We've written often about the contractor's duty to inquire and seek clarification of solicitation ambiguities before submitting its bid. The rule is clear. If the solicitation is obviously unclear, the contractor has a duty to inquire and seek clarification of the ambiguous language or assume the risk of error. A protest later will fail as untimely. But what about the government? Does the government have a duty to seek clarification of apparent mistakes in the contractor's offer in a negotiated procurement under FAR Part 15? Yes, says the Court of Federal Claims in a recent opinion by Judge Charles Lettow.
Procurement officials have authority to act regarding clerical errors in sealed bidding and negotiated procurements. Where sealed bidding is concerned, the rules regarding clerical and other mistakes in bids "are cast in mandatory terms," says Judge Lettow. In contrast, the regulatory provisions regarding mistakes discovered before award in offers for negotiated procurements are "largely discretionary". Judge Lettow cites the discretionary language in FAR 15.306(a)(2) permitting the contracting officer to provide the offeror an opportunity to "clarify certain aspects of proposals . . . or to resolve minor or clerical errors." He does not mention FAR 15.306(b)(3)(i) which permits clarification and refers specifically to FAR 14.407 which recites the mandatory requirements.
Judge Lettow sees a fairly sharp dividing line between the rules in negotiated and sealed bidding procurements. However, he says, "the permissive language of the clarification provisions in Part 15 does not mean that those provisions are not susceptible to judicial enforcement."
The protesting contractor mistakenly submitted the wrong information regarding the experience of one of its subcontractors. The subcontractor was proposed by a competitor with the correct project experience information. The government took the position it had no duty in inquire about the possible error by the protester. The government rejected the protester's proposal as incomplete.
Interestingly, the court focused on whether competitive negotiation is so far removed from sealed bidding that a contracting officer's reaction to a clerical mistake can be "diametrically different" in the two types of procurement despite factually compelling reasons to seek clarification.
The court decides the government had the duty to inquire and grants relief to the contractor. The contracting officer abused her discretion. She "improperly refused to seek clarification . . . ."
The lesson here? In negotiated procurements, contractors should attempt to correct mistakes or make clarifications in their proposals even where negotiations are not going to be conducted. Clarifications are not negotiations. Moreover, contractors should argue, in appropriate cases, that it would be an abuse of discretion not to allow the correction. Their proposals should not be rejected.
bill@spriggsconsultingservices.com
Thursday, September 26, 2013
Thursday, June 13, 2013
SSA MUST ADEQUATELY EXPLAIN DECISION
The Government Accountability Office (GAO) has just sustained a protest because the source selection authority (SSA) failed to substantively consider differences between proposals, and also failed to adequately explain and properly document the source selection decision. B-408046; B-408046.2.
This is a case where the award was made to the lower priced, lower-rated offeror. The differences on the technical scores were not great but the protester's were better than the successful awardee's. As we've noted over and over again, in these days of budget constrains, agencies tend to award to the lower priced offeror even in a best value procurement where the technical/management and past performance factors are significantly more important than cost or price. Here, GAO signals again that it is watching the store to see if the agency is following the rules.
While an agency has broad discretion in making a tradeoff between price and non-price factors, says GAO, "an award decision in favor of a lower-rated, lower-priced proposal must acknowledge and document any significant advantages of the higher-price, higher-rated proposal and explain why they are not worth the price premium." Put this rule in the book: An award decision in favor of a lower-priced proposal must acknowledge, explain and document any significant advantages of the higher-price, higher-rated proposal and explain why they are not worth the price premium.
In this very recent case, GAO said the solicitation stated that technical/management approach was more important than the past performance factor, and when combined the non-cost factors were significantly more important than the cost factor. The SSA's decision acknowledged that the protester's proposal was higher rated on past performance but the SSA found that the "slightly better" past performance ratings were not significant enough to warrant paying the higher evaluated price. The record did not explain why the SSA concluded that the protester's past performance as only "slightly better" and the record did not support the decision that this difference was not worth the price premium for the protester's proposal.
As we've reported before, conclusory statements are not enough to justify the source selection decision. The rule is that the SSA must explain the rationale for the decision and specifically justify awarding to a lower-priced offeror, in a best value procurement, by going on to explain (and document) the reasons why the higher-rated (for the non-price factors) offeror's higher price is not worth the premium.
