Government Contracts – Schwartz – Fall 2011
Contents
I.
Basic Legal Considerations When Contracting with Governmental Entities .................................................................. 1
A.
Transactions & Agencies Covered By Federal Procurement Law; Exceptions ............................................................ 1
B.
The Power to Contract ................................................................................................................................................ 3
C.
Appropriations and the Anti-Deficiency Act ............................................................................................................... 4
D.
Authority of Agents ..................................................................................................................................................... 6
E.
Aspects and Consequences of Sovereignty................................................................................................................. 9
F.
Federal-State Relations ............................................................................................................................................. 15
G.
The False Claims Act and Qui tam Suits Against Contractors ................................................................................... 16
H.
Criminal Prosecution ................................................................................................................................................. 17
I.
Free Speech Rights of Government Contracts .......................................................................................................... 18
II.
Protests Claims and Disputes: Adjudication for Controversies Concerning Contract Award and Performance .......... 18
A.
Contract Award Controversies .................................................................................................................................. 18
B.
Contract Performance Disputes: The CO and the Contract Disputes Act ................................................................. 27
III.
Formation of Government Contracts ........................................................................................................................ 30
A.
Basic Principles of Government Contract Formation................................................................................................ 30
B.
Competition Policies ................................................................................................................................................. 31
C.
Alternative Procedures ............................................................................................................................................. 34
D.
Qualification .............................................................................................................................................................. 38
E.
Types of Contracts: Allocation of the Risk of Uncertainty ........................................................................................ 41
F.
Collateral Socio-Economic Policies............................................................................................................................ 44
IV.
I.
Administration of Government Contracts ................................................................................................................ 45
A.
General Approach to Contract Interpretation .......................................................................................................... 45
B.
Contractor’s Rights.................................................................................................................................................... 45
C.
Government Prerogatives ......................................................................................................................................... 47
Basic Legal Considerations When Contracting with Governmental Entities
A. Transactions & Agencies Covered By Federal Procurement Law; Exceptions
 Introduction to federal government procurement
 About $300 billion annually, also a way for the government to regulate the private sector with collateral provisions
 Ex: affirmative action, minimum wage, reporting requirements, etc.
 Federal procurement is a recurring source of dissatisfaction in the law
 Gore’s National Performance Review
 Swinging pendulum metaphor—deregulation leads to more discretion to government employees using common
sense / making better choices or taking advantage of less oversight and committing fraud;
 Goal of government (FAR)—avoid waste, buy cheap, buy quality, avoid fraud and abuse, etc.
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
Globalization—government contracts is becoming globalized through treaties, NAFTA, GPA (WTO’s government
procurement Act)
 Procurement Statutes—same process applies to all federal agencies, the process began with military procurement which
leads to some issues with ‘exceptionalism’ since the military has special ‘national security’ type privileges
 Armed Services Procurement Act (10 USC § 2303) (ASPA)—Applies to procurement by the following agencies, ‘for its
use or otherwise,’ for all property (other than land[procurement of property is covered by other laws]) & all services
for which payment is to be made from appropriated funds:
 Department of Defense (DOD)
 Army, Navy, Air Force, Coast Guard
 NASA
 Federal Property and Administrative Services Act (41 USC § 252) (FPASA)—Generally the same as the ASPA. They
drifted apart at some point and the Competition in Contract Act (CICA 1984) re-harmonized them; 1965 amendments
to the FPASA extended its control to most Executive Agencies
 Civilian counterpart to ASPA
 Only governs executive agencies (excluding GAO)
 Motor Coach Industries v. Dole (4th Cir. 1984)—An agency subject to federal procurement guidelines cannot avoid
the guideline by creating a trust to execute the procurement b/c the character of the trust is still public
 Facts: MCI (disappointed bidder) claims that FAA didn’t invite enough competition. Federal Aviation Authority
argues that the trust they used to fund the project for which they were accepting bids is private and thus not
subject to federal procurement law.
 Factors to consider in determining whether an entity is public or private:
 Who controls the money and how is the trust funded
 Purpose of establishment of the trust or entity
 Character of the agency spearheading the entity’s creation
 Trust’s beneficiary and administrators
 Degree of control exercised over public agency
 Injunctive relief granted
 If an agency controls the money and the decisions about how it’s being spent, it’s still federal money.
Otherwise everyone could create a ‘private’ trust in order to accomplish their own goals.
 Federal Acquisition Regulations (FAR)— Applies to all government acquisition; superimposed on both ASPA & FPASA;
 Required to be followed by executive agencies in the procurement of:
Key Principles of Govern. Contracts
 Property other than real property
Transparency
Wealth distribution
 Services, including research and development
Integrity
Competition
 Construction, alteration, repair, or maintenance of real property
Uniformity
Risk Avoidance
Best Value
Customer Satisfaction
 The Administrative Procedure Act (APA), 5 USC § 553
 The Tucker Act (28 USC § 1491)—waives sovereign immunity of the US with respect to claims against the government
Efficiency (administrative)
based on contracts and governs jurisdiction of Court of Federal Claims
 Comparative Law Note
 GATT dispute resolution panel heard dispute between US and EU and held that where procurement is carried out
under government control, by a private company with government funds in the interest of the government, it is
considered a government procurement.
 Similar to criteria used in Motor Coach.
 Exceptionalism v. Congruence
 Exceptionalism—because of the government’s sovereign status, unique functions, and special responsibilities, the
government as a contracting party is not subject to all of the legal obligations and liabilities of private contracting
parties
 Tends to apply in contract performance cases (Foreman)
 Termination for Convenience (Corliss)
 Government cannot be equitably estopped (Merrill; Richmond)
 Come back here and fill this part in with examples
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
Congruence—government is treated like a private party when entering into contracts with private parties
 Offer and acceptance
 Authority (?)
 Consideration
 Come back here and fill this part in with examples
 Reverse Exceptionalism—where the government has additional duties that a private individual does not have; creates
extra rights for contractors and bidders.
 Requirement for competitive bidding and advertising
 Being sued for non-competitive bidding
 Two Types of Procurement Disputes
 Bid Protests/Award Disputes
 Types:
 Procedural—wrong bid process was used
 Substantive—wrong party was awarded the bid
 3 Party Dispute between (1) government, (2) winning bidder, and (3) losing bidder; can be heard:
 General Accounting Office (GAO)
 Court of Federal Claims (CoFC)
 Performance Disputes
 Can be heard by Board of Contracts Appeals or the Court of Federal Claims
 Governed by the Contracts Disputes Act of 1978 (CDA)
 Provides choice of forum
 Does not apply to procurement of real property, including acquiring a lease (as opposed to entering a lease,
which is covered by the CDA, see Foreman)
 Foreman v. United States (Fed. Cir. 1985)—the Contracts Dispute Act includes entering into leases as it involves
procurement of property other than real property. In contrast, it doesn’t include acquisition/assignment of a lease
is the procurement of real property, and in that case the CDA would not apply
 Facts: Forman entered into a lease with the government to build a post office and then sued when the
government started subletting against the contract. Forman wanted FL law to apply, but the Board held that
federal law applied. Thus, the contract was construed against Foreman, and they lost.
 Board of Contract Appeals had jurisdiction because the ‘real property in being’ exception does not apply since
the contract was to build a post office (nothing in being at the time) and create a lease (not acquire one)
 EXCEPTIONALISM—federal law controls interpretation of federal contract
 Other notes: Forman wanted contra proferentum (construing ambiguous contract against drafter, govt. in this
case), but Court usually declines this. Restraints on alienation are narrowly interpreted for policy reasons.
(PS)BCA (agency’s BCA)
 contracting officer
Fed. Circuit
SCOTUS
US Ct. of Federal Claims
B. The Power to Contract
 A-76 Contracting Process—when should the government do it itself, and when should it contract out to private sector?
 Government typically contracts out for goods
 Creates a procedure to determine when to contract out
 There are protest options available to contractor based on the decision to go in-house, but not for government
employees if the government decides to contract out.
 The government has the authority to enter into voluntary procurement contracts (Tingey) and terminate for convenience
(Corliss) and to enter settlement contracts.
 The government needs to be able to enter into contracts (satisfies federalism) and voluntary contracts don’t have to be
authorized by Congress or by statute (satisfies separation of powers).
 Agencies are also, by extension, able to contract as long as it is relevant to their duties.
 United States v. Tingey (US 1831)—US, a sovereign, has the power to enter into voluntary contracts even though the
Constitution does not explicitly authorize that power.
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
Necessary & Proper Clause—power to contract is a reasonable way to carry out enumerated powers
Authority to contract is limited by the standards placed on government by the authorization of Congress through
an appropriation.
United States v. Corliss Steam-Engine Corp. (1875)—government has the authority to terminate for convenience
because the government deals with issues that arise unexpectedly more often than a private party (ex: war) and its
needs change. An agreement to settle payment is an extension
 Government enters into a Termination Settlement Proposal
 One of the biggest examples of EXCEPTIONALISM.
C. Appropriations and the Anti-Deficiency Act
 Comptroller General
 Separation of Powers and the Government Accounting Office (GAO)
 Comptroller General is the head of the GAO. Because she is subject to the control of the legislature, she cannot
perform executive functions. (Bowsher v. Synar)
 Part of legislature—president nominates from a list of 3 candidates compiled by Congress, Congress can veto
the president’s vote by a certain %, a joint resolution from Congress can remove her = cannot perform
executive duties
 Comptroller General plays important roles in government contracts law:
 Bid protest role and budgetary advice role
 Bowsher v. Synar (US 1986)—comptroller general is part of legislature and her functions under the Act are
executive, which cannot be done. Congress has sufficient control over the CG that you cannot vest her with
executive functions
 Stevens dissent: removal is not enough to say CG is part of legislature
 Competition in Contract Act (CICA) Enacted in 1984
 Formerly codified recommendation structure discussed in Ameron. Gave GAO formal authority.
 CICA gives the comptroller general the power to:
 Issue recommendations to procuring agencies brought by disappointed bidders,
 Stop execution of a contract while it investigates the protest using the ‘automatic stay’ provision
 Stay can be lengthened or shortened by GAO as needed, though agency doesn’t need to obey the
extension
 If the agency wants to override the GAO, they must send a report to Congress. Technically, the GAO can
only recommend, but practically, this requirement compels the agency
 Ameron v. Army Corps of Engineers (3rd Cir. 1986)—CICA provisions are constitutional, including an automatic stay
provision issued by the GAO.
 Facts: Ameron was the lowest bidder, but were found unresponsive, so Corps gave the contract to another
group. Ameron complained to GAO and the GAO issued a stay provision. Corps continued with their contract
award because they claimed the CICA was unconstitutional.
 Two-part test:
 Inquire as to the extent to which the legislative act prevents the executive from accomplishing its
constitutionally assigned function Q1: Not really sure about this 2-part test thing here.
 If the potential for disruption is great, Court must determine whether justified by an overriding need to
promote objectives within the scope of constitutional authority of congress.
 Comparative Law note—similar approach to GAO is taken in US-Canada Free Trade Agreement. Agencies are
encouraged to comply with recommendations and are then obligated to report to Parliament when they don’t
 Fiscal Law
 Appropriations Clause of the Constitution (Art I, § 9, cl. 7)—money cannot be drawn from the treasury unless express
statutory appropriations have been made
 In contrast to the idea that the government does not need express statutory authorization to enter into contracts
 Theory: Can enter into contracts but must not pay the money
 Policy:
 Separation of powers—gives executive the power to obligate payment from treasury—a congressional power
 Prevents fraud and corruption
 Protects public money
 Makes sure that public money is used according to judgments reached by Congress.
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

