contractor to provide the same level of service for 10% less money.  This is unconscionable behavior.  Sequestration may cause a reduction in services and therefore the price of those services.  But it is strikingly unfair and unjust (the meaning of unconscionable) to require a contractor to provide the same services for less money.  Naturally, the contractor did not agree but offered to provide reduced services for a reduced price.  That sounds reasonable.

Unconscionability doesn't get talked about much.  The Armed Services Board of Contract Appeals (ASBCA) occasionally uses the term to describe egregious government behavior, usually in the context of the failure to cooperate or communicate or where the government seeks to impose drastic contractual penalties.  The Uniform Commercial Code (UCC) uses the term to describe strikingly unfair behavior in the commercial marketplace.

We believe that contracting officers are indeed the conscience of the procurement system.  Or, they should be.  FAR 1.602-2, dealing with the responsibilities of contracting officers, states at sub paragraph (b) that the responsibility of the contracting officer is to "ensure that contractors receive impartial, fair and equitable treatment."  The duty of good faith and fair dealing falls most heavily upon the shoulders of contracting officers and that duty is implied in all phases of government contract activity.

Budget constraints are here to stay forever.  But Congress did not intend to place the burden on contractors to provide the same services for less money.  That is not sequestration.  That is unconscionable manipulation.  And, if combined with the threat of termination, it is unconscionable extortion.  Other government behavior many be so extreme as to be a breach of contract.  Cardinal change comes to mind. An argument can be made that a particular contract interpretation requirement is so onerous as to be unconscionable and therefore unenforceable.

We expect more from the people to whom we entrust the warrant to act on our behalf in spending our taxpayer money.  Yes, we want them to spend it wisely.  But we do not expect them to drive contractors from the marketplace we depend upon because they are not treated impartially, fairly and equitably.  The point of this piece is that it is not enough to be fair.  Contracting officers are the conscience of the system and must avoid unconscionable behavior, especially in times of severe budget constraints.

bill@spriggslawgroup.com                                   www.spriggslawgroup.co