Would that we all would finally get this message.
bill@spriggsconsultingservices.com
This is a case where the award was made to the lower priced, lower-rated offeror. The differences on the technical scores were not great but the protester's were better than the successful awardee's. As we've noted over and over again, in these days of budget constrains, agencies tend to award to the lower priced offeror even in a best value procurement where the technical/management and past performance factors are significantly more important than cost or price. Here, GAO signals again that it is watching the store to see if the agency is following the rules.
While an agency has broad discretion in making a tradeoff between price and non-price factors, says GAO, "an award decision in favor of a lower-rated, lower-priced proposal must acknowledge and document any significant advantages of the higher-price, higher-rated proposal and explain why they are not worth the price premium." Put this rule in the book: An award decision in favor of a lower-priced proposal must acknowledge, explain and document any significant advantages of the higher-price, higher-rated proposal and explain why they are not worth the price premium.
In this very recent case, GAO said the solicitation stated that technical/management approach was more important than the past performance factor, and when combined the non-cost factors were significantly more important than the cost factor. The SSA's decision acknowledged that the protester's proposal was higher rated on past performance but the SSA found that the "slightly better" past performance ratings were not significant enough to warrant paying the higher evaluated price. The record did not explain why the SSA concluded that the protester's past performance as only "slightly better" and the record did not support the decision that this difference was not worth the price premium for the protester's proposal.
As we've reported before, conclusory statements are not enough to justify the source selection decision. The rule is that the SSA must explain the rationale for the decision and specifically justify awarding to a lower-priced offeror, in a best value procurement, by going on to explain (and document) the reasons why the higher-rated (for the non-price factors) offeror's higher price is not worth the premium.
Would that we all would finally get this message.
bill@spriggsconsultingservices.com
Saturday, June 1, 2013
TIPS ON CLAIM RESOLUTION
Contractors hate to litigate claims. They have better things to do. It takes too long and diverts important resources into a speculative, risky enterprise with no hope of a new product or service line. But some contractors are either forced or choose to treat losses written off as possible profit enhancers in tough times. There are other reasons to pursue claims particularly when they involve contract interpretation issues which may apply to ongoing contract performance, or defending a termination for default by arguing affirmative relief claims.
So we thought we would provide a list of tips for contractors preparing for the possibility of claim litigation.
So we thought we would provide a list of tips for contractors preparing for the possibility of claim litigation.
- Prepare a professional request for equitable adjustment (REA) and convert it to a claim only after negotiations with the contracting officer fail. See www.spriggsconsultingservices.com for a list of 14 tips on how to negotiate a settlement of the REA. Submit the claim with the proper certification (do not change a word) and ask for a prompt final decision as required by the regulation. Remind the contracting officer interest is running on the claim.
- Appeal the failure to issue a decision if it is not rendered either within 60 days or a reasonable time (usually 90 days), whichever is appropriate under the regulation.
- Make your choice of forum based on sound professional advice. This usually means going to the Board of Contract Appeals (Board).
- Always file your complaint with your notice of appeal. Always. There is no need to wait the 30 days.
- Always ask opposing counsel to agree to mediation right away. Always. The first step in the litigation should be an attempt to set up a mediation meeting presided over by a Board judge. In fact, it is possible to engage the services of a Board judge even before commencing the litigation.
- Consider forgoing discovery and arguing that opposing counsel's discovery should be limited. If you have prepared your case properly, you may be able to proceed to trial without discovery or after limited discovery. Control of the other side is difficult and depends on the judge.
- Consider carefully dispositive motions. Legal issues can be disposed of on motion. Try to narrow or completely eliminate the factual issues so that the only issues that remain are legal issues susceptible to disposition on motion.
- If mediation has not worked early on, forget alternative dispute resolution (ADR). Go ahead and go to trial as fast as you can or file your dispositive motions.
- There is a reason for the hackneyed "settlement on the court steps." It happens. But it most likely happens before the parties have invested too much time in witness preparation and before they come close to the courthouse steps.
- The Boards like to adjudicate entitlement and leave quantum (damages) to the negotiation of the parties. Even the slightest headway on entitlement can lead to settlement.
bill@spriggslawgroup.com http://www.spriggslawgroup.com/
DOD REA CERTIFICATION REQUIREMENT
On December 7, 2011, DOD introduced a new clause for contracts estimated to exceed the simplified acquisition threshold. DOD now requires contractors to certify that any request for equitable adjustment (REA) exceeding that threshold in amount is "made in good faith, and that the supporting data are accurate and complete to the best of [the contractor's] knowledge and belief."