Anti-Deficiency Act (31 U.S.C. § 1341)—forbids government from entering contracts for which there isn’t an
appropriation already existing unless there is a funds availability clause is included,
 Criminal penalties for knowing/willful violations by a CO, though not often enforced; more a scare tactic
 People go to the GAO because the advice is influential. The agency has no reason to question the ruling and no
one has standing to question an expenditure if the GAO says it’s ok
 Creates government defense—does not restrict agencies from contracting, but it creates a defense if the
government breaches an obligation to pay money for which there is no appropriated fund
Appropriations have to be available with respect to time, purpose, and amount.
 Time of Appropriation
 Supplemental Appropriations Act of 1955, § 1311
 Money must be spent within the time for which it was available.
 To the Secretary of State (Comp. Gen 1955)—the government doesn’t have to pay expenses unless there
has been a binding agreement made during that contract year.
 Tax money that wasn’t certain to be levied is not sufficient to support a valid obligation under § 1311
 In order for a contract to be signed in one fiscal year but not performed until the next, there must be
a showing that the service/product was actually needed for the fiscal year in which the contract was
signed; otherwise, the contract must be from the fiscal year in which the services are rendered.
 Common law contract rules determine when a contract was executed—offer/acceptance,
changing terms, counteroffer, etc.
 Bona Fide Needs Rule—to legally obligate a fiscal year appropriation, the supplies/services are required to
serve a bona fide need in the fiscal year in which the need arises
 Replacement Contracts Doctrine—Acting CG Weitzel to Secretary of Interior (CG 1954) carves out an
exception for cases where contract is a replacement contract; Requirements for using a lapsed year:
 (1) performance extended beyond the expiration of the period of availability for obligation;
 (2) the contract is terminated because of the contractor’s default; and
 (3) there was a need for the work/services at the time of the original contract and there is still a need
 Appropriations cannot be expended for future liability unless there’s concrete support for the expenditure
 GAO is likely to interpret purpose restrictions more strictly if there is no time limit on appropriation
 Multi-Year Contracts—funds availability clause in a multi=year contract seems to turn into several separate
contracts that must be affirmatively renewed each year by the government (Goodyear)
 Judgment Fund—there’s a standing statutory appropriation that provides funds to pay judgments against the
government in case the government has to pay damages for something or other
 Purpose of the appropriation (31 USC § 1301)—can only spend money for the appropriated purpose
 To the Secretary of State (CG 1962)—CG will not allow use of appropriations for remodeling of the state
department to create tube delivery system to the White House because
 It is not reasonably related to the purpose of the appropriation.
 If Congress doesn’t give an explicit TIME requirement, GAO is stricter about PURPOSE. Q1: how can
Congress give a blank check on the time requirement if all appropriations expire at the end of the fiscal
year? I have in my notes that Schwartz said that time is not necessary.
 Amount of appropriation—government cannot promise more $$ than has been appropriated for any specific
purpose.
Funds Availability Clause—Appropriations are only made once a year, so long-term contracts have a condition that
payment is conditional on the necessary appropriation; Corliss Steam Engine had an example of a clause
 Purposes:
 Allows government to make Multi-year contracts even if funds are not currently available
 Prevents government from breaching contract if funds are not appropriated in violation of the AntiDeficiency Act
 Required Instances:
 Multiple year contracts for known amounts
 NOT required for requirements contracts (where consideration on the buyer’s side is promising to buy
whatever they need from a particular buyer)
 Solar Turbines v. United States (1983)—Absence of funds availability clause shows that the contract is
not a multi-year contract b/c requirements contracts don’t need them. Fiscal law has a bearing on
contract interpretation.
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Facts: Solar entered into a contract with the Air Force to supply power plants & generators for 5
years. Air Force agreed to purchase all requirements w/in max limits from Solar & set estimated
amounts for purchase for each year. Solar argues that the contract is a multi-year contract with fixed
minimum obligation. Air Force says it’s a requirements contract & they only buy what they need.
 Effect of a Funds Availability Clause on a LEASE:
 Funds availability clause for the “out years” does not bind the government by appropriations alone
 Contract is only enforceable if:
 The appropriation becomes available, AND
 The government affirms the contract.
 Goodyear Tire v. US (US 1928)—to bind the government there must be (1) an appropriation and (2)
an affirmative renewal of the lease for the next year
 Facts: Goodyear had a multi-year contract with a funds availability clause. Government held over
for half the year and agreed to pay when the appropriation came. They paid for half, and
government sued for the whole year claiming that the lease renewed with the appropriation
 Analysis: if Goodyear won, the government would have entered into an implied contract, but the
government cannot be entered into implied contracts
 Not perfectly good law—are holdover doctrines implied in law? Maybe, maybe not. Schwartz
doesn’t think this is good law. Mostly serves to warn government contractors to make sure that
the lease says what they think it says.
 EXCEPTIONALISM—creates an option contract without the government having to pay for the option. This
is particular to leases, and does not apply to multiple year contracts for goods and services
 Delay caused by lawful exercise of suspension clause, contractors cannot get damages for breach, but can get
an equitable adjustment for standby costs.
 CH Leavell v. US (Ct. Cl. 1976)—suspension of work clause does not allow damages, but it does allow an
equitable adjustment if:
 No fault or negligence of the contractor,
 Contract is suspended for an unreasonable amount of time,
 By an act of Congress or an increase in cost of performance
 Facts: exhaustion of funds is not a breach of contract. Contractor must either suspend the work and come
back when the suspension is over or finish the work with her own money.
 CONGRUENCE—protects contractors. Tries to strike a balance in assuming risks. Q1: Is this really
congruence or is it exceptionalism with less bite to it. Would a regular contractor have to pay only an
equitable adjustment if they just ran out of money and suspended?
Equitable Adjustment—remedy to constructive change (when a government asks a contractor to do more or less work
than originally agreed to)
 Less generous but easier to get than expectancy damages
 Prevents contractor from suffering losses
D. Authority of Agents
 GL Christian Doctrine—If a contract clause is mandatory but is somehow left out of the final contract, the court will read
it in.
 GL Christian v. United States (Ct. Cl. 1963)—contracting officer for the government did not include the termination for
convenience clause in the contract, and Christian sues for anticipated profits because the clause is not included
 The clause must be inserted in all fixed-price contracts
 EXCEPTIONALISM at its finest. One of the greatest hits.
 “Force and effect” principle—when certain conditions are met, an agency regulation is treated like a statute and is
binding on private parties affected by its terms
 Christian is an atypical application of the force and effect principle because it subjects private parties to policy
mandate of the government regulations
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
Accardi doctrine—agencies must follow their own regulations. If they don’t, the agency action can be set aside under
the APA Q1: Should we know how to apply this / force and effect or how to apply it on the exam?
 Usual consequences is court invalidates action taken in violation of agency regulations rather than treat the agency
as if it had followed the regulation
 Agency Regulations & the FAR
 Purpose of the FAR—guides government employees about what clauses must go into which type of contracts.
 Promulgation and procurement regulations
 The APA requires a public notice in the Federal Register when making new regulations and must offer
opportunity for comment by a concerned party (exception for public property, contracts, benefits, etc.)
 Office of Federal Procurement Policy Act goes farther— says that procurement under the FAR must be open to
comment. It goes farther than APA comment and encourages public meetings as a forum
 FAR § 1.601:
 Government contracts can only be entered into and signed by a contracting officer!!!
 Prevents corruption and incompetence
 Political responsibility—know who to blame
 Separation of powers
 Taxpayer protection
 Authorizes head of agency to delegate contracting officer authority in larger agencies
 Appointments must be in writing
 Look for clear proof of actual authority—THIS WILL BE ON THE EXAM DON’T BE FOOLED BY A FAKER
 If an agent exercises proper authority to enter into a contract, it is final and binding on the government
 Unless the right to review was reserved by a higher power
 United States v. Purcell Envelope Company (1919)—a person offered a bid to Purcell for Post Office’s envelope
needs. When the new postmaster general got into office, he tried to revoke the bid. The court held that since
the original contractor had had authority, the decision to go with Purcell stuck.
 If an agent exercises improper authority to enter into a contract, it is not final and binding on the government
 Unless RATIFICATION—a person with authority lends approval afterward to make the contract binding when:
 Supplies or services have been provided to the government
 Ratifying official has authority
 Resulting contract would have been otherwise proper
 Price is fair
 Contracting officer recommends payment and legal counsel concurs
 Funds are and were available at the time of commitment
 An unauthorized contract can be ratified by inaction when someone with actual knowledge is aware or
should have been aware of contract entered into by someone with apparent authority but fails to
disaffirm the contract.
 William v. US (Ct. Cl. 1955)—there was a contract to pave road on an air force base but the
contracting Air Force person didn’t have authority. Regardless, the court enforced the contract and
inferred approval of the contracting officer because he knew of the contract and was silent.
 Gordon Woodroffe Corp. v. US (Ct. Cl. 1952)—doctrine of apparent authority is not operable against the
federal government; to make a contract, use a government authority contracting officer.
 Facts: a contract specialist agreed to pay for a generator, but made a bad deal. When the government
cancelled, Gordon sued.
 Exceptionalism—Doctrine of Apparent Authority not applying to the government
 Contract modification similarly must be handled by a contractor with the authority to do so.
 General Electric v. United States (Ct. Cl. 1969)—General Electric contracted with military for weapons
systems but went over their allotment, claiming to be under the inducement of a contracting specialist.
The specialist had no authority though and the internal letters indicating agreement with the
unauthorized contract specialist did not amount to ratification.
 Implied-in-Fact v. Implied-in-Law
 Implied-in-Fact: Real contract where the conduct of parties, rather than the words, implies a contract that should be
enforced; Government IS held liable for contracts implied-in-fact
 Implied-in-Law: when courts think that the equities between parties require the court to find a contract where there
may not have been one; Government IS NOT held liable for contracts implied-in-law
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 Equitable Estoppel—prohibits a party from disavowing a representation it has made, where an opposing party has
justifiably relied on that statement and where it would be unfair to the other party to change it now.
 Elements—(1) representation, (2) justifiable reliance, and (3) detriment to relying party
 Apparent authority—an application of the doctrine of equitable estoppel. Contractor seeks to estop the lack of
authority defense by saying that the government’s contracting official appeared to have authority
 These problems come up frequently because the government is big and has many actors
 Competing policies—fairness v. enforcing the law; preventing unauthorized claims against treasury
 Government CANNOT be equitably estopped (Federal Crop Insurance v. Merrill; OPM v. Richmond) EXCEPTIONALISM
 In the 60s and 70s, SCOTUS repeatedly rejected estoppel cases though there is dicta that there could be an
exception for “affirmative misconduct”
 Elements including affirmative, intentional act by a government official.
 No case has ever found this to have happened.
 Federal Crop Insurance Corp. v. Merrill (US 1947)—New Deal farmers were assured by government officials that
the insurance covered their crop, but the government insurance people were wrong, a regulation prevented this
insurance. The government was not bound to pay the insurance by this mistake.
 Office of Personnel Management v. Richmond (US 1990)—an individual cannot use estoppel to get money from
the government unless that money has been appropriated. Narrow ruling. Court will decide another day if there is
an estoppel case that can succeed against the government
 Facts: government employee is given the wrong information twice concerning effect of work on disability
benefits. In reliance, he took extra work and exceeded his earning limit. The government stopped payments.
Fed. Cir. allowed equitable estoppel for affirmative misconduct . Overturned on appeal.
 Stevens Concurrence—the funds were appropriated for programs not people, but this case is still not an
affirmative misconduct warranting estoppel.
 Marshall/Brennan Dissent—this is a case of affirmative misconduct. Congress has said nothing about
appropriations in estoppel context
 Internal inconsistencies leave a strong presumption of immunity from equitable estoppel
 1. Court starts with ambiguous, broad rule that the government can never be estopped for any purpose
 2. Court then reverts to narrow, technically correct formulation of the rule that estoppel cannot permit
payment of “a claim for payment of money from the Public Treasury contrary to a statutory appropriation
 3. Internally inconsistent because on the same page it says “money may be paid out only through an
appropriation made by law; in other words, the payment of money from the Treasury must be authorized
by statute” (NOT the same! Authorized by statute is not the same as by statutory appropriation)
 Possible interpretations of Richmond—Cannot estop the government when:
When anyone is trying to get $ from Treasury (may be for violation of something,
including K)
When payment of $ is contrary to law (may include regulations and
common law)
When gov’t paying would be contrary to any statutes
(including appropriations statute)
When gov’t paying in absence of proper
appropriations statute.
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Yes
Is the private claim/defense
an estoppel argument?
Does the Richmond
super immunity bar
the estoppel claim?
Yes
The claim fails
No
No
Apply Merrill and
then the claim fails
Broad Avenue;
Purcell Envelope

Estoppel Analysis
Schwartz’s 3-part test:
(1) did the agency have authority under the
pertinent statutes and regulations to waive the
requirements that the agency is seeking to
enforce?
(2) did the claimant make a timely request for
such a waiver to the government agency
involved?
(3) was refusal of a waiver an abuse of discretion
that may be overturned on judicial review under
the APA?
Post-Richmond Developments:
 Broad Avenue Laundry v. US (Ct. Cl. 1982)—CO’s actions bind the government if made within her authority.
This is not an estoppel issue, but a Finality issue.
 Facts: the applicable regulations didn’t require or prohibit an adjustment and the contracting officer made
the final decision to enter a written modification of a fixed-price contract. Ct. of Cl. held that US was
bound because CO’s action was within scope of authority.
E. Aspects and Consequences of Sovereignty
1. Contract & Statute: Fed. Government’s Authority to Change its Mind ( & its Contracts)
 Sovereign Acts Doctrine:
 US is not liable for breach of contract when its “public and general” acts, as a sovereign state have the effect of
violating contracts that it enters into with private parties.
 Rule of interpretation—strict interpretation of government’s contracts including a warranty that performance will
not be obstructed or burdened by the regulatory acts of the government
 Classic examples: rail embargos, tariffs, wars against Indian tribes, etc.
 Difficult to determine when the government is acting in a public and general capacity
 Horowitz v. US—when a public and general act has the incidental effect of breach of contract, it’s not a breach
 Government sold surplus silk and promised that it would send the silk by rail within 3 days. Another entity of
the government prohibited rail shipment.
 Interprets contract—government will ship in 3 days unless some other scheme of law gets in the way
 If the government had specifically only banned government shipments of silk, it would not have been a public
and general act and the government would have been liable to Horowitz
 Unmistakability Doctrine—contracts to which government entity is a party should not be interpreted to immunize
government’s contracting partner from subsequent exercises of sovereign authority (passing legislation), unless the
contract has surrendered the power to exercise that authority against the contracting party in unmistakable terms.
 It is not reasonable to expect the government to make unconditional promises cutting off its own exercise of power
 Implicitly, the contract says the government will keep their promise unless the law changes
 To promise otherwise, the government be very clear (unmistakable)
 Major interpretative issues in unmistakability:
 To what class of agreements does it apply?
 How is the overlap between sovereign acts and unmistakability to be handled?
 How unmistakable?
 United States v. Winstar— SCOTUS affirmed CoFC and Fed. Cir. decision for П but opinion only a plurality; major victory to
the П, but no majority opinion. Plurality opinions and fragmentation
-9-

Facts: Пs allege that federal bank regulatory agencies induced solvent S&L institutions to take over insolvent S&L
institutions by promising the continuation of favorable regulatory accounting treatment to the merged entities. When
Congress enacted FIRREA, the lax rules that had been part of the inducement became illegal. Пs claim that government
breached the contract.
 Overview of Plurality by J. Souter (joined by J. Stevens, O’Connor [with regards to Unmistakability] and J. Breyer [with
regards to SAD])
 Unmistakability Doctrine—takes a restrictive view at the scope and applicability of the unmistakability doctrine
and holds that it doesn’t apply here in Winstar.
 A government contract that appears literally to promise the contractor a specific course of regulatory
treatment usually should be read instead as promising payment of damages if that specified course of
treatment is altered.
 Does not infer an exemption to subsequent statutes or exercises of sovereign authority
 This version of the doctrine is narrow but offers the government substantial protection when it applies
 Sovereign Acts Doctrine—takes the position that the SAD does not apply whenever a significant consequence of
the governmental action is to free the government from its own contractual undertakings.
 Insists on giving a limiting meaning to “public and general” act
 Strong requirement of generality—law can only be considered public and general if releasing the government
from its contractual obligation is an incidental effect of a much more widely applicable change in the law.
 Litmus test—is a substantial effect of the change in law to allow the government to avoid its own contract
obligations? Then it’s not public and general.
 Just because the statute has a public purpose doesn’t mean the SAD defense is met
 Limitations on the impossibility doctrine that apply in private contracts also apply to SAD:
 (1) nonoccurrence of the performance obstructing circumstance that actually arose was a basic
assumption of the parties’ contract
 (2) SAD is only a default rule—government & private party can agree that government will be liable for
breach caused by change in the law
 Does not discuss the intersection of SAD and UD.
 This opinion has a strong pro-congruence flavor
 Overview of J. Breyer’s Concurrence—addresses only the UD and not the SAD
 Advocate for congruence
 Doesn’t completely agree w/factual finding that the government made a promise to indemnify contractor
 Overview of J. Scalia’s Concurrence (joined by J. Kennedy & Thomas)—Requirements had been met because
government had undertaken by its statements & acts, not to undercut its contracts by subsequent sovereign acts.
 Unmistakability Doctrine—applies to ALL government contracts. It is a common sense presumption that the
government will rarely promise to exempt a contractor from future changes in the law. A promise should only be
found if contract is clear
 Sovereign Acts Doctrine—SAD adds little to the effect of the Unmistakability Doctrine; does not directly address
the insistence on giving a strict reading to the public and general requirement
 Overview of J. Rehnquist’s Dissent (joined by J. Ginsburg on issue of UD)—
 Unmistakability—concludes that UD offers the government a defense that is both broad in application and difficult
to overcome where applicable
 Applies to all government contracts (like Scalia and his Justices)
 Cannot be avoided by reinterpretation as a promise for indemnification
 Sovereign Acts—more expansive view than plurality that changes in the law qualify as “public and general” acts
and should not be viewed as a breach of contract
 Would have ruled for the government on the merits because the UD creates a very strong presumption against
finding a promise to the contractor of indemnification if there is a change in the law
 Schwartz—the more generic the impact of a federal sovereign action that interferes with the performance of a government
contract, the clearer (more unmistakable) the contract must be to make government liable for breach
 Application of Winstar  Mobile Oil Exploration v. US (US 2000)—court found that government broke its promise and
repudiated the contract; awarded restitution $$ back to Mobile
 Facts: two oil companies seek restitution of $156 million paid to government in return for lease contracts to explore
and develop oil off the NC coast. The rights were conditioned on companies’ obtaining a set of permissions from
various government agencies. When government denied them certain opportunities, they sued.
 Analysis: Congruence case.
-10-