Just to review the bidding, contractors may seek REA's for upward adjustments in price and schedule extensions on any government contract containing the standard Changes clause. For commercial item contracts awarded under FAR Part 12, it's a difference story. There, the changes clause says changes may only be made by mutual agreement of the parties. However, REA's can be submitted under breach of contract theories on commercial item contracts. In any event, if you have the new clause in DFARS 252.243-7002, you must certify your REA.
This is not the same certification required under FAR Subpart 33.2. If you desire to convert your REA to a claim, you must use the certification language at FAR 33.207. That certification adds another clause to the certification asserting the contractor's belief the amount accurately reflects what it believes the government must pay and attests to the certifier's eligibility to make the certification. If you want to request the contracting officer's final decision thereby affording yourself the opportunity to appeal that decision and you want to recover interest on your REA, you must certify it with the exact language from FAR 33.207. Although minor informalities in the language can be corrected later, you should use the exact language in the regulation.
REA's are an integral part of the public contracting scheme. One of the major differences between public and private commercial contracts is the use by the government of the Changes clause. Because the government dictates the mandatory use of this clause and thereby maintains total control over the contractor's performance, the law has developed various remedies for the contractor to recover additional costs (and profit on those costs) under various theories called constructive changes. (These constructive changes are actually breaches of the contract given a different name.)
We've written several blogs about breaches of government obligations under every contract. The government's specifications must be free of errors, conflicts and omissions and must permit commercially practicable performance. The government is obligated to cooperate with the contractor, not interfere in the contractor's performance and communicate with the contractor. The govenment is obliged to provide information vital to the contractor's performance. There are other types of constructive changes such as constructive acceleration of performance (where the government unjustifiably denies the contractor's request for a schedule extension). Differing interpretations of contract language give rise to constructive changes.
The take away points are these: (1) you have a right to seek redress for constructive changes; (2) if you submit an REA on a DOD contract, you must certify it under DFARS 252.243-7002; (3) if you want to convert your REA to a claim, you then must recertify it in accordance with FAR 33.207; and (4) call us as we are experts at preparing REA's and claims.
WHEN, WHY AND HOW TO CONVERT THE REA TO A CLAIM
One of our most popular discussions deals with how to prepare a request for equitable adjustment (REA). In response, we've had a number of questions about when, why and how to convert the REA to a claim. Again, there is no guidance in the regulations in answer to these questions so we suggest answers based on our experience.
The REA is not defined in FAR Part 2. A claim is defined there as follows:
A claim arises when the "submission" (the word used in the above referenced quote for which we substituted "routine request" in brackets) is disputed or is not acted upon in a reasonable time. FAR Subpart 33.2 covers the initiation and certification of a claim, interest on claims and all the rules relating to the contracting officer's decision on a claim. The distinguishing characteristics between the REA and a claim are a claim must be certified (if over $100K), interest runs on it from date of receipt and the contracting officer is obliged to render a decision on it from which the contractor can appeal to the tribunal of its choice.
In practice, unless it knows its request will be disputed, the contractor usually submits the REA first. Then, if the contractor meets resistance, either in the form of delay or denial, the contractor should "convert" the REA to a claim, certify it (probably in any event) and request the contracting officer's final decision. Most often this is accomplished by simply resubmitting the REA with a cover letter providing the requisite certification and request for decision.
A claim, in any event, must be submitted within 6 years of its accrual. The REA can be submitted any time before final payment. The judicial tribunals do not have jurisdiction to hear the claim unless it has been certified (if over $100K) and the contracting officer has either rendered a decision or failed to do so within a reasonable time (60 days for small claims).
bill@spriggslawgroup.com http://www.spriggslawgroup.com/
The REA is not defined in FAR Part 2. A claim is defined there as follows:
"Claim" means a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract.The regulation goes on to say a routine invoice is not a claim. It then states:
The [routine request] may be converted to a claim, by written notice to the contracting officer as provided in 33.206(a), if it is disputed either as to liability or amount or is not acted upon in a reasonable time.We believe it is reasonable to treat the REA as if it were a routine request for payment. It is a request, not a claim. The intent is to negotiate a settlement of the matters raised in the submission. The costs of preparing, presenting, negotiating and settling the request are allowable costs. The intent behind the request is to reach agreement to modify the contract to provide some or all of the relief requested.