When dealing with government contracts in regulatory/selling/leasing contexts, FAR does not apply
Why didn’t government argue SAD or UD? Because they would have lost
 Souter’s plurality approach to SAD—the government’s Outer Banks Environmental Protection Act was not a
public and general act because it only affected a specific class of government contracts
 Souter reinterprets the promise from promising not to change the law to promise to indemnify the law.
The unmistakability doctrine wouldn’t apply
 Scalia’s approach—rebuttable presumption that government didn’t make a promise that they’d never change
the law, but he would have likely said the presumption is rebutted on the facts of the case
 Other examples from the handout:
 (a). Ban on civilian railroad shipments after contract to sell silk
 SAD applies and gives government a defense. The ban is public and general. If the government had been a private
seller, the impossibility doctrine would have kept them from being sued.
 UD does not need to be applied.
 (b) Selling uranium to power plants and then a ban on shipment of uranium
 No SAD defense because no one but the government sells uranium, thus it’s not a public and general act.
 Might resort to UD defense since the government did not contract away its ability to make sovereign acts. It
doesn’t unmistakably say that it will ship regardless of national security reasons.
 (c) Secure permanent disposal of spent nuclear fuel
 Government has lost all of these cases.
 UD defense has not worked though it might be better than SAD. The contracts are very clear about their promises
to take away oil by a certain date
 (d) government leases oil fields and there are new environmental restrictions
 Like Mobile Oil but since they dropped their SAD/UD defense, we don’t know for sure they would have lost. Mobile
Oil reserves certain hurdles that the contractor will have to get over, but because they only reserved some, the
contract unmistakably said they would do what they promised as long as none of the other things happened. Q1: is
this Mobile Oil?
2. Comparison: State Disabilities Under the Contracts Clause
 State Impairment of Private Contracts
 It is ok for a state to impair if there is a legitimate public purpose, but it must be necessary and reasonable
 Courts are deferential to legislature & there’s a heavy burden of proof on those who argue there is no legit public purpose
 State Impairment of Public Contracts
 Disabilities under the contract clause of the Constitution
 “No state shall ... pass any ... law impairing obligations of Contracts”
 SCOTUS decided that this constitutional provision applies not only to state actions impairing actions of private
contracts, but also state actions impairing their own contracts
 Reserve Powers Doctrine:
 Doctrine says that state can contract, but cannot contract away its police powers or other powers—Courts do not
require the state to adhere to a contract that surrenders essential attributes of its sovereignty.
 This doctrine is the source of the Unmistakability Doctrine, which crossed over into federal law
 Analysis: A state will be liable for impairment unless:
 (1) Under reserved powers doctrine, it had no authority to make the promise to change the law, OR
 (2) If it had the authority, it must show the modification is reasonable and necessary.
 Reasonable: How much time has passed since the initial obligation? Were problems foreseeable at the time
the state entered into the contract? No right to change obligations, if yes.
 Necessary: Least restrictive means test = can the state find an alternative means of achieving this purpose?
Non-deferential.
 Contracts Clause and the Unmistakability Doctrine/SAD
 Similar considerations are taken when deciding if a state or government can modify its own contractual undertaking
 Maybe the federal government should have more latitude, the Constitution gives them the right to do this
 In most cases, the result is the same between federal and state
 Federal—was the impairment public and general?
 State—was the impairment reasonable and necessary?
 US Trust Company of New York v. New Jersey (1977)—Contract was impaired in this case, and the state action was not
reasonable and necessary—the state did not encounter anything legitimately unforeseeable.
-11-
 Facts: plaintiff is the trustee from bonds issues from the Port Authority (government). A statute that limited the
government from running deficit mass transit trains was taken away. Government argues there has been no breach
in the fundamental sense (they never failed to pay money on bonds). The Trust says that consideration for the
bonds was to have the money available to pay it back (security impaired). Trust wants a declaratory judgment
saying the repeal was unconstitutional.
 Analysis: the test to determine whether a modification is legitimate is whether it serves a legitimate public purpose
because we are dealing with the impairment of a public contract. Court asks whether the modification was
reasonable and necessary
 NY & NJ could have modified the regulation prospectively instead of retrospectively. The government could
have gotten funds from elsewhere. Court is only asking if it is legally possible, not necessarily practical
 Court looks at how foreseeable this problem was at the time the promise was made. The reason for the
1962 covenant was to address existent problems. Nothing much had changed, it was 12 years later.
 Part of this test is thus foreseeability, both qualitative and chronological
 State law provides that when a state modifies its own contractual obligations to escape liability, it must show
it had no ability to enter into a contract that would bind it (like restricting police powers contracts)
 Q1: I don’t really understand the whole binding contract thing. Is the necessary and reasonable requirement
both for impairments of the private and public contracts? I cannot tell if there’s a difference between the 2.
 This is a state impairment of a public contract. The government has the authority to make the promise and the
promise did not affect a reserved power. The regulation is not reasonable and necessary because there was a less
intrusive means of doing the same thing (it was a foreseeable problem at the time of contract)
 Analysis in US Trust Company
 Was there an impairment?
 Reconcile with Contract Clause
 For private contracts:
 Was there a legitimate public purpose? (defer to legislature)
 Were reasonable means used to accomplish that purpose?
 For public contracts:
 Did state have the ability to limit its own power to act in the future?
 Reserved powers cannot be contracted away; if they are, the promise is void

Reserved: police powers, power of eminent domain

Not reserved: taxing and spending powers
 If a promise was made, was it unmistakable and clear? Q1: how do you measure this
 If it is not a reserved power, is the regulation reasonable and necessary?
 Sometimes when it is reasonable and necessary, a state may modify obligations that are
initially valid
 Teeth—reasonable and necessary is a strict standard—how much time has passed? Was there
a less intrusive means of accomplishing the same end? Q1: Are these all the measurements?
3. Choice of Law in Field of Federal Procurement
 28 USC § 1345—when the United States is a plaintiff, the district courts have original jurisdiction
 28 USC § 1652—state law is the rule of decision in civil actions, unless otherwise provided.
 Choice of law in Federal Procurement—five cases on point—Clearfield Trust, Kimball Foods, Foreman, Wegematic, and Firestone
 EXCEPTIONALISM—state law governs most private contracts (Erie), but does not govern federal contracts
 What law governs government procurement cases?
 Does federal statutory law (a regulation, statute, or Constitution) require a federal rule of decision?
 If no express requirement displacing Erie and the Rules of Decision Act, what is the basis for apply federal law?
 It doesn’t matter if the government contract forgot to put it in there either because GL Christian doctrine
says it will be read in.
 Assuming there should be a federal law rule of decision, should that federal law come from judge made federal
common law or borrowing state law?
 Factors to be considered? (Clearfield)
 Is there a need for federal uniformity?
 Will federal policies be interrupted by borrowing state law?
 Is there a need for uniformity between the state and federal law?
-12-

Borrowing state law rarely happens because the need for uniform federal interpretations of the standard
procurement contract clauses preclude borrowing from state law. (see Clearfield and Kimball)
 Exception for when state law is uniform among all the states (UCC, for example, see Wegematic)
 Especially pertinent with government contracts because of Article 2 of the UCC.
 There are usually not gaps in the FAR
 Clearfield Trust v. US (US 1943)—in the area of government contracts, federal law applies and NOT state law. Federal common
law (contrary to Erie) will be applied. There are almost no gaps in federal law though.
 When there is no statute, court has to create federal law, and they can borrow principles from states.
 Because the area of commercial paper is such a vast area where the government is involved, there is a need for
uniformity Thus the court decided not to copy state law, but to create federal common law.
 Here, they did not borrow PA state law
 Facts: check is issued and funds drawn from the Fed. Reserve of PA. Check never reached its recipient and is endorsed
(forged) to JC Penney’s who endorses it to Clearfield who endorses it to Fed. Reserve. Government wants its money back.
Case is in federal court because US is a party.
 US v. Kimball Foods (US 1979)—because the case is about federal contracts, federal law controls. (1) If there’s no reg on point,
look to federal common law (Clearfield). (2) Where do you get the common law? There’s a need for uniformity between the state
and federal law, so they borrow state law
 Facts: federal contract issue arose. The district court created federal common law by borrowing state law. The ct. of
appeals rejected that and used UCC and Tax Lien Act as guidance in creating federal common law.
 American Pipe and Steel v. Firestone (9th Cir. 1961)—apply federal law in a case between a primary contractor and a
subcontractor on a government contract in the 9th Circuit only.
 In a dispute between a sub & a prime contractor on a federal contract issue, the 9th circuit held that federal law applies.
They asked the second step of the Kimball analysis without asking the first. In every other circuit, a dispute between two
private contractors, even when working on a government contract, choice of law is decided under Erie.
 Arguably, they came up with the right answer but used the wrong logic. They did Kimball in reverse. They should have
borrowed federal principles but applied state law.
Yes
Yes
Is there a gap
in the
coverage of
the issue by
federal
regulations or
statutes?
No
Is there a federal
regulation,
Constitutional
provision, federal
case law
precedent on
point??
Use federal
law that
covers the
issue
Apply that
law
Is there a uniform
state law on
point? (ex: UCC)
Apply state law according to
Erie doctrine on choice of law.
This is still federal common
law, just borrowing the
principles of state law
Foreman
No, should the
judge borrow
state law or
make up
fedeal law?
Is yes to any
of the
above, apply
federal law
(1) Is there a federal interest in
uniformity? (2) would state law
frustrate specific contracts or
discriminate against the US? (3) Is
there a strong interest in having
the private parties in a particular
state have similar laws applicable
to all contracts?
4. The Government Contractor Defense to Tort Liability
 Federal Forts Claim Act (28 USC § 2679)
 US is liable for tort claims in the same manner & to same extent as a private individual under similar circumstances
 District courts have jurisdiction in tort claims where Δ is United States
-13-
 Fed employees acting w/in scope of their office/employment are absolutely immune from common law tort liability
 Exceptions:
 Feres doctrine—military personnel & their families can’t recover for injuries suffered in course of military service
 Claims arising in a foreign country
 Government Contractor Defense (Boyle)—federal law defense to state tort action
 Government is not liable in state tort for design or manufacturing defects in equipment if: Q1: What’s a federal tort?
 (1) United States approved reasonably precise specifications
 Defense is not available if the problem is something that the specifications were silent about (Bailey)
 This defense is NOT available when government buys commercially available products off the shelf because
there are no specifications.
 Probably will not apply to service contracts either because there won’t be government-approved
specifications. Apply the 3-part test anyway, just to be safe.
 (2) Equipment conformed to those specifications, AND
 These first two steps assure that the suit is within the area where the policy of the discretionary function
would be frustrated. Boyle government contractor defense is part of the discretionary function exception
 (3) Supplier warned US about dangers in use of equipment that were known (or should have been known) to
supplier but not the buyer (US).
 Note:
 These three factors are not military-specific, so this is a government contractor defense (not just military)
 If multiple design or manufacturing defects are alleged, the Boyle 3-part test should be applied to each
 EXCEPTIONALISM—US is not held to the same standard of other tortfeasors
 Boyle v. United Technologies Corp. (US 1988)—3-Part Boyle test came from the opinion (see above) because government
contractors shouldn’t be liable for doing what the government told them to do
 Facts: Family of military decedent sues helicopter company for defective repair and design. US made the reasonably
precise specifications for the helicopter. In federal court for diversity case. Family wants state law to apply. SCOTUS
held that federal law applies because of the large federal interest involved.
 Analysis: SCOTUS said government contractor defense applied here—immunizes government contractors from civil
liability arising out of performance of federal procurement contracts. Here, the contractors did warn about the
dangers of the reasonably specified specifications that they conformed to
 Bailey v. McDonnell Douglas Corp., (5th Cir. 1993)—if the claim is for something not precisely specified in the contract,
then there is no defense even if the contractor followed all the other specifications. When applying Boyle factors, look to
see if the precise specifications were met for each claim.
 Facts: П sues under design and manufacturing defect. Lower court granted summary judgment as to the design
defect, but the manufacturing defect claim might still stand.
 Qualified Immunity—government employees are immune from liability unless their actions violate a constitutional right of the П
that was clearly established at the time of the action
 Richardson v. McKnight (US 1977)—prison guards employed by private firms contracting with TN to manage state prisons
are NOT entitled to a qualified immunity defense against a constitutional tort claim brought against them by prisoners
under 42 USC § 1983.
 SCOTUS reaches this result even though the qualified immunity defense would apply to prison guards who are state
employees in a comparable situation
 Court limits holding to only specific context of prisons
 Leaves the door open for other contractors assuming government functions to argue for the immunity
 Correctional Services Corp. v. Malesko (US 2001)—constitutional tort claim liability arising under Bivens does not apply to
federal prison contractors
 Bivens held that federal officials and employees are liable for constitutional torts
 Malesko majority are the four Richardson dissenters (plus O’Connor)
 It is still uncertain whether immunity from common law claims granted to government officials applies to government
contractors Q1: I don’t understand this at all. Come back to it.
 Safety Act: creates statutory government contractor immunity; the agency can give you a certification for your work;
unclear whether this means you automatically have the defense, or if this merely allows you to invoke the defense
 Special tort defense for manufacturers of homeland security equipment
 Goes beyond the judge-made government contractor defense
 Requires certification of qualified technology—must be antiterrorism to fit the Safety Act
-14-
Tort Liability in State/Federal Contexts for Claims against Government Employees or Contractors
Claims Arising from
Claims v. Gov’t Employees
Claims v. K’er and Employees
STATE Functions:
§ 1983 Claims for
Claim arises under 42 USC § 1983 for actions Does the claim arise under color of state law? It may
Constitutional
in violation of federal law taken “under color (Wyatt v. Cole)
Torts
of state law.”
No qualified immunity, under Richardson v. McKnight,
Qualified Immunity Defense is available.
but may be qualified immunity in other contexts besides
prisons.
State Tort Law
Claims
Claims Arising from
FEDERAL Functions:
Implied
Constitutional
Torts (Bivens
actions)
State Tort Law
Claims
Claim & defenses controlled by state law
May be a good faith defense
Claim & defenses are controlled by state law
Claims v. Gov’t Employees
Claims v. K’er and Employees
Claims arise by implication from provisions
of the Constitution that are allegedly
violated.
Can contractors be held liable for such “constitutional
torts” when acting under US gov’t contract? (Malesko
says NO as to K’er).
Qualified Immunity Defense is available.
Should Richardson’s result be applied by analogy to
deny qualified immunity defense?
By amendment of the FTCA (Federal Tort
Claims Act) in 1988, a claim against the US is
the only remedy available for tort claims
based on actions of employees within the
scope of their employment.
Should Boyle analysis and factors be applied here to
grant a defense in some circumstances?
Gov’t Contractor Defense recognized in Boyle applies.
Arguably, the judge-recognized immunity scheme that
applied to claims against federal employees prior to the
1988 FTCA amendment, under cases running from Barr
v. Matteo through Westfall v. Erwin may also apply;
qualified immunity for discretionary acts.
F. Federal-State Relations
1. Federal Contractors’ Immunity from State and Local Taxation
 Legal Incident Test—look to see who the true purchaser of the product is
 If the government is buying the product, then they cannot be taxed
 If a tax has an incidental economic effect on the government, it does not make it automatically illegal.
 If the government automatically pays the contractor for the product, then the federal government is buying and
cannot be taxed (Alabama v. King & Boozer)
 Alabama v. King & Boozer (US 1941)—the government is not automatically obligated to pay the contractor since
they have the right to inspect the product prior to its acceptance
 Facts: K&B sells lumber to government contractor building an army camp for US. AL law imposes a tax on the
seller, who passes the tax on to the purchaser
 If Congress wants government contractors to share the immunity, they will need to pass a law
 The issue is whether the government is the purchaser (which is also the issue in Motor Coach Industries)
 BUT if the contractor is the purchaser, then they ARE subject to the tax
-15-
 States can tax contractors unless it is really a tax on the United States where the government unequivocally controls
the purchase (McCulloch v. Maryland—states cannot tax the government)
 Examples of discriminatory taxes: If a state exempts from taxation builders working on state buildings, but then taxed
federal contractors the same type of work. State must treat federal contractors as they would state contractors
2. Federal Contractors’ Immunity from State Taxation
 Federal contractors are immune from state regulation if there is irreconcilable tension between the state regulation and a
federal regulation or policy
 States cannot regulate prices charged by federal contractors because that would regulate prices paid by US government
 Paul v. US (US 1963)—CA cannot enforce price regulations on milk because that regulates the government
 Facts: the CA regulation in dispute is a minimum price regulation on milk sellers. CA wants to apply that regulation
on milk sold at military institutions (government).
 The implicit conflict—federal regulations have a policy of getting the lowest price so the minimum regulation
impairs this policy and disrupts competitive bidding.
 Import to not that Paul does not establish a general rule that federal government contractors are immune from regulation
 The results turned on a conclusion that the regulation, if applied to federal contractors, would frustrate federal
procurement policies
 Ex of state regulation that would not have an irreconcilable tension with federal procurement: State regulation of the
minimum wage paid by businesses within the state.
 Would have an economic impact on what the contractor has to charge the federal government.
 Affects prices but does not eliminate competition in the government’s procurement market
G. The False Claims Act and Qui tam Suits Against Contractors
 False Claims Act (31 USC § 3729)
 An action filed by the Attorney General or a relator that provides civil action against anyone who knowingly either
presents false claim for payment to the US or presents a false record in support a claim for payment to the US
 FCA provides treble damages plus a penalty fee for each count. Adds up quickly.
 When Attorney General uses this, it can use criminal investigative demands, which allow discovery before filing
complaint
 Knowingly does not necessarily mean specific intent. Should be actual knowledge, deliberate ignorance of the truth
or falsity of the information, or reckless disregard of the truth.
 When a relator files the suit, the government can:
 (1) intervene—has 60 or more days to decide
 Government has the primary responsibility
 Relator can continue as a party to the action:
 Government may dismiss if it gives the relator note, despite objections of the relator
 Government may settle if court determines the settlement is fair, despite objections of relator
 (2) not intervene—relator can then take over the action (Qui Tam Action)
 Government can ask for depositions and pleadings
 Government can stay discovery if it would interfere with an investigation
 Govt. can intervene later with a showing of good cause, but status and rights of relator are not limited
 If action is successful, relator can get treble damages
 If not, they pay for litigation fees, plus other party’s fees if the suit is deemed frivolous
 General Information
 Relator—qui tam provisions encourage whistleblowing.
 To show standing, the relator must show fiscal harm to the government. They do not have to be
personally harmed. They also must have non-public information.
 Cannot use the civil investigative demands that the government can.
 Qui Tam suits are filed under seal
 Criminal Prosecution:
-16-
 FCA violations do not constitute jeopardy, and don’t preclude criminal prosecutions
 Government has advantage in proving case if they’ve already proven the criminal case
 Why contractors hate this statute
 Provides a penalty of $5-10k plus treble actual damages for each count
 Cannot re-litigate the facts if there has been a parallel criminal proceeding (or a plea of nolo contendere) Q1: Does
the civil or criminal case come first? The relator is only involved in the civil one, right?
 Civil investigative demands use pre-filing discovery
 Kelly v. Boeing (9th Cir. 1994)—qui tam suit brought by a former employee who alleged that Boeing, as a subcontractor to the
government, improperly charged the government with lease costs. The government elected not to intervene
 Boeing moved to dismiss on four constitutional challenges:
 Standing—relator has no standing to sue because they suffered no harm
 Separation of powers—Congress can’t assign prosecutorial powers to persons not under control of executive
branch; lack of removal provisions violate President’s exercise of authority; qui tam allows judicial branch to
encroach on executive authority as well
 Appointments clause—relator has so much government power that they should be appointed; only officers of the
government can litigate on government’s behalf
 Due process—Boeing was deprived property without due process by allowing a financially interested party to
prosecute who has no duty to see a fair and just result
 Qui tam statutes were affirmed on all accounts
 Standing—the relator has standing by standing in the government’s shoes—assignment theory (unilateral contract);
policies of standing are satisfied because relator has a personal stake in the outcome—fund the suit, get the money
if they win, pay money if they lose and the case is deemed frivolous
 Separation of powers—all prosecutorial power doesn’t need to belong to executive branch. Under Morrison, the
independent counsel had much broader investigative authority, prosecutorial discretion, and authority to use
resources, and it has been deemed Constitutional.
 Government can always intervene
 No office from which to remove a relator, but government can end the litigation (removal in that sense)
 FCA doesn’t let the judiciary intrude on prosecutorial authority
 Appointments clause—relator has no actual government power; activities can be limited by the court. Only have the
power to litigate the one case they have non-public information about
 Due process—prosecutors don’t have to be neutral. There is a single interest between the relator and government.
H. Criminal Prosecution
 United States v. Matzkin (4th Cir. 1994)—in government contractor world, information on a bid can be a conspiracy to defraud
the government b/c government has enough interest in the information that it was their property and they don’t need the sole
interest in it. Information about the bids was valuable, even if only temporarily..
 Facts: Matzkin is an attorney and consultant for government contractors, assisting DC contractors in the bidding process.
He bribed his navy contract for information about the bids—proprietary information in the bids as well as prices. The
contracts involved in the case use competitive negotiation, so the information would allow his client to change the
proposal to their own advantages.
 Analysis: Bribery charge: Matzkin is acquitted. This charge requires showing of influencing/inducing conduct and the jury
may not have been convinced that Boeing was being influenced. Conversion: Matzkin not convicted of conversion, but is
convicted of conspiracy to defraud the US by conversion
 Government adapts the conversion principle to this situation and the court is sympathetic
 Major criminal offenses chargeable in procurement-related cases—many are just as applicable outside of the government
contracts field, but specifically:
 Criminal provisions of the False Claims Act (18 USC § 287)—fines up to $1M for crimes against DOD
 False Statements Act (18 USC § 1001)
 False Statement Act originally part of the False Claims Act but then separated & given broader application
 Gravamen of offense: Make a false statement or conceal a material fact in a statement in any matter within the
jurisdiction of any department or agency of the federal government
 Bribery (18 USC § 201(b))—anything of value offered to influence an official act
 Conspiracy (18 USC § 371)—punishes conspiracy to commit an offense or to defraud the US
 Conversion or Embezzlement (18 USC § 641)—applies to conversion or embezzlement of money or property of the US.
 Both §§ 1341 and 1343 involve using communications to defraud.
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 18 USC § 1341—Mail Fraud
 18 USC § 1343—Wire fraud
I. Free Speech Rights of Government Contracts
 Board of County Commissioners v. Umbehr (US 1996)—government contractor has the same 1st Amendment rights as
government employees. Check the Balancing Test.
 Facts: Umbehr, sued government claiming he lost the contract b/c Board was retaliating against him for criticism. Board
says they terminated under the contract. Umbehr claims he is entitled to same 1st Amendment rights as public employees.
 Balancing Test for First Amendment Rights,:
 Contractor must show that speech on a matter of public concern was substantial factor in termination
 Government needs to show by a preponderance of the evidence that the contract would have been terminated
anyway OR that interests of government somehow outweigh the First Amendment rights interests
 Dissent: Scalia is mad. Says anti-discrimination laws and competitive bidding already protects contracts. There are some
contexts where government should be able to discriminate on political grounds (don’t give racist organization a security
job in a housing project)
II.
Protests Claims and Disputes: Adjudication for Controversies Concerning
Contract Award and Performance
A. Contract Award Controversies
 Generally
 Definition—an interested party’s written objection to any of the following:
 Solicitation or request by federal agency for a contract for procurement of property or services
 Cancellation of such solicitation
 Award or proposed award of contract, OR
 Termination or cancellation of an award of contract
 Stay—function of the statute, requires procurement to stop once a protest is brought
 Ameron v. US Army Corp. of Engineers—comptroller general controls the length of the stay by dismissing the claim
as frivolous. Contractor is then able to challenge the dismissal in court
 Someone can override the stay in two situations:
 Best interest of the United States
 Urgent and compelling needs
 Current and Past Forums for Bid Protests
 Current
 GAO (Government Accountability Office) / Comptroller General (overwhelming bid protest forum of choice)
 Court of Federal Claims (CoFC)—full service bid protest forum See
 Past
 District Court lost jurisdictions—government contract bar often wants option to go to District Court b/c they fear
that CoFC favors the government. But CoFC and GAO know a lot about government contracts law
 Argument that district courts still have jurisdiction
 APA was interpreted in Scanvwell/Steinthal to grant the District Courts jurisdiction over big protest
 Under APA, which did not change with the Tucker Act, the district courts always had jurisdictions—
commentators suggest Congress intended to remove jurisdiction
 BUT, if you read Tucker Act carefully it says the jurisdiction “described in § 1491”, not “created by
1491”  this is the jurisdiction to render judgments on bid protests.
 This argument is most appealing in situations where review is sought by an “outside the
beltway” bid protester b/c protestors tend to be concerned that the CoFC is pro-government.
 Also, the savings provisions (3) & (f) assume that the District Court is out of the process.
 District Courts clearly lost the statutory reaffirmation of bid protest jurisdiction supplied by other provisions
of the 1996 amendments to the Tucker Act (in effect until 2001). The argument is that the district courts
simply returned to the status that existed before 1996, governed by Steinthal and Scanwell.
 1996 amendment of the Tucker Act
 Broadened jurisdiction of the CoFC
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
Codified jurisdiction of district courts with a ‘sunset provision’ for the end of 2000, and since Congress did
not do anything, they lost jurisdiction in Jan. of 2001. There is some ambiguity
 General Services Board of Contract Appeals (GSBCA) used to be able to hear concerns from Brooks Act about
acquisition of computer products (Automated Data Processing)
 6 Variables/Questions with respect to the forums:
 Claims—which claims can the forums entertain
 Standing—who can bring the claim
 Remedies—what can the tribunal do for the winning party
 Standard of Review—What SOR to apply? Deference to a prior forum?
 Relation to other forums—is the prior forum a bar to proceeding?
 Nature of Process—What are the fact-finding processes/tools available? Nature of the record in evidence?
CURRENT FORUMS:
APPLICABLE
STATUTE
Government Accountability Office/Comptroller General
Competition in Contracting Act (31 USC §§3551 – 3556)
GAO authority upheld in Ameron
JURISDICTION
Jurisdiction over all bid protests
Not narrowed to specific kinds of bid protests
STANDING
TIMING OF CLAIM
STANDARD OF
REVIEW
BROAD standing, includes any “interested party” (actual or
prospective bidder whose direct economic interest would be
affected by award of K or failure to award K - §3552)
No need to show that bidder would have won to have
standing (Dyneteria)
BUT – need to show that would have had substantial chance
No formal zone of interest test to determine standing.
Standing may be more restrictive in the case where a person
other than a potential bidder is allegedly hurt and wants to
bring a bid protest. e.g. labor unions that represent
employees of a company that loses out to another bidder 
can’t fit the statutory definition of “interested party.”
Bid protests can be made before or after an award.
But it’s best to bring claim before award to take advantage
of automatic stay provision.
Within one day after receiving protest, CG must notify
agency involved in the protest.
GAO must issue automatic stay prior to award of K once it
received bid protest (unless written finding of “urgent and
compelling circumstances” (31 USC §3553)
(2) CO can withhold authorization to proceed with
performance of K if: a protest is likely to be filed, and
immediate performance of K is not in best interest of US. (3)
If federal agency receives notice of protest, CO cannot
authorize performance to begin while protest is pending.
CG has to issue decision within 125 days of receiving protest.
Deference given to procuring agency.
Deferential to agency decisions (Dyneteria – deference to
SBA decision)
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CoFC
Tucker Act – 28 USC §1491
1996 Amendments to Tucker Act (§ 12 of Administrative
Dispute Resolution Act)
CoFC can hear protests regarding a solicitation (or lack of
solicitation) or award
CoFC & District Courts can hear claims of unfair / illegal
solicitations.
Jurisdiction under §1491(a) over statutory claims that
mandate compensation, express or implied in fact Ks with
gov’t, or non-tort claim against gov’t.
No jurisdiction over a claim that is pending in another
court, under 28 USC § 1500. (GAO is not a court).
CoFC can hear claims after they are heard by GAO. This is
not an appeal, b/c GAO is not a court; just another forum
for same claim.
Uses 2 part injury in fact/zone of interest test from
Merriam v. Kunzig. (This is the approach that was followed
by the district courts).
Federal Circuit has ruled that where GAO standard is more
restrictive, CoFC should follow the GAO approach.
Trend is to follow GAO approach, but it is an unclear area of
law.
Bid protests can be made before or after an award.
Can issue temporary restraining order, but not as easy as
automatic stay at GAO.
Arbitrary & capricious as applied to issues of fact & policy.
De novo standard as applied to questions of law, EXCEPT
where Chevron may apply.
Chevron - District Courts (and arguably CoFC) must afford
REMEDIES
AVAILABLE
RELATION TO
OTHER FORUMS
Automatic STAY until decision made (unless CG advised in
writing of urgency)
Can RECOMMEND only, including the following:
Injunctive or declaratory relief
Recommendations can also include: (§3554)
Refrain from exercising options
Recompete K
Issue a new solicitation/invitation
Terminate K
Award K consistent with regulations
Combo of above, or other recommendations CG sees
necessary.
Damages, including Bid Prep Costs and Bid Protest Costs
(only GAO can award this, atty fees)
Non-complying agencies are reported to Congress.
Courts give deference to GAO decisions because of GAO
expertise.
Jurisdiction of GAO is not exclusive; rather recourse to GAO
will generally (not NECESSARILY) precede and judicial
proceedings.
Claim can be brought in GAO, and then same claim brought
to CoFC.
CLAIMS
Protest must be in form of written objection to a solicitation,
termination or cancellation of an award, or proposed award.
OTHER
Bid protest forum of choice, because of automatic stay
provision and authority to recommend bid protest cost
GAO reviews the record rather than having a trial
FORMER FORUMS:
APPLICABLE
STATUTE
JURISDICTION
deference to FINAL decision of contracting agency and
GAO on issues of policy (Steinthal & Shoals)
* CoFC is still new to applying SOR not under APA not Heyer
so there will be continuing adjustments in learning to apply
the standards (either GAO or old district court SOR)
Π bears burden (harder to get than automatic stay)
Can award declaratory and injunctive relief.
Can award monetary damages including bid prep costs, but
NOT bid protest costs (except maybe under Equal Access to
Justice Act).
This Act only awards attorneys’ fees to bidder if court
determines that gov’t position was not substantially
justified, win on merits, small business.
Unlikely to get BOTH equitable and monetary relief. This
may be when you seek to have the contract awarded to
you. In this case, you are awarded the K, but don’t get bid
preparation costs.
Under 31 USC §3556, can appeal GAO decision to CoFC;
decision of GAO becomes part of record.
District Courts (and arguably CoFC) must afford deference
to FINAL decision of contracting agency and GAO on issues
of policy (Steinthal & Shoals)
This is undecided issue.
Can hear bid protests regarding a solicitation or an award
or any alleged violation of statute or regulation in
connection with procurement.
CoFC (prior to 1996)
District Courts
The APA (1970 – 1996/2000)
The Tucker Act
Bid protests where gov’t failed to treat bid fairly (Heyer Products)
Does not include bid protests for an unfair solicitation.
STANDING
* Heyer Products standing: Disappointed bidder has standing on
theory of implied K to give fair consideration to bid.
* This excluded potential bidders
Some violations of procurement law were not redressed in this forum
(Central Arkansas Maintenance violation of Procurement Integrity Act
not heard
REMEDIES
AVAILABLE
* May award bid preparation costs
*NOT available: Expectancy damages and Bid protest costs (attorney’s
fees)
* Initially, injunctive relief not available.
* Limited injunctive relief available between Heyer Products and 1996,
but only when complaint is filed before contract is awarded
STANDARD OF
* give due regard to the interests of national defense and national
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*The Little Tucker Act – District Court has
concurrent jurisdiction with CoFC for claims >$10K
*Jurisdiction over bid protests – solicitation or an
award
*Пs “suffering legal wrong b/c of agency action or
adversely affected or aggrieved by agency action
within the meaning of the relevant statute.”
*Includes Пs who have injury in fact and are within
zone of interest that statute was designed to
protect Merriam v. Kunzig
*Includes disappointed bidders, but unlikely to
include prospective bidders.
*Monetary damages not available.
*Equitable relief available.
*Courts generally shouldn’t issue stays’ only when
there has been violation of a clear duty of a
procurement official (Steinthal)
*Injunctive relief should be denied if an overriding
public interest consideration exists (Steinthal)
*After 1996, declaratory and injunctive relief
appear to be available regardless of whether claim
is filed before or after K is awarded.
Arbitrary and capricious as applied to issues of
REVIEW
RELATION TO
OTHER FORUMS
security
* a bid award may be set aside if either (1) procurement official’s
decision lacked a rational basis or (2) procurement procedure involved
a violation of regulation or procedure
* Rational basis (arbitrary and capricious). Did the contracting agency
provide a reasonable explanation of its exercise of discretion and the
disappointed bidder bears a heavy burden of showing that the award
decision had no rational basis.
* Disappointed bidder must show a clear and prejudicial violation of
an applicable statute or regulation. Absent the error there was
substantial chance that it would have received the award