A claim arises when the "submission" (the word used in the above referenced quote for which we substituted "routine request" in brackets) is disputed or is not acted upon in a reasonable time. FAR Subpart 33.2 covers the initiation and certification of a claim, interest on claims and all the rules relating to the contracting officer's decision on a claim. The distinguishing characteristics between the REA and a claim are a claim must be certified (if over $100K), interest runs on it from date of receipt and the contracting officer is obliged to render a decision on it from which the contractor can appeal to the tribunal of its choice.
In practice, unless it knows its request will be disputed, the contractor usually submits the REA first. Then, if the contractor meets resistance, either in the form of delay or denial, the contractor should "convert" the REA to a claim, certify it (probably in any event) and request the contracting officer's final decision. Most often this is accomplished by simply resubmitting the REA with a cover letter providing the requisite certification and request for decision.
A claim, in any event, must be submitted within 6 years of its accrual. The REA can be submitted any time before final payment. The judicial tribunals do not have jurisdiction to hear the claim unless it has been certified (if over $100K) and the contracting officer has either rendered a decision or failed to do so within a reasonable time (60 days for small claims).
bill@spriggslawgroup.com http://www.spriggslawgroup.com/
Thursday, May 9, 2013
UNREALISTICALLY LOW PRICE: PROTEST SUSTAINED
The Government Accountability Office (GAO) has just sustained a protest in which the protester argued that the awardee's proposal should have been rejected as unacceptable on the basis that its price was too low. The solicitation established that the agency would evaluate whether bidders' prices were unrealistically low and the record reflected a failure by the agency to perform a price realism evaluation of the awardee's low price.
The solicitation advised offerors that "unrealistically" low prices "may" serve as a basis for rejection of a proposal. GAO said: "Implicit in the solicitation's reference to 'unrealistically' low prices is the presumption that the agency would actually consider whether an offeror's price is in fact unrealistic and, as a consequence, unacceptable."
The Air Force in this case argued that the evaluation for price realism was optional because the solicitation said unrealistically low price proposals "may" be found unacceptable. Wrong, says GAO. The use of the term "may" refers to the agency's discretion to reject an unrealistically low price, as opposed to reserving to the agency the right to evaluate prices for realism in the first place.
GAO sustained the protest because the agency failed to contemporaneously evaluate whether the awardee's low price, which was 17 percent below the government's estimate, was realistic.
What is a price realism analysis? Price analysis is covered in FAR 15.404-1(b), There are various techniques listed with preference for the first two. Price realism is covered in FAR 15.404-1(d)(3) where the regulation states cost realism may be used on competitive fixed-price contracts in certain circumstances. GAO has made it clear that if the solicitation uses the magic words indicating unrealistically low prices may be cause for rejection, the agency must then carry through and perform the analysis. What is the analysis? It is to determine whether the proposed price is realistic for the work to be performed, reflects a clear understanding of the contract requirements and is consistent with the contractor's technical proposal.
In our opinion, also implicit in such solicitation language is the requirement to check whether the pricing is unbalanced. See FAR 15.404-1(g).
bill@spriggslawgroup.com www.spriggslawgroup.com
The solicitation advised offerors that "unrealistically" low prices "may" serve as a basis for rejection of a proposal. GAO said: "Implicit in the solicitation's reference to 'unrealistically' low prices is the presumption that the agency would actually consider whether an offeror's price is in fact unrealistic and, as a consequence, unacceptable."
The Air Force in this case argued that the evaluation for price realism was optional because the solicitation said unrealistically low price proposals "may" be found unacceptable. Wrong, says GAO. The use of the term "may" refers to the agency's discretion to reject an unrealistically low price, as opposed to reserving to the agency the right to evaluate prices for realism in the first place.
GAO sustained the protest because the agency failed to contemporaneously evaluate whether the awardee's low price, which was 17 percent below the government's estimate, was realistic.
What is a price realism analysis? Price analysis is covered in FAR 15.404-1(b), There are various techniques listed with preference for the first two. Price realism is covered in FAR 15.404-1(d)(3) where the regulation states cost realism may be used on competitive fixed-price contracts in certain circumstances. GAO has made it clear that if the solicitation uses the magic words indicating unrealistically low prices may be cause for rejection, the agency must then carry through and perform the analysis. What is the analysis? It is to determine whether the proposed price is realistic for the work to be performed, reflects a clear understanding of the contract requirements and is consistent with the contractor's technical proposal.