28 USC § 1500 – CoFC doesn’t have concurrent jurisdiction if
same P has same claim pending in another court (Keene Corp.)
fact and policy.
De novo standard as applied to questions of law,
EXCEPT where Chevron may apply.
District Courts (and arguably CoFC) must afford
deference to FINAL decision of contracting agency
and GAO on issues of policy (Steinthal & Shoals)
1. Bid Protest Jurisdiction of the GAO
 APPLICABLE STATUTE: Authority to hear protests is codified in the Competition in Contracting Act (31 USC §§ 3551-3556) and
the authority was upheld in Ameron.
 JURISDICTION—All bid protests and it’s not specified. Complainant first brings their case before the contracting officer, then GAO
 STANDING:
 Broad standing—“interested party” requirement from CICA is satisfied if party can show they would be better off had they
gotten the contract (31 USC § 3551)
 An actual or prospective bidder whose direct economic interest would be affected by the award of the contract or
failure to award the contract (§ 3552).
 The person didn’t necessarily have to bid and doesn’t have to show that they would have won (Dyneteria)
 RECENTLY the standing provision has gotten stricter through GAO case law. Now the test seems to be that
the protestor must show that it would have at least a “reasonable possibility” of receiving the contract
award but for the alleged error that it has identified in its protest.
 A labor union would not fit the confines of “interested party,” even though they might have been better off if their
employer got the government contract.
 TIMING OF THE CLAIM:
 Bid protests can be made before or after an award, but it’s best bring the claim before the award to take advantage of
automatic stay provisions (Automatic stay provision and scheduling (31 USC § 3553, Ameron))
 GAO issues an automatic stay prior to the award of the contract once it received bid protests unless there is a
written finding of ‘urgent and compelling circumstances’ 31 USC § 3553
 A contracting officer can withhold authorization to proceed with the performance of a contract if a protest is likely
to be filed and immediate performance of the contract is not in the best interest of the United States.
 Once the agency receives notice of the protest, the contracting officer cannot authorize performance to begin while
the protest is pending
 Within one day after receiving a protest, the comptroller general must notify the agency involved in the protest
 Decision timetable (31 USC § 3554)—very speedy timetable
 GAO must make a decision within 100 days. Discretion lies with the judge to maintain the stay
 Interrelation of forums and GAO decisions becoming part of record (31 USC § 3556)
 Comptroller General must issue the decision within 125 days of receiving the protest
 STANDARD OF REVIEW
 Deference given to the procuring agency
 Deferential to agency decisions (Dyneteria showed deference to the SBA decisions about the size of Tombs, etc.)
 GAO reviews the record rather than having a trial
 REMEDIES AVAILABLE (31 USC § 3554(b) and (c))
 First, an automatic stay until the decision has been made (unless the comptroller general is advised in writing of urgency)
 The Comptroller General can only recommend but non-complying agencies are reported to Congress so recommendations
are very powerful. Common recommendations are:
 Injunctive or declaratory relief
 Refraining from exercising options
 Recompeting the contract
 Issuing a new solicitation/invitation for bids
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



 Terminating the existing contract
 Awarding the contract consistent with regulations
 A combination of above or other recommendations that the GAO sees necessary
 Damages, including bid preparations costs (the costs incurred when preparing a bid) and bid protest costs (which
are attorneys’ fees)
 Appellate courts give deference to GAO decisions because of GAO expertise
RELATION TO OTHER FORUMS
 Jurisdiction of the GAO is not exclusive. Recourse to the GAO will generally (not necessarily) precede judicial proceedings
 Claims can be brought in the GAO and then the same claim brought to the CoFC—second bite of the apple
CLAIMS: Protests are in form of written objection to a solicitation, termination, or cancellation of an award or proposed award.
Other:
 Bid protest is forum of choice because of the automatic stay provision and the authority to recommend a bid protest cost
 GAO’s role in the 3 Phases of Government procurement:
 Pre-award—considers protests to ensure that agencies have properly conducted competition
 Award—GAO considers protests challenging awards primarily to ensure that selection was reasonable/consistent
 Post-Award—GAO generally does not consider challenges to contract administration
Dyneteria, Comp. Gen (GAO 1075)—relaxed standing in the GAO; GAO is very deferential to the determinations of SBA on
competency and design as a small business
 Facts: government sent out an invitation for bids (IFB means it’s sealed bidding) for 3 years’ worth of meals for the Air
Force. Dyneteria was 5th lowest bidder. The top 3 were deemed not responsible, but one of them got a certificate of
competency from SBA. Dyneteria cannot show that if their claims are meritorious that they would get the contract but
demonstrates the relaxed view of standing in the GAO. Dyneteria wants GAO to review the SBA’s award of the certificate
of competency, alleging it was fraudulent (GAO only has jurisdiction if there was fraud).
 Analysis: GAO tokes a very deferential approach to looking at the agency’s record (no collusive bidding). Gives deference to
SBA’s determination that Tombs was a small business.
 This is what led to the automatic stay provision—the contracts were already underway here.
2. Award Controversies in the Court of Federal Claims Prior to 1996
 APPLICABLE STATUTE:
 The Tucker Act at 28 USC § 1491(a)(1) Three branches
 JURISDICTION granted to Court of Federal Claims over two categories of claims
 Tucker Act (28 USC § 1491)—conferred jurisdiction on the Court of Claims and waived sovereign immunity of the US to
permit recovery of damages in certain categories of claims
 Federal Courts Improvement Act of 1982 formalized the two-tier structure (trial commissioners whose decisions
were appealable to the Court itself) of the Court of Claims
 Statutory claims—“any claim against US founded under Constitution, any Act of Congress, or any regulation of an
executive department”
 Construed narrowly
 Only grants monetary relief against the US, not declaratory or injunctive relief.
 The statute, regulation, or constitutional provision must confer a monetary right on the claimant
 Only the Just Compensation Clause of the 5th Amendment (Takings Clause) has provided the basis for the
recovery of damages against the US
 Excludes from the waiver of sovereign immunity all tort claims and makes clear that claims otherwise within
the class covered need not be for liquidated damages. Q1: I don’t get this.
 Government consents to be sued on “implied” contracts but case law holds that this refers to contracts implied in
fact, not to quasi-contracts or those “implied in law”
 Claims upon any express or implied contract with the government
 Implied in fact contracts
 Not Implied in law contracts
 Claims for liquidated or un-liquidated damages in cases not sounding in tort Q1: I have no effing clue what this means.
 JURISDICTION
 Bid protests where the government failed to treat the bid fairly
 Heyer Products Company Inc. v. The United States—This is not a claim under the first provision of the Tucker Act, a
bid protestor doesn’t have standing to complain about statutory violations because the statutes were passed to
benefit the public, not the bid protestor **This is no longer good law**
-22-






Facts: The government issued an invitation for bids (sealed bidding) for low voltage circuit testers and the
award was given to someone who was the seventh lowest bidder. Heyer claims that it was retaliation for
Senate committee testimony and or favoritism for Weidenhoff. Army said it was technical reasoning that
justified its decision (one of the factors considered in the ASPA).
 Heyer wants bid preparation costs ($7k) and expectation damages ($38k) and Army moved to dismiss for
failure to state a claim.
 Analysis: Expectation damages cannot be given because there was no contract here, but there was an
implied unilateral contract that the bid would be fairly considered so bid preparation costs (restitution)
could be awarded.
 Implied in fact contract—Offer: if you bid, we will consider your bid fairly. Acceptance: bid submitted
 If contracting officer gets a bribe, that is a breach of an implied in fact contract
 Company could claim an agency is not good. This is not be a breach of implied in fact contract.
 Sharp limitations for implied contract theory of bid process
 Doesn’t work for unduly restrictive solicitation because the implied contract to treat the bid
fairly doesn’t cover harsh rules. The government is still evaluating fairly
 Only deviations from the solicitation or unfair treatment allow a Heyer Products claim.
 1996 reforms come from this case
 Limited as to standing—in order to have suffered from an implied in fact contract, the company has to be a
bidder. Otherwise, there would have been no injury or inducement to bid. If you didn’t bid, the remedy
would be zero for bid preparation costs.
 Don’t get injunctive relief, just a monetary remedy, or expectation damages (what you would have
earned if you had been given the contract). This is a compromised remedy.
 Does not include bid protests for an unfair or illegal solicitation
STANDING:
 Heyer Products says a disappointed bidder has standing on a theory of implied contract to give fair consideration to a bid
 This excluded potential bidders
REMEDIES AVAILABLE:
 May award bid preparation costs but may NOT award expectancy damages and bid protest costs (attorney’s fees)
 Initially, injunctive relief was not available
 Limited injunctive relief was available between Heyer Products and 1996, but it depended on the timing of the claim
 Under Heyer Products, only the injunctive relief is allowed if bid protest is filed before the contract is awarded
RELATION TO OTHER FORUMS:
 28 USC § 1500—CoFC does not have concurrent jurisdiction if the same plaintiff has the same claim pending in another
court (Keene Corp.)
 CoFC used to be called the Court of Claims
 No automatic stay provision but can issue injunctions and declaratory relief
Other
 Between Heyer Products and 1996 Congress made ineffective attempts to broaden the remedial authority of the CoFC
 1982 split the CoFC into two courts
 There was pressure to open up the district court forum because relief in the CoFC was limited. Wanted to improve
the CoFC as a bid protest forum
 Little Tucker Act 28 USC § 1346
 Allows the district courts concurrent jurisdiction over claims with the CoFC core jurisdiction as long as the claim did
not exceed $10k.
 No equitable relief
 Relevant for small businesses that wanted to go to district court, but not a very effective remedy
Comparative Law Note
 Canada courts held that a contract arises between the government and all those who bid in response to an IFB
 Canada also awards expectancy damages
3. United States District Courts under the Administrative Procedure Act
 Steinthal & Co. v. Seamans (DC Cir 1971)—invented the idea of bid protests being in district courts via the APA (using Scanwell’s
decision); deference to the contracting officer is still applicable to the CoFC exercise of expanded jurisdiction after 1996.
 Facts: government buys parachutes. Steinthal thought they had 12o days plus a reasonable amount of time to issue the
bid. Pioneer thinks it was a firm 120 days to issue the bid. Steinthal is the lowest bidder and took 150 days. CO says the
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government should re-solicit for bids. Everyone protests to the Comptroller General who denies the protest and upholds
the re-solicitation.
 Analysis: District court rules in favor of Steinthal and does not allow a re-solicitation. DC Cir. reverses. The district court
improperly applied the standard of review and didn’t give the proper deference to the contracting officer, who got
instructions from superiors.
 Relevance of Steinthal today
 Even if the district court has lost all of its bid protest jurisdiction, many of the points made by the DC Circuit here
are now applicable to the exercise of the CoFC’s expanded bid protest jurisdiction, post 1996 and 2001.
 Unresolved issue—whether all of the doctrines that had been applied in the district courts are now to be applied in
the CoFC when it hears a bid protest case.
 Scanwell (DC Cir. 1970)—a disappointed bidder may bring an action for judicial review of the award of a contract to
someone else. Steinthal is from a year later and clarifies and conditions the decision in here.
 APPLICABLE STATUTE: The Administrative Procedure Act (5 USC § 701, et. Seq.)
 5 U.S.C. § 701 Application; Definitions—broad definition of what an agency is—any instrumentality that works for the
United States with a few exceptions. Presumption in favor of judicial review.
 5 U.S.C. § 702 Right of Review—standing to those aggrieved within the meaning of a relevant statute (APA is just a
procedural statute). Relief does not include money damages—it’s equitable
 5 U.S.C. § 704 Actions Reviewable—final agency decisions are subject to judicial review.
 5 U.S.C. § 706 Scope of Review—arbitrary and capricious standard.
 Deferential standard of review for final agency decision (Steinthal)
 Deferential on issues of fact & policy
 Not deferential on interpretation of statutes unless agency is charged with administration of a statute and
Congress has not resolved the issue; or ambiguous (Chevron)
 Congress said this standard of review applies in all bid protest forums
 JURISDICTION: The Little Tucker Act—District Court has concurrent jurisdiction with the Court of Federal Claims for claims less
than $10,000
 Jurisdiction over bid protests in the solicitation or of an award.
 STANDING:
 (1) Plaintiff’s suffering legal wrong because of agency action or adversely affected or aggrieved by agency action within the
meaning of the relevant statute AND the bid protest has to have the potential for redress by the court (both are easy to
prove in a bid protest for government contracts)
 Includes plaintiffs who have injury in fact and are within the zone of interest that statute was designed to protect
 Includes disappointed bidders
 Unlikely to include prospective bidders.
 (2) Zone of Interest—claim specific (ex: if arguing due process, show the zone of interest protected by the due process
constitutional provision)
 Zone of interest is almost always satisfied.
 If Congress had thought about it, it would tend to protect you
 John W. Merriam v. Robert L. Kunzig, Administrator, General Services Administration (3d Cir. 1973)—the way the law
developed and maybe relevant to CoFC standing today
 Facts: procurement for office space from the GSA. Merriam is an unsuccessful bidder and formerly held the
contract. Seeks an injunction.
 Issue: Do an unsuccessful bidders have standing to challenge an award even if they can’t prove they would get it?
 District Court—dismissed and said no standing
 Court of Appeals—disappointed bidders have standing if they satisfy the two-part test:
 Injury in fact (Merriam lost a contract & profits. No need to show ‘but for’ or that Merriam would have won)
 П falls within the zone of interest protected by the statute that the plaintiff said was violated
 Government contracts statutes don’t just protect the public and the government, but also the bidders
(this is contrary to Heyer Products)
 Might be insufficient to show that they would have or should have bid
 Courts of appeals all follow Merriam, allowing disappointed bidders standing to challenge an award allegedly in violation of
the procurement laws.
 Do not require Пs to show that it had an inside track or certainty of success in getting the contract if it prevailed in
its challenge to the existing award.
-24-
 On the other hand, if П is not eligible for the contract OR if ultimate benefit to the П if they do win at trial, is
speculative—the П may not have standing
 IN SUM, THE CoFC STANDING RULES CAN EITHER USE THE DISTRICT COURT STANDING PRINCIPLES APPLIED IN MERRIAM
OR THE GAO STANDING RULES. Most likely use the Merriam and subsequent cases for application in district court though.
 Significant change from Heyer Products doctrine
4. An Unavailable Alternative: Board of Contract Appeals
 Coastal Corporation v. United States (Fed. Cir. 1983)—
 Facts: Government bought storage facilities for petrol reserves. When they decided they didn’t need them anymore, the
canceled their requests for proposals after the initial proposal state but before the contract was awarded (reserved right).
Coastal sued for bid preparation costs claiming that there was an implied contract to finish the solicitation.
 Held—Board Contract Appeals does not have jurisdiction over bid protests, only claims protests. On the merits, Coastal
was not entitled to bid preparation costs because the government reserved the right not to award them the contract
 Contracts Dispute Act confers jurisdiction on Contract Boards only over contracts for procurement of property
 Implied contract, which defines the way the government must deal with bids in the process of selecting a
contractor, is not a contract for the procurement of goods or services under §3(a) of the CDA.
 Jurisdiction cannot be waived! Even if no one raises it (Constitution, Article III) (however!! Usually this
consideration is only necessary when the tribunals are both Art. III courts. The Energy Board of Contract Appeals is
not an Article III court!)
 Board of Contract Appeals—between ’84 and ’96, the Board had bid protest jurisdiction over cases arising out of data processing
procurement because of the technical nature of the product. Brooks Act has since been repealed.
5. Judicial Bid Protest Jurisdiction Following the 1996 Tucker Act Amendments
 1996 Tucker Act Amendments—
 Court of Federal Claims—dramatically expanded the bid protest jurisdiction
 §1491(b)(1)—codifies bid protest jurisdiction of the CoFC
 Heyer Products—this § codified bid protest jurisdiction, so you no longer need to rely on it for jurisdiction
 Expanded the standing jurisdiction to anyone who is an interested party (GAO approach) or the district court
standard (more likely)
 § 1491(b)(2)—injunctive and declaratory relief is awarded. Money damages are only for bid preparation costs
(Heyer Products codified)
 Cannot get expectation damages.
 Combining remedies—usually cannot get both injunctive and monetary relief (Ex: no proposal costs if award
is enjoined).
 No attorney’s fees or bid protests costs in the CoFC under Tucker Act.
 Equal Access to Justice Act allows people who litigate against the government to get attorney’s fees if:
 They are a small entity (corp. net worth < $7M or individual <$2M)
 They show that the government’s position was unreasonable (more than just the govt. lost)
 Standard of Review—APA standard (Steinthal)—arbitrary and capricious standard with deference on the policy and
facts and ambiguous statutes (Chevron); no deference to interpretations of generally applicable statutes or FAR
6. The Relationship Between Bid Protest Forums and Performance Dispute Fo rums
 Remedy—if a contract has been improperly awarded and partially performed:
 Preliminary injunctions/temporary restraining orders can be issued if the plaintiff asks & certain requirements are met
 If there is an injunction or recommendation (GAO), the agency must decide what to do:
 Government must terminate improperly awarded contract and pay for performance
 Contracting Officer asks contractor that was terminated for a termination/settlement proposal (TSP)
 If parties cannot agree as to settlement, then it is considered a performance dispute, and must go to Board
of Contract Appeals or Court of Federal Claims as a separate claim
 Amdahl—bid protest tribunals never decide how much the government must pay the terminated
contractor; that is a claims protest
 If there is a dispute about how much the terminated contractor should be paid it can be:
 (1) Void but not Voidable—a termination for the convenience of the government
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If the award was only legally erroneous, then the agreement may be terminated and
compensated according to the termination for convenience clause