In our opinion, also implicit in such solicitation language is the requirement to check whether the pricing is unbalanced. See FAR 15.404-1(g).
bill@spriggslawgroup.com www.spriggslawgroup.com
Tuesday, May 7, 2013
PROCUREMENT TRENDS SO FAR IN 2013
We can only report on what we see. We don't see everything and report only on what is happening in our corner of experience. However, there are some noticeable trends so far in 2013 worthy of note. They involve source selection, protests, sequestration related pullbacks of outsourced work and claims. Here are some of the things we've noticed.
Protests seem to be trending upward. GAO publishes its statistics once a year and the last publication does not show what we're seeing now. More contractors are seriously considering and actually filing protests. And, the rate of sustained protests, particularly over the last few months, is trending downward. Frankly, we can't even remember the last protest sustained by GAO. The grounds for protesting seem to center around allegations of unreasonable evaluations and source selection decisions that don't follow the published evaluation factors. There is an increase in claims that best value procurements have been turned into lowest price, technically acceptable (LPTA). One thing is clear: agencies are finding ways to go to the lowest priced offeror. Contractors beware. The lowest price may win no matter what the evaluation factors may say.
Evaluation factors are not clear. That's often been the case in the past, but it appears there may now be a purpose in lack of clarity. Contractors need to clear up any ambiguity in how they will be judged before they submit their proposals. They should especially beware of best value procurements which leave any question as to whether the agency really is looking for the lowest price. Agencies should be candid and spell out exactly what they mean when they suggest the that as the technical proposals are subjectively judged to be close to equal, price becomes more important. What does close to equal mean? How important will price become?
With regard to claims, we also see a trend that they are increasing. We've seen several examples in which the agency has reduced work on task orders because of sequestration. The problem is that on fixed priced orders, cutting back is a partial termination which permits the contractor to submit a termination settlement proposal which also reprices the remaining work. The real problem arises in commercial item contracts where the agency proposes a modification descoping the work. The changes clause in these contracts says changes can only be made by mutual agreement. Unilateral changes are a breach of the contract. And then there is the problem contractors have with the way the commercial item contract termination for convenience clause is written. It has been interpreted to restrict the type of recovery afforded under the non commercial item clause.
We've also seen a trend in which agencies are treating fixed priced work as if it were time and materials. In a time and materials contract, contractors have precious little opportunity for relief when hours are reduced. We are seeing some contractors struggling with the way to reprice the remaining work.
In the case of fixed price commercial contracts, we are seeing some contractors resorting to the old breach of contract claim. (As we've written, constructive changes were a fiction of the past to make breaches of contract compensable under the changes clause so the Boards of Contract Appeals would have jurisdiction.) Again, agencies cannot impose unilateral changes in commercial item contracts. That's a breach. Unilaterally imposed reductions of work are terminations for convenience. It remains to be seen whether contractors can successfully argue these reductions are breaches of contract.
So as far as trends go from our little corner of the world, protests and claims trend upward and successful protests trend downward. Claims are still in their infancy. The need for careful review of evaluation factors could never be more more important.
bill@spriggsconsultingservices.com www.spriggsconsultingservices.com
Protests seem to be trending upward. GAO publishes its statistics once a year and the last publication does not show what we're seeing now. More contractors are seriously considering and actually filing protests. And, the rate of sustained protests, particularly over the last few months, is trending downward. Frankly, we can't even remember the last protest sustained by GAO. The grounds for protesting seem to center around allegations of unreasonable evaluations and source selection decisions that don't follow the published evaluation factors. There is an increase in claims that best value procurements have been turned into lowest price, technically acceptable (LPTA). One thing is clear: agencies are finding ways to go to the lowest priced offeror. Contractors beware. The lowest price may win no matter what the evaluation factors may say.
Evaluation factors are not clear. That's often been the case in the past, but it appears there may now be a purpose in lack of clarity. Contractors need to clear up any ambiguity in how they will be judged before they submit their proposals. They should especially beware of best value procurements which leave any question as to whether the agency really is looking for the lowest price. Agencies should be candid and spell out exactly what they mean when they suggest the that as the technical proposals are subjectively judged to be close to equal, price becomes more important. What does close to equal mean? How important will price become?
With regard to claims, we also see a trend that they are increasing. We've seen several examples in which the agency has reduced work on task orders because of sequestration. The problem is that on fixed priced orders, cutting back is a partial termination which permits the contractor to submit a termination settlement proposal which also reprices the remaining work. The real problem arises in commercial item contracts where the agency proposes a modification descoping the work. The changes clause in these contracts says changes can only be made by mutual agreement. Unilateral changes are a breach of the contract. And then there is the problem contractors have with the way the commercial item contract termination for convenience clause is written. It has been interpreted to restrict the type of recovery afforded under the non commercial item clause.