It will go to a performance tribunal

It will presume the contract is voidable not void (a little illegal, but not totally)

Presumption for favoring factors treating contract as merely voidable.
 (2) Contract is “void ab initio”

Government has to argue that everyone, including the contracting officer and
government should have known that the contract was illegal

Void—majority of cases hold that if a government officer awards a contract in violation
of the statute, the agreement will be void where the illegality is plain or palpable under
the circumstances

Contractor will receive the market value/value of services conferred
 Board of Contract Appeals or CoFC, depending on who has authority under the Contracts Dispute Act,
decide whether the contract was void or voidable
 Decided in a claims proceeding under the CDA
 Usually there’s a settlement because to argue that the contract is void, CO will have to argue
that contract she approved was flagrantly illegal (not likely)
 If government accepts the contractor’s TSP, there is no claims proceeding
 United States v. Amdahl (Fed. Cir. 1986)—it is for the bid protest forum to decide whether the contract was wrongfully awarded
 Facts: Treasury Department bought a used computer from Freddie Mac based on a “sole source” award. Amdahl was not
an unsuccessful bidder—they did not bid on the contract. П brings suit in the Board of Contracts Appeals claiming that (1)
government had a duty to look for other contractors and (2) payment terms were ahead of delivery (statutory violation)
 Held: A bid protest tribunal should not hear this case because the issue of void/voidable & recovery damages are
performance dispute issues.
 GAO should issue a stay and then agency can give the contractor the choice between:
 Quantum meruit (value rendered as measured by the FMV (Q1: what the hell?); or
 Value rendered as measured by the termination for convenience (contractors usually choose this)
 The rest of the proceeding is bid-protest—but bid protest forums never decide how much the government pays
 The performance dispute is brought separately in either BCA or CoFC
 CoFC can entertain bid protests and performance disputes, but even if the claim was brought in the CoFC,
they should do a separate proceeding for the bid protest after the performance dispute.
7. International and Comparative Law Notes Regarding Bid Protest
 Generally
 US procurement law has preferences favoring US goods
 These preferences are overridden by applicable trade treaties
 WTO Government Procurement Agreement
 GPA and NAFTA Each of these treaties requires the US to open procurement to foreign offerors and imposes requirement
of remedies that must be made available
 GATT (WTO):
 fundamental provision: excludes procurement from free trade requirements; shows strong attachment to
protectionist policies
 also a desire to work towards trade liberalization in government procurement
 GPA: created an optional side agreement that interested GATT members could join…commit to opening
certain sectors of government procurement to entities from other GPA member nations
 Has been a disappointment
 EU and US are members…China coming along
 Substantive requirement: member nations must treat supplier of other nations no less favorably than their
own domestic suppliers (national treatment)
 bid protest procedures:
 GAO and CoFC satisfy standards to bid protest tribunals
 May be able to raise claims of domestic procurement law violations; CICA and Tucker Act don’t disqualify
foreign protesters
 standing: like the GAO “actual or prospective” bidder test
 GPA standing might not measure up to CoFC (district court standard)
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 automatic stay provision of GAO satisfies challenge procedures
 Remedies: correction of breach or compensation for loss suffered
 GAO: probably doesn’t satisfy (recommendation only)
 CoFC: satisfies
 NAFTA:
 requires member nations to not discriminate against foreign suppliers
 does not seek to regulate quality of bid protest tribunals (like GPA)
 EU: not binding on US (more similar than dissimilar)
 Review Directive: nations must create procedures for prompt review of challenges to procurement decisions that allegedly
violate EU law
 Standing: mix between GAO and district court standards
 Remedies:
 Interim measures: like automatic stay provision
 Contract set aside and damages (maybe expectancy)
 Nations get to limit authority of review bodies to just monetary
 Our tribunals get to decide corrective or monetary remedies
B. Contract Performance Disputes: The CO and the Contract Disputes Act
1. Introduction to the Disputes Process, Contract Disputes Act
 Contract Disputes—deals with the class of disputes arising from government contracts
 Two sub-categories
 Traditional breach of contracts
 Constructive change (equitable adjustments
 Used to be controlled by ‘disputes clauses’ in contracts and called for a contracting officer decision followed by a right of
appeal to the head of the agency. Because there were so many disputes, the agencies gradually developed a system of
administrative appeals boards that exercised delegated authority.
 Background to Enactment of Contracts Disputes Act
 Wunderlich Act—Judicial review of Contracting Officer’s decisions. Standard of review is deferential in context of
performance disputes. No contract could provide for administrative finality on questions of law.
 US v. Wunderlich—no judicial review of administrative decisions on fact unless there was bad faith Penner
 Narrow construction given to the jurisdiction conferred on the appeals board
 Judicial review of the board determinations was not de novo but confined to the record before the appeals board
 Contracts Disputes Act, 41 USC § § 7101 et. seq.
 § 605(a)
 A continued requirement that claims be presented initially to and decided by the contracting officer
 Claims must be in writing
 6 year statute of limitations for non-fraud claims
 Decision from the CO is in writing with reasons for decision
 § 605(b)
 Allows government to provide in contract that pending a CO decision, the CO is obligated to continue performance
 Renders the CO decision final unless it’s appealed
 The only way to appeal is under the CDA, not through the APA to try to get to district courts
 § 605(c)(1)
 Decision must be made promptly (60 days for claims under $100K)
 For claims greater than $100k, contractor must certify the claim is in good faith and data is accurate
 For such certified claims, contracting office must make decision within 60 days
 Contracting officer doesn’t have to decide if claim isn’t certified, but must tell the contractor of the defect.
 Defective certification cannot deny jurisdiction of a court or BCA, but must be corrected before entry of final
judgment of the BCA or court. (§ 605(c)(6))
 Certification of a claim can be made by anyone authorized to bind the contractor (§ 605(c)(7))
 § 605(c)(7)—if a decision is not made within a reasonable amount of time, it is deemed a denial of the claim.
 § 606—Contractor has 90 days to appeal to the Board of Contract Appeals
 § 607
 Codification of the role of agency board of contract appeals
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 Government appeal from the Board of Contract Appeals needs approval by attorney general
 (d) Board of contract appeals are authorized to grant relief available to a litigant asserting a claim in CoFC Q1: huh?
 (g) decisions of BCA are final, but contractor can appeal to Fed. Cir within 120 days.
 § 609—
 Contractor has 12 months to sue in the CoFC
 Decisions of BCA on questions of law can be reviewed, are not conclusive
 Decisions of BCA on questions of fact ARE conclusive unless fraudulent, arbitrary, capricious, bad faith etc.
 Jurisdiction:
 Provision for a contractor’s choice of forums following the contracting officer’s initial decision: the contractor may
file an action in the CoFC or the BCA.
 Jurisdiction of Board of Contract Appeals & CoFC claims extends to both claims of breach of contract &
other performance disputes
 Jurisdictions are exclusive—cannot apply to BCA and CoFC Q1: at the same time?
 Appeal from either tribunal goes to the Federal Circuit.
 Time for contractor to appeal agency’s decision runs from date of receipt of decision by contracting officer.
 According to College Point Boat Corp., an agency can only be upheld based on the original analysis. If the Fed. Cir.
wants to present an alternative ground, the court must remand to allow the agency to consider it.
 Amendment to CDA in 2007—consolidates the BCA into two boards, one for military contracts (Defense and NASA) and
one for Civilian contracts (executive branch agency contracts from other agencies)
 90 days to appeal to BCA
de novo review on fact
and law, no deference, even
to fact, to the CO.
 Contract Officer
 De Novo review
on fact and law
FED CIR. from BCA
120 days to appeal (41 USC §601(g)
 Fraudulent, arbitrary, grossly erroneous, &
bad faith findings of fact are set aside
 Wunderlich Act
 De novo review on law.
BCA
Fed. Cir.
CO
SCOTUS
FED CIR. From CoFC
 60 days to appeal (28 USC §2107, not from
CDA)
 Questions of fact—clearly erroneous
standards
 Questions of law—De novo review on law
unless Chevron applies (see Grumman)
CoFC
 12 months to appeal to CoFC
 De Novo review on fact and
law
2. Role of the Contracting Officer 41 USC § 605 (CDA) Decision by Contracting Officer
 All claims must be in writing & submitted to the contracting officer. Usually by a contractor, but sometimes by government
 Dual role. Contracting officer must represent the government in entering into contracts and try to get the government a
good deal, but also must give the contracting officer a fair chance to be heard—neutral decision-maker.
 CO hears from Government and Contractor and makes an impartial decision.
 Keystone v. United States (Ct. Cl. 1960)—a unilateral assertion and no time for the contractor to defend itself meant
that the contracting officer’s decision in favor of the government was improper
 Facts: government demands payment from a contractor who seeks an explanation since contract was
already completed. Contractor receives a letter & asks for time, but CO says he has already decided.
 Analysis: Contractor appealed the CO’s decision to the BCA, but it is dismissed as untimely. This is incorrect
because the CO never made a proper decision (time never started running)
 Penner Installation Corp. v. US (affirmed by SCOTUS 1950)—Though the decision of CO is final & non-reviewable, if
the decision is arbitrary or made in bad faith (without due regard for both parties) then it can be reviewed.
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Facts: Contractor made a claim to CO for equitable adjustment from contractual changes. CO rejected nearly
the entire claim. On appeal, the Court of Claims said CO was final and non-reviewable.
If a decision is not supported by facts, bad faith will be inferred
3. Choice of Forum and Procedures Under Contracts Dispute Act
 Before Submitting a Claim
 Submit a request for equitable adjustment to the CO. Request for equitable adjustment isn’t a claim, but that’s to start
 ADR is encouraged by FAR 33.214.
 Certification
 For claims greater than $100k, contractor must certify the claim is in good faith and data is accurate
 For such certified claims, contracting office must make decision within 60 days
 Contracting officer doesn’t have to decide if claim isn’t certified, but must tell the contractor of the defect.
 Defective certification cannot deny jurisdiction of a court or BCA, but must be corrected before entry of final
judgment of the BCA or court. (§ 605(c)(6))
 Certification of a claim can be made by anyone authorized to bind the contractor (§ 605(c)(7))
 Two categories of people who may certify a claim under § 605(c)(1)
 (1) senior company official in charge at the location involved
 (2) officer or general partner having overall responsibility for conduct of contractor’s affairs
 United States v. Grumman—certification furthers an important goal and affects subject matter jurisdiction, so it can
be raised at any time. On the exam, say Grumman subject to Congressional changes. Also Transamerica
 Facts: Grumman submitted an uncertified claim to the CO followed by a certified claim from the CFO. The CO
denied on the merits and Grumman appealed to the ASBCA. Government moves to dismiss for failure to
properly certify. The issue was never raised to the CO and never ruled on. Board said it was proper, so the
government appealed to the Fed. Circuit.
 Analysis: The court vacates the Board decision because the claim was not certified under the FAR. Only a
senior official with authority at the location or authority over the contract can certify the claim. Court held
that agency’s rule is valid because there is a gap in the statute and Chevron doctrine applies.
 Dissent: not an appropriate regulation, goes too far to prevent fraud.
 Congress responded to the Grumman decision
 Amended § 605 to agree more with the dissent—duly authorized officer as a matter of corporate law
 A defective certification can be corrected
 Statute of limitations runs until there is a valid certification
 Claims under the CDA
 8 Elements of a Monetary Claim (FAR 33.201)
 (1) In writing
 (2) request a final decision
 Failure to state a claim to the CO is a jurisdictional defect that will not allow the party to go to CoFC or BCA.
 Need not use magic words, but a reasonable person should be able to discern that the contractor wants a
final decision Transamerica Insurance v. United States
 (3) seek payment as a matter of right
 (4) include a sum certain
 Transamerica Insurance Corporation v. United States, (Fed. Cir., 1992)—There does need to be an explicit
request for a final decision; the parties can be negotiating and asking for a final decision at the same time as
long as the desire for a final decision is evident. The court says this was a binding certification because there
was substantial compliance with the certification requirements (even though contractor certified to info he
didn’t know about the subcontractor).
 Transamerica asked for an EA for roof work (drawing wrong). The CO adjusted the contract a little,
but not for the full amount. Transamerica appealed to CoFC. Government claims that CoFC lacked
jurisdiction b/c Transamerica never requested a final decision. The CoFC accepted this argument.
Transamerica appealed.
 all that is needed is that (1) the contractor asserted in writing and with sufficient specificity a right to
additional compensation, (2) the government disputed that right, and (3) the contractor
communicated its desire for a contracting officer decision.
 This is a still a good test for routine disputes, but after Reflectone, non-routine requests do not
require a separate dispute of that request.
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Be careful with ‘it would be nice’ instead of ‘you owe us’
Also from Transamerica—prime contractors need only believe there is good ground for a subcontractor’s
claim, not necessarily believe the claim to be certain. Q1: does this mean that primes make claim on behalf
of subs?
(5) be non-routine, in dispute
 Reflectone, Inc. v. Dalton, (Fed. Cir., 1995)—an equitable adjustment is a claim even though the amount is
not yet in dispute. The dual role formalities of the contracting officer is not necessary.
 Reflectone asked for an equitable adjustment. CO rules on it, but denies it in part. Reflectone
appealed. According to ASBCA, the equitable adjustment would have to be brought to the CO, who
would rule on it as the government’s advocate and then rule on it again as an adjudicator. After the
first ruling, the amount of payment would be in dispute. Otherwise, a routine request for payment is
not a claim (need a dispute). Reflectone appeals to the federal circuit.
(6) be made with sufficient specificity
(7) be certified if it’s above $100k
(8) submit to the Contracting Officer.
III. Formation of Government Contracts
A. Basic Principles of Government Contract Formation
 Generally:
 Strong presumption that the government will follow the law of private contracts unless a statute or regulation says so
 Contracts are formed through either sealed bidding or competitive negotiation
 There are other procedural rules that have no analogue in private contracts
 Congruence:
 Offer and acceptance
 Consideration
 Implied-in-fact Contracts
 Implied-in-Law Contracts
 Statute of Frauds
 Parol Evidence
 Exceptionalism:
 Full and Open Competition (Schwartz refers to this as reverse exceptionalism)
 Competitive Negotiation
 Types of Contracts
 Definite Quantity—no issues with consideration
 Indefinite Quantity—must have a minimum quantity or will fail for lack of consideration
 Requirements—Buyer promises to order from the seller if they need the product. This is the consideration Torncello.
 Common Law Doctrines that Appear in Government Contracts
 Offer and acceptance
 Competitive Negotiations—government produces an integrated writing and sends it to contractors. This is the
offer. The award of the bid constitutes acceptance.
 Sealed Bidding (FAR Part 14)
 Invitation for bids is an invitation to make an offer. The bid constitutes the offer. The government awarding
the contract is the acceptance.
 Government accepts offer in any way that is a written indication that the bidder won. There is no need for a
formal contract signed by both of them.
 United States v. Purcell Envelope (US 1919)—a binding contract is made when the government accepts a fixed firm
bid made by the contractor through ‘sealed bidding.’
 Facts: The Post Office put out a bid for invitations and the Purcell Envelope Co. was lowest bidder and won
the bid. The Post Office found Purcell responsible. Then, new Postmaster General came to office & revoked
/ canceled the contract, declaring it to be null & void based on another report unfavorable to Purcell.
 Analysis: Purcell’s response to the ad for bids by the Post Office was their offer & the acceptance of offer by
the Post Office created a contract. The government argues the new Postmaster should be able to reevaluate
the old Postmaster’s decisions. The Court decides that so long as the last officer was acting within her
delegated authority, the acceptance is binding on the United States
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
Other side of OPM v. Richmond and Gordon v. Woodroffe (holding that the government CANNOT be bound
by those acting OUTSIDE their authority) because this case holds that the government CAN be bound by
those acting WITHIN their authority. Those actions are not inherently revocable.
 Statute of Frauds
 Express contracts with the government must be in writing to be enforceable
 US v. American Renaissance Line (DC Cir. 1974)—court finds for ARL because oral agreements are not
contracts.
 Only express contracts must be in writing, a court can find an implied-in-fact contract without a writing
 31 USC § 1501 is the Statute of Frauds
 Implied Contracts
 Implied-in-fact
 Actual contract is formed either explicitly or implicitly by words/deeds
 There should be a meeting of the minds to make an implied-in-fact contract
 According to Algonac, must have unusual facts to enforce an implied-in-fact contract
 Algonac v. United States (Ct. of Cl. 1970)—Based on the conduct of the parties and provisions of the
contract, the court found there was an implied-in-fact contract to pay for storage
 Facts: Algonac worked for the government with armored plates. Afterward, the government
didn’t pick up the armored plates like they should have. They sent questionnaires about them,
but never came. Algonac continued for 10 years to store them. The CO made a finding that
the armored plate was abandoned, and Algonac sued for storage costs. Algonac went to the
board but they said they didn’t have jurisdiction.

Since they would have been liable if they had gotten rid of the armored plate, there must have
been a contract to pay for storage.
 Algonac is in the ‘kids don’t try this at home’ category because It’s either past the high water mark or
right at it for an implied-in-fact contract.
 A court cannot find an implied-in-fact contract if there would not or could not have been an actual
contract with those terms
 Hercules makes it even harder to enforce these contracts
 Hercules v. US (US 1996)—
 Facts: Injured veterans class action from a device used in Vietnam war. Hercules and others
settled and then sued to enforce the settlement under implied warrant and indemnification
theories. If they hadn’t of settled, they would have won under Boyle pg. 12.
 Implied warranty argument fails because Court found that conditions were not such that the
government would extend the implied warranty to 3rd party claims—the government is
warranting that specifications will work. A promise to indemnify was not implied because
there was no appropriation for 3rd party tort claims. CO would not have agreed to an open
ended indemnification. Implied in law maybe, but that would further preclude Hercules.
 Implied-in-law
 “Quasi-contract”
 Equity/fairness requires that one party be treated in a certain way, so the court treats it as though there was
a contract.
 NOT ENFORCEABLE against the government
B. Competition Policies
 Competition Requirements of the Armed Services Procurement Act (10 USC § 2304)
 Full and Open Competition 10 USC § 2304
 §2304(a): must have full and open competition—a system of acquisition in which all responsible sources are
permitted to participate
 Full and Open is the default rule unless there is an exception
 § 2304(a)(2)(A)(ii) Sealed bids shall be solicited if award is based on “price & other price-related factors”
 § 2304(a)(2)(A)(iii Sealed bids shall be solicited if it isn’t necessary to conduct discussions about bids.
 §2304(c) (7 EXCEPTIONS to F&OC):
 Getting around Full and Open competition; § 2304(c): exceptions from the competition requirement
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Not a total exception to competition, as § 2304(e) says—still need to use as much competition as
circumstances permit (not sole source procurements)
(1) Only available from one responsible source, or from limited number of responsible sources, and no
other type will satisfy agency needs. (But gov’t must use as many sources as there are.)
(2) partial exceptions for when an agency’s need for property/services is unusual & compelling, and US
would be seriously injured unless agency is permitted to limit number of sources from which it solicits offers.
 (f)(5)(A): can’t use this when there has been poor planning
(3) It is necessary to award contractor to particular source in order to keep the source viable: (A) maintain
facility, producer, manufacturer or supplier available for furnishing property in case of national emergency,
or (B) to establish or maintain essential engineering, research, or development capability to be provided by
an educational or nonprofit . . . (C) to procure services of an expert for use in litigation.
 makes it legal to alternate contracts between two sources to keep companies viable
 government has an interest in keeping more than one business alive to make the product
(4) Terms of international agreement or treaty, or directives from foreign gov’t reimbursing agency requires
procedures other than F&OC.
(5) A statute expressly authorizes procurement through specifies source, or agency’s need is brand-name
commercial item authorized for resale.
(6) can limit number of sources solicited to protect national security
(7) when it is in the public interest and Congress is informed in writing 30 days before the contract is
awarded; justification must be explicit
 amended in 1984: added competitive negotiation & fewer exemptions. Still, there would are always
unforeseen circumstances, so (7) is a catchall for anything missed that needs less competition.
 Seems like a huge loophole but it’s not
Does gov’t need to use
F&OC? (Does exception
apply under §C?)
No
Which
technique?
Yes
Deciding How to Procure
Goods/Services
Sealed Bidding
or
Competitive
Negotiations
In US, we claim both of
these are F&OC. Rest of
world may disagree.
If no, use non-competitive
(or partially competitive)
procedure.
 § 2304(f)
 Justification requirement – CO must justify & certify accuracy of non-competitive procedures uses in writing
 Means that government can’t make excuses for not using F&OC after the fact.
 The written justifications are generally available under the Freedom of Information Act.
 Approval must come from higher agency officials, depending on the greater $$ amount involved.
 Justification used must include (1) exception used, (2) explanation why, (3) determination that a “fair and
reasonable price” will be obtained.
 Lawful Practices that Frustrate Full and Open Communication
 Use of sole source procurement
 Restrictive design or performance specifications
 Use of change orders to enhance scope of work under previously awarded contract
 Test of whether the change is permissible is whether the change is outside the scope of the original
procurement  Would the contract, as modified, have attracted a materially different field of competition
than the initial procurement drew.
 Orders above required minimum on an indefinite quantities contract
 Contract extensions, picking up of options and lease renewals – can all constitute de facto sole sourcing
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 Restrictive determination as to responsibility of bidders
 Ex: “If you’ve never done this work before, you’re not responsible” – may be problematic and prohibited.
 Use of long term contracts
 Bundling contracts—lots of items in a single procurement
 Procedures that Violate Full & Open Competition
 Deferential standard of review to determine if Full and Open Competition was used
 Board provides deferential standard provided proper procedures are used by the agency
 But see Pacific Sky (where comptroller General is not very deferential to the Air Force) and Memorex (where
GSBCA didn’t give much deference to the procuring agency)
 Contract Too Long in Duration
 Administrative convenience of CO is not sufficient to justify a contract significantly long in duration—longer
than a year. Pacific Sky (holding that requirements contracts that are years in duration violate F&O
competition)
 Administrative convenience of procuring agency is sufficient to justify the contract of long duration because
an agency has special needs (Air Force may need consistent contract for five years because of training,
assembly of aircraft, etc.
 In re Pacific Sky—comptroller general applies fairly deferential standard but still finds that the 5-year term in
the case is not justified by administrative convenience nor is the bundling.
 Facts: The Air Force awarded a 5-year requirements contract to Allison for aircraft parts. Pacific Sky is
an interested party who protests for violation of the CICA: no qualification standards, term is too long
and anti-competitive, and it violates synopsizing requirements. AF claims it was justified because at
the time of acquisition no other supplier was approved to provide each of the 294 parts. Also, there
was a line-item deletion clause that allowed breakout procurement to get new sources
 5 years could be reasonable in some other context, but not here. Also, bundling was too much here.
In this case, the bundling was for the good of the CO and not the procuring agency.
 sole source procurements are scrutinized; there must be a reasonable basis for the stated
needs (deferential). Here, AF provided no justification for bundling all 294 parts, except
convenience of the contracting officer, which is not enough.
 Also no justification for the long term of the contract; it is non-competitive. Admitting that
there may be other competitors in the next 5 years just weakens the argument for having such
a long contract (non-competitive).
 Also applicable below in bundling.
 Bundling Beyond a Reasonable Limit
 Administrative convenience of CO is not sufficient to justify a significant bundling requirement. See Pacific
Sky (where court found that requirements contract for 294 bundled aircraft replacement parts obtained in
sole source procurement violated full & open competition)
 Administrative convenience of procuring agency is sufficient to justify the long duration of a contract or the
bundling of a contract.
 When bundling is illegal, it’s referred to as ‘bundling’ but when the procurement is just bundled enough not
to be considered bundling, it’s called “strategic sourcing”
 Unduly Restrictive Specifications
 Unduly restrictive specifications—If it goes beyond minimum needs of agency (See Memorex and Comnet)
 Court will always be skeptical of an all or nothing requirement and prefers a sliding scale with a number of
factors considered Memorex
 Administrative convenience of procuring agency is a permissible reason for a restrictive requirement (See
Comnet, where court allowed agency to require data processing system that would work with the software
the agency already uses)
 Protest of Memorex Corporation, GSBCA (1985)—Specifications of any kind are inherently anti-competitive,
but not necessarily impermissibly so. It’s not ok to have specs that impermissibly narrow the competition.
 Facts: government held a competitive negotiation for disk drives for DLA computers. Memorex
objects because it says the performance specifications were too restrictive and impermissible.
Memorex took the protest to the GSBCA (special computer status).
 Analysis: the standard of review is de novo [because it’s the GSBCA]. A specification violates F&OC
when it is an unreasonable and unnecessary restriction on competition (burden supposed to be on
protester).
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
The “reliable plus” requirements were not acceptable because it was a third party standard
and it was made an absolute criterion of eligibility (abdicated all discretion). GSBCA would
prefer this be weighted instead of either ‘in or not’
 The cache storage requirements were fine – the protestor didn’t establish that the DLA was
unjustified (and DLA allowed those without cache to compete with a penalty imposed—not an
absolute bar).
 Memorex Test:
 (1) presume the restrictions are valid,
 (2) Ask if the restrictions are reasonable?,
 (3) ask if the government has a legitimate necessity for the restrictions?
 Brand names can be used in the specification, but not exclusively relied on. Government must indicate
capability/performance needed, and bidders who can comply must be permitted to compete
 In Re Comnet (Comptroller General 1975)—rules do not ban specifications that include a brand name
as long as the government spells out the features needed so bidders can see if they could supply
something to fit the government’s needs.
 Facts: the government agency was buying a data processing system for NOAA. The government
issued one solicitation and got some bids, but they cancelled the bid because the specifications were
inadequate, as pointed out by Comnet. The agency issues a new solicitation, Comnet protested.
 Comparative Law Note on Specifications
 Specifications used to limit competition may burden foreign competition
 EU: member nations must state specifications in European standards, not national standards
 GPA: member nations must use available international standards when available
 There are some circumstances where you are allowed to modify or change a bid:
 Withdrawal  a bid that should have been obvious to government is cause for withdrawal of the bid.
 Corrections  Allowed when there is clear and convincing evidence of mistake.
 It appears that courts/comptroller general will afford at least some deference to procuring agency, at least
regarding the specs they include in an IFB.
C. Alternative Procedures
 1984 Competition in Contracting Act(1984): Congress authorized federal agencies to choose between two forms of
competitive procurement—sealed bidding and competitive negotiations.
 Competitive negotiations became an alternative means of competitive procurement
 Before 1984, there were too many restrictions and at the same time it was too lax.
 Alternative procedures are governed by ASPA 10 USC § 2305 and FPASA 41 USC § 253.
 Q1: Why are these the alternative procedures? What is the default? F&O
 Agencies have discretion in deciding whether to use sealed bidding or competitive negotiation and there is a deferential
standard of review at the Board or CoFC level
1. Sealed Bid Contracting
 When to Use Sealed Bidding or Competitive Negotiation 10 USC § 2304(a)(2)(A)—this is the preferred method of contracting
and must be used if the following conditions are met (FAR 6.401):
 (1) When Time Permits—this is usually not an issue since competitive negotiation actually takes more time
 (2) When Awards Will Be Made on the Basis of Price and Other Price-Related Factors
 Easily manipulated to get to competitive negotiation for non-standard goods because statutes don’t tell you when
the agency can or cannot use qualitative/non-price factors
 If the bids are going to be technical proposals rated on a sliding scale, use competitive negotiation instead
 If the government chooses competitive negotiation but then awards the contract on the basis of price alone, the
GAO or CoFC will look skeptically at the reasons why the government said it needed Competitive Negotiation
instead of sealed bidding; Racal Corporation—competitive negotiation is not OK based on:
 Choosing the winner based on price and price-related factors
 Concerned that the bidders won’t understand requirements doesn’t justify discussions. Agency can host
bidder conferences, q&a sessions, etc. which is still permitted for sealed bidding
 Expected changes does not justify discussions because this could always be a concern.
 (3) It is Not Necessary to Conduct Negotiations/Discussions with Bidders about Bids
 Be careful because this can be manipulated as well
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 (4) There is a Reasonable Expectation of Receiving More Than One Bid
 How to do a Sealed Bidding – 10 USC § 2305
 Mechanics:
 Invitations for bids (IFBs) are part of the process of sealed bidding
 Discussions can be held through a pre-bid conference to explain complicated specifications, if need be
 Award bid to the:
 (1) Responsible bidder who responds with
 (2) responsive bid that is
 (3) most favorable to government considering only cost and cost-related factors.
 Modification or Withdrawal:
 After sealed bids are opened, modification or withdrawal is prohibited unless such modification/withdrawal is (1)
received before the award has been made and (2) either:
 Delayed past the time of fixed opening SOLELY b/c of a delay in mailing and the bidder isn’t responsible; OR
 In the interest of the government and not prejudicial to other bidders; OR
 Reasonable based on evidence that there was a mistake. “too good to be true”
 Withdrawing a bid—an opening bid cannot be revoked, even if it is prior to acceptance UNLESS
 There was a mistake in the bid, especially if it should have been obvious to the government. Burden is high
 Unreasonable delay in making an award after the bid is offered. Firm offers don’t mean the bid has to stay
open forever.
 Refining Associations, Inc v. US (Ct. of Cl. 1953)—when an offer is submitted, the offeror cannot revoke the
bid after the opening of the contracts. Unless there is clear evidence of mistake, there is no injustice in
holding the bidder to the condition of the bid.
 Facts: Refining revoked their contract before the government accepted the terms of their bid.
Refining wants the private law to apply, but government says that the bid was a firm offer.
 Analysis: The consideration for the bid is that the government treats it fairly (Heyer Products), but
when the regulations are clear, the government doesn’t need to have consideration. The regulations
said the bid could be withdrawn only before bids are opened. Exceptionalism.
 Revocation of a private contract is allowed any time before an acceptance, but government
contracts can only be revoked up until the opening of the bids
 Correcting a Bid
 Minor mistake is fixable, but not if it is extreme
 Situations when it may be allowed, but courts are skeptical:
 If contractor wants to adjust the price to become the lowest bidder.
 Where modification attempts to displace the lowest bidder, the mistake and intended bid
must be discernable from the bid itself coupled with the invitation for bids for the correction
to be allowed
 Example: Multiplication errors—if bid price and unites are there in the bid, it is easy to see if
the math was wrong. Then, if the contractor has the lowest bid, it wins.
 If contractor is the lowest and wants to adjust her bid upward.
 Where a low bidder attempts to modify and adjust the price upward, the contractor must
show by clear and convincing evidence that there was error, how the error occurred, and what
the intended price was.
 Suspicion arises about whether the contractor wants out of the responsibility of being the low
bidder or whether the contractor wants to get the contract but negotiation up to be just a
little lower than the next lowest company
 Responsive/Non-Responsive Bids:
 It is a violation of full & open competition to accept a non-responsive bid (that doesn’t conform to specifications, or
has significant deviation that affects price, quantity, or quality)
 The process is public, so everyone knows the price of the awarded bid.
 A bid marked confidential and not read at a public announcement is non-responsive, even if the stamp is
subsequently removed. It gives the contractors two bites at the apple
 Prestex Inc. v. United States (Ct. Cl. 1963)—Contracting officer can only accept bids for products that conform with
specifications without significant deviation.
 Facts: Prestex’s bid was not responsive and the CO could not have accepted a non-responsive bid because it
is outside of their authority.
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