We've also seen a trend in which agencies are treating fixed priced work as if it were time and materials. In a time and materials contract, contractors have precious little opportunity for relief when hours are reduced. We are seeing some contractors struggling with the way to reprice the remaining work.
In the case of fixed price commercial contracts, we are seeing some contractors resorting to the old breach of contract claim. (As we've written, constructive changes were a fiction of the past to make breaches of contract compensable under the changes clause so the Boards of Contract Appeals would have jurisdiction.) Again, agencies cannot impose unilateral changes in commercial item contracts. That's a breach. Unilaterally imposed reductions of work are terminations for convenience. It remains to be seen whether contractors can successfully argue these reductions are breaches of contract.
So as far as trends go from our little corner of the world, protests and claims trend upward and successful protests trend downward. Claims are still in their infancy. The need for careful review of evaluation factors could never be more more important.
bill@spriggsconsultingservices.com www.spriggsconsultingservices.com
Sunday, April 7, 2013
A T FOR C MAY BE A BREACH OF CONTRACT
Judge Nancy B. Firestone, of the U. S. Court of Federal Claims COFC), has just handed down an opinion in which she holds that the government's termination for convenience (T for C) may be a breach of a non-commercial item procurement contract for security services in Iraq and Afghanistan. The Department of Defense (DOD) awarded two contracts to the plaintiff but then terminated each for its convenience. After reviewing all the relevant Court of Appeals for the Federal Circuit (CAFC) opinions, she concludes:
She begins her discussion pointing out that the government's right to terminate a contract for convenience without giving rise to a breach of contract claim has its roots in military contracts. The military needed the clause so as to avoid large, unneeded military procurements upon cessation of war and other hostilities. She then acknowledges that the CAFC has held a T for C may give rise to a breach claim where there is bad faith or an abuse of discretion. The CAFC also has recognized a T for C can be a breach when the government "contracts with a party knowing full well it will not honor the contract."
Importantly, a claim for breach of contract based on breach of the implied duty of good faith and fair dealing is different than a claim for breach based on an improper T for C. The implied duty of good faith and fair dealing is inherent in every contract. This duty requires each party "do everything that the contract presupposes should be done by a party to accomplish the contract's purpose." A party must not destroy the reasonable expectations of the other party.
The breach of the obligation to exercise good faith and fair dealing also includes, as we have written many times, the duty to cooperate, communicate with and not interfere in the other party's performance. Again, and very importantly, proof of bad faith is not required to show a breach of the implied duty of good faith and fair dealing in most cases. As Judge Firestone notes: "Evidence of government intent to harm the contractor is not ordinarily required."
Judge Firestone agrees with the government that breach of the covenant of good faith and fair dealing cannot be the basis for a claim of an improper T for C. However, animus toward the contractor is not required. The government can abuse its discretion by not intending for the contract to go forward, by terminating for convenience in order to get a better price for itself and by entering into a contract without intending to allow the contractor to perform. These are breaches of the duty of good faith and fair dealing and are therefore an abuse of discretion.
Judge Firestone concludes with the language quoted above: the government can breach the contract by some form of "improper self-dealing for its own benefit" such as terminating a contract just so it can award it to another contractor (which was the alleged case before the judge).
Can the government breach this duty of good faith and fair dealing by walking away from an awarded contract just so as to take the work in-house due to sequestration or budget limitations? Perhaps. Is it "improper self-dealing" or not?
bill@spriggsconsultingservices.com www.spriggslawgroup.com
The court reads these precedents to include liability for breach of contract based on an improper termination for convenience where the government has engaged in some form of improper self-dealing for its own benefit or to the benefit of another contractor.Her discussion hinges on the linchpin of the duty of good faith and fair dealing.
She begins her discussion pointing out that the government's right to terminate a contract for convenience without giving rise to a breach of contract claim has its roots in military contracts. The military needed the clause so as to avoid large, unneeded military procurements upon cessation of war and other hostilities. She then acknowledges that the CAFC has held a T for C may give rise to a breach claim where there is bad faith or an abuse of discretion. The CAFC also has recognized a T for C can be a breach when the government "contracts with a party knowing full well it will not honor the contract."