Exceptionalism because you cannot accept a bid that isn’t exactly like your specifications, but it’s also
congruence because there was no “meeting of the minds”
Small deviations are allowed. Permissible deviations do not affect: (1) price, (2) quantity, or (3) quality
2. Competitive Negotiation ***On a lot of the old exams***
 Solicitation
 The agency must first create a source selection plan where they develop criteria and procedures to be used
 “RFP” Request For Proposals
 Detailed requirements about the criteria
 Lay out the criteria and stick to it, or else scrap the RFP and start with an entirely new one
 Proposals are not available to the public. The agency has a proprietary interest in the solution.
 Harder to achieve transparency than sealed bidding
 Criteria Used to Determine Winner of Competitive Negotiation
 The lowest price among the technically acceptable bids
 Series of Technical criteria (Essex Electric)
 May rate on a pass/fail basis (“go/no go”) or by assigning weighted values
 Government must say how they will choose the winner and they must do what they said they’d do
 Best Value—room to define in advance what would be a quality product that would meet the agency’s needs
 Pre-Award Survey
 Used as part of the determination of responsible bidders
 The pre-award survey focuses on firm’s ability to perform as required and involves matters like financial resources,
experience, facilities, and performance record
 Different from negotiation, which focuses on developing, through discussions if needed, the contractual obligations (Essex)
 Award/Negotiations
 Proposals are evaluated
 Merits of each bid assessed under criteria previously determined
 Bids are ranked by the criteria—many protests come from contractors who claim the government didn’t
rank their bids as they should have
 Non-responsive bids are not rejected b/c the RFP is usually vague & lacks specificity, so there can be
discussions
 Can make an award on an initial offer; “Awarding on initial proposal”
 The agency must have reserved that right in the RFP or they can go forward with discussions and
negotiations; Most agencies include such a reservation
 If the initial offer meets the agency’s needs
 Negotiations—agency narrows the competitive range to see who’s left
 Contracting officer can further winnow the proposals to establish the operative competitive range.
 When companies are head and shoulders above other companies
 When there is no big gap, there may be room for a bid protest
 In 1996 Clinger-Cohen was passed—a CO can artificially constrict the competitive range for efficiency, even though
throwing out some realistic contenders might happen
 Contractors can modify as a result of discussion and all parties are given the chance to submit another proposal by
the “common cut-off date”
 All parties get a chance to make a final proposal revision—BAFO—best and final offer.
 Final proposals are reevaluated under the previously established evaluation
 The ranking is fixed because the criteria hasn’t changed.
 Debriefing (FAR 15.505)
 When a contractor loses, they are entitled to a debriefing which includes
 how their bid was evaluated,
 the summary of the rationale for choosing another bidder,
 the ranking of the bidders, and
 what the contractor’s strengths and weaknesses are.
 Request for a debriefing must be made within 3 days.
 Matter of Essex Electro Engineers (Comp. Gen. 1986)—if you have non-price criteria but they are all pass-fail, those non-price
criteria could have been specifications that go to pass/fail element of responsibility.
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 Facts: Essex protested the terms of a solicitation for electric generator sets (brought the suit as a prospective bidder),
alleging that it did not use sealed bidding as required and the evaluation criteria lack specificity required. The solicitation
said the proposals would be evaluated on overall lowest price and a pass/fail evaluation of technical criteria. Army said
competitive negotiation was used because their technical personnel needed discussion concerning the understanding of
the technical proposal. Essex said they could have used a pre-award survey to accomplish negotiation of terms.
 Analysis: pre-award survey is used to determine financial/resource capabilities, not negotiation. Negotiations are useful for
defining contractual terms. Comp. Gen. used a deferential standard of review and doesn’t question the methods used
unless they were unreasonable. Protest was denied. Q1: come back to this
 Matter of Racal Corp. (Comp. Gen. 1986)—army chose based on price, not a technical proposal, so discussions were not
necessary. Negotiated procedures are ok where there are technical proposals, but not for understanding of routine matters.
Also, risk of change is always present and doesn’t justify competitive negotiations over sealed bidding.
 Facts: Army used competitive negotiations to get gas masks. Racal wanted them to use sealed bidding. The RFP set out
price and other factors, and said they needed competitive negotiation to make their solicitation understood and for
convenience in case things changed.
 Comparative Law Note Regarding Procurement Procedures – (see chart, Volume II) (p.651)
 EU Public Procurement Directives: not binding on US
 3 Basic Techniques for Procurement: (1) Open tendering, (2) restricted tendering, and (3) negotiated procedures
(non-competitive)
 open tendering/restrictive tendering (less so here): competitive types of procurement; member nations and
agencies can choose between these two, but the noncompetitive negotiated procedures only sometimes
 Open tendering—any interested entity may bid for the contract
 Sealed bidding satisfies the requirement of open tendering, but they ARE NOT equal
 Open tendering allows use of either lowest price OR best value
 Restrictive tendering—competition occurs only among those invited to participate by contract authorities
 restrictive tendering would not be allowed under F&OC in the US
 gives almost complete discretion to select invitees, no genuine competition
 Negotiated procedures—similar to the US non-competitive practices: unforeseen circumstances, national
security, etc.
 EU list is more extensive
 A written justification must be presented, not published like in US (FOIA)
 Restrictions less meaningful in EU – can still use restrictive tendering
 Public Procurement Directive (2004)—allows for competitive dialogue, which is close to competitive
negotiation
 GPA: binding on US
 Member nations choose between Open and Selective Tendering Procedures
 Limited Tendering—non-competitive procedure whose use is permitted in circumstances like full & open
communication in the US
 Similar to EU list
 Limited ability to use the wholly-non-competitive kind of procurement is good for US, because if it
was more restrictive than the statute, we’d have to follow the treaty (complying with US law is not
violating the limited section)
 There is a lot of discretion in choosing between open and selective, but sharp restrictions on limited
tendering (like EU)
 open tendering would be allowed under F&OC in US
 uses lowest price and best value criteria (like EU)
 Negotiations are more allowed than in EU. Permitted if the intent is indicated in the solicitation or if no one
tender is obviously the most advantageous.
 selective tendering would not be allowed under F&OC in the US
 can (1) use lists of previously established qualified bidders or (2) qualify/select bidders on a procurement by
procurement basis (latter is like EU)
 (1) would be impermissible pre-qualification device
 (2) would frustrate F&OC
 GPA makes more of an effort than EU to make it competitive: bids must be invited from max number of
suppliers
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 Limited tendering restrictions are similar to F&OC exceptions
Sealed Bidding v. Competitive Negotiation
Award Basis
SEALED BIDDING
Responsive Bid (to IFB)
Goes to lowest, responsible bidder based on price and
price related factors
Negotiations & discussions are not used but Pre-bid
conferences are allowed
Contract Awarded
Right Away?
Invitation
Type of contract
available
No– first must determine if responsible after choosing
tentative winner
Invitation For Bids (IFB)
Must be some kind of fixed-price or fixed price with
economic price adjustment
Responsibility
Determined after low bidder is chosen.
Responsive Bid
As long as bid doesn’t “substantially deviate” (price,
quantity, or quality), CO can accept bid; Otherwise, CO
has no authority to accept non-responsive bid
 Bid must be 100% responsive to IFB.
 Bids are open publicly
Other
COMPETITIVE NEGOTIATIONS
“Best Value” to gov’t, using price & other factors
stated in Source Selection plan. (not necessarily
lowest bottom line)
Can have multiple rounds; iterative process (whittle
group of bidders down to “competitive range”).
Negotiation is allowed
Yes, if gov’t reserves right to do so in RFP.
Request For Proposals (RFP)
Agency chooses between fixed price or cost based
contract
Decisions between the two are effectively
unreviewable.
Responsibility factors can be included as weighing
factors in Source Selection Plan (takes discretion
away from SBA in cases of small businesses)
Non-responsive bid is a discussion point, or reason
to give lower points on sliding scale.
Bids are considered proprietary; not open publicly.
(Although losing offeror can find out why she lost;
where deficient compared to winner).
Vastly more discretionary
D. Qualification
Focus on Past
Focus on Present
Generic Determination
Debarment, Suspension, & De Facto Debarment
Pre-Qualification
Case By Case
Civil & Criminal Fraud Prosecutions
Responsibility
1. Debarment, De Facto Debarment, and Suspension
 Involves a determination based on the past conduct or performance of a given contractor
 If bad past conduct is involved, the contractors are generally ineligible for future government contract
 Suspension
 An interim remedy that can last up to 12 months or 18 months if there’s a good reason
 Like a preliminary injunction and is used while the government determines whether to debar.
 During suspension period, the contractor cannot participate in any IFB or RFP.
 Requires less due process than a debarment
 Debarment
 Generally
 Disqualified from government contracts permanently
 Suspension and debarment represent a blanket determination of non-responsibility
 Agencies have inherent authority to refuse to do business with people they think are unsuitable
(implicit in the mandate to award contracts only to responsible bidders)
 Not contract specific AND is executive branch wide
 Usually for a term of years, not more than 3 years.
 Central registry of all debarred companies that extends throughout the whole executive branch
 Causes for Debarment (48 USC § 9.406-2)
 (1) Conviction or civil judgment for procurement-type crimes:
 Commission of fraud or criminal offense connected to public contract
 Violation of antitrust statutes related to the submission of offers
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 Embezzlement, bribery, theft, forgery, falsification/destruction of records
 (2) Contract Violations (based on a preponderance of the evidence)
 Willful violation of terms of government contracts or sub-contracts
 History of poor performance on government contracts
 (3) Violations of Drug-Free Workplace Act of 1988
 (4) Residual Clause § 9.406-2(c)
 “any other cause of so serious or compelling a nature that it affects the present responsibility of a
Government contractor or subcontractor”
 Generally never happens, but a case like Enron might bring it up.
 Procedure:
 Agencies each have special debarment procedures involving a “debarment official”
 Must give notice of proposed grounds for debarment
 Must give a hearing to discuss contested facts and an opportunity to cross any adverse witnesses (BUT facts
that are established in civil or criminal cases are not re-litigated. There is no right to an evidentiary hearing,
but the contractor does have a right to respond)
 De Fact Debarment
 Actions that have the practical effect of debarment
 Forums:
 Not GAO or CoFC: As of 2002, GAO no longer hears suspension/debarment issues and the forums in the agency
itself 4 CFR § 21.4(i);
 District Courts: Can hear suspension and debarment cases, because they are reviewable under the APA (de facto
and quasi-de facto debarments can be heard here as well)
2. Responsibility




Makes determination by looking at present capability
Done contract by contract
“Responsible prospective contractor” means a contractor that meets the standards in FAR 9.104
FAR 9.103: CONTRACTORS MUST BE DEEMED RESPONSIBLE
 (a) purchases shall be made from responsible contractors only
 (b) CO must make affirmative determination of responsibility prior to the award of a contract
 A determination is a go/no go determination and cannot be traded off against cost or other factors
 Burden is on the Contractor to prove that the contractor is responsible
 When in doubt