Importantly, a claim for breach of contract based on breach of the implied duty of good faith and fair dealing is different than a claim for breach based on an improper T for C. The implied duty of good faith and fair dealing is inherent in every contract. This duty requires each party "do everything that the contract presupposes should be done by a party to accomplish the contract's purpose." A party must not destroy the reasonable expectations of the other party.
The breach of the obligation to exercise good faith and fair dealing also includes, as we have written many times, the duty to cooperate, communicate with and not interfere in the other party's performance. Again, and very importantly, proof of bad faith is not required to show a breach of the implied duty of good faith and fair dealing in most cases. As Judge Firestone notes: "Evidence of government intent to harm the contractor is not ordinarily required."
Judge Firestone agrees with the government that breach of the covenant of good faith and fair dealing cannot be the basis for a claim of an improper T for C. However, animus toward the contractor is not required. The government can abuse its discretion by not intending for the contract to go forward, by terminating for convenience in order to get a better price for itself and by entering into a contract without intending to allow the contractor to perform. These are breaches of the duty of good faith and fair dealing and are therefore an abuse of discretion.
Judge Firestone concludes with the language quoted above: the government can breach the contract by some form of "improper self-dealing for its own benefit" such as terminating a contract just so it can award it to another contractor (which was the alleged case before the judge).
Can the government breach this duty of good faith and fair dealing by walking away from an awarded contract just so as to take the work in-house due to sequestration or budget limitations? Perhaps. Is it "improper self-dealing" or not?
bill@spriggsconsultingservices.com www.spriggslawgroup.com
Saturday, April 6, 2013
From Federal Times: As budgets tighten, contract attorneys expect uptick in bid protests
Two weeks after sequestration began, contract lawyer Bill Spriggs got a call from a vendor client upset that a federal contracting official had just ordered it to cut its price by 10 percent for “sequestration-related cuts” without a change in service levels.
Spriggs declined to name the contractor or agency, but said the dispute involved a non-defense civilian agency and a commercial item contract where changes can’t occur unless by mutual agreement.
“It’s the first time I’ve seen something like that,” said Spriggs, who runs the Spriggs Law Group in Virginia.
While lawyers sort out the dispute, the larger question is whether the incident was just an anomaly or perhaps an early sign that the sequester will bring about more contract disputes and bid protests.
For more, click on the link:
http://www.federaltimes.com/article/20130403/ACQUISITION03/304030007/As-budgets-tighten-contract-attorneys-expect-uptick-bid-protests?odyssey=nav%7Chead
Spriggs declined to name the contractor or agency, but said the dispute involved a non-defense civilian agency and a commercial item contract where changes can’t occur unless by mutual agreement.
“It’s the first time I’ve seen something like that,” said Spriggs, who runs the Spriggs Law Group in Virginia.
While lawyers sort out the dispute, the larger question is whether the incident was just an anomaly or perhaps an early sign that the sequester will bring about more contract disputes and bid protests.
For more, click on the link:
http://www.federaltimes.com/article/20130403/ACQUISITION03/304030007/As-budgets-tighten-contract-attorneys-expect-uptick-bid-protests?odyssey=nav%7Chead
Thursday, April 4, 2013
SUE THE CONTRACTING OFFICER?
Occasionally, we've been asked if it is possible to sue the contracting officer personally. For a lot of reasons, we discourage such an action, not the least of which is the questionable motivation for doing it. Not too long ago, a contractor terminated for default decided to sue the contracting officer in U.S. District Court and the Court of Appeals for the Second Circuit very recently decided the appeal of that suit. Let's take a look at the facts and briefly review what the circuit court decided.
The contractor sued the procuring contracting officer (PCO), the Chief of Contracting, the administrative contracting officer (ACO) and the Program Manager for the New York District Corps of Engineers. The suit alleged that the contractor's contracts were terminated in retaliation for the contractor's criticism of the Corps' mismanagement of construction projects, that the terminations negatively impacted the contractor's business and that, as a result, the contractor was deprived of its constitutionally protected rights to free speech and substantive due process. The contractor had appealed the terminations of its contracts to the Armed Services Board of Contract Appeals (ASBCA) but those appeals were dismissed (for reasons not germane here) without prejudice.
In a case called Bivens, the U. S. Supreme Court ruled in 1971 that a cause of action existed for victims of unreasonable searches and seizures against the government agents conducting the complained of searches and seizures. The Court said it would infer a private right of action for monetary damages where no other federal remedy is available based on the principle that for every wrong, there must be a remedy. Three Justices dissented, saying such "legislating" should be left to Congress. Thus, there was born what became know as a "Bivens action" in court. (The Second Circuit was reversed in Bivens.)
In revisiting the issue last month, the Second Circuit considered whether the Contract Disputes Act (CDA) of 1978 precluded the contractor's Bivens action. It noted that other circuit courts had decided just such a preclusion existed.
The court started its discussion noting that precisely because the Bivens action is a judicially created remedy (not based on statute), federal courts have been reluctant to recognize a broad application of such implied judicial relief. The remedy is an extraordinary thing that should rarely if ever be applied in new contexts. If there is an alternative remedy available, the implied relief should not be granted.
The court concluded that in the face of the comprehensive CDA scheme of relief, federal courts should decline to infer new substantive legal liability without legislative aid. Although the CDA does not allow contractors to bring actions against government employees in their individual capacities for alleged violations of constitutional rights, nevertheless, the CDA affords a meaningful and exclusive remedy against the government. In effect, the CDA remedy is exclusive for all claims arising out of or related to government contracts. Therefore, contractors cannot sue the government employees in their individual and personal capacities.
So contractors have an exclusive remedy under the CDA and cannot sue the contracting officer personally. And if contractors still have retribution on their minds, they also should be wary of alleging bad faith. Government employees are legally presumed to be acting in good faith and successfully overcoming that presumption requires a showing of well-nigh irrefragable proof.
And the obvious question: can the contractor sue the PCO and others personally for pre-award actions and inactions? We're looking for a case but it would seem the Competition in Contracting Act CICA) provides what may be described as a meaningful and exclusive remedy through the bid protest procedures.
bill@spriggslawgroup.com www.spriggsconsultingservices.com
The contractor sued the procuring contracting officer (PCO), the Chief of Contracting, the administrative contracting officer (ACO) and the Program Manager for the New York District Corps of Engineers. The suit alleged that the contractor's contracts were terminated in retaliation for the contractor's criticism of the Corps' mismanagement of construction projects, that the terminations negatively impacted the contractor's business and that, as a result, the contractor was deprived of its constitutionally protected rights to free speech and substantive due process. The contractor had appealed the terminations of its contracts to the Armed Services Board of Contract Appeals (ASBCA) but those appeals were dismissed (for reasons not germane here) without prejudice.
In a case called Bivens, the U. S. Supreme Court ruled in 1971 that a cause of action existed for victims of unreasonable searches and seizures against the government agents conducting the complained of searches and seizures. The Court said it would infer a private right of action for monetary damages where no other federal remedy is available based on the principle that for every wrong, there must be a remedy. Three Justices dissented, saying such "legislating" should be left to Congress. Thus, there was born what became know as a "Bivens action" in court. (The Second Circuit was reversed in Bivens.)
In revisiting the issue last month, the Second Circuit considered whether the Contract Disputes Act (CDA) of 1978 precluded the contractor's Bivens action. It noted that other circuit courts had decided just such a preclusion existed.
The court started its discussion noting that precisely because the Bivens action is a judicially created remedy (not based on statute), federal courts have been reluctant to recognize a broad application of such implied judicial relief. The remedy is an extraordinary thing that should rarely if ever be applied in new contexts. If there is an alternative remedy available, the implied relief should not be granted.
The court concluded that in the face of the comprehensive CDA scheme of relief, federal courts should decline to infer new substantive legal liability without legislative aid. Although the CDA does not allow contractors to bring actions against government employees in their individual capacities for alleged violations of constitutional rights, nevertheless, the CDA affords a meaningful and exclusive remedy against the government. In effect, the CDA remedy is exclusive for all claims arising out of or related to government contracts. Therefore, contractors cannot sue the government employees in their individual and personal capacities.
So contractors have an exclusive remedy under the CDA and cannot sue the contracting officer personally. And if contractors still have retribution on their minds, they also should be wary of alleging bad faith. Government employees are legally presumed to be acting in good faith and successfully overcoming that presumption requires a showing of well-nigh irrefragable proof.
And the obvious question: can the contractor sue the PCO and others personally for pre-award actions and inactions? We're looking for a case but it would seem the Competition in Contracting Act CICA) provides what may be described as a meaningful and exclusive remedy through the bid protest procedures.
bill@spriggslawgroup.com www.spriggsconsultingservices.com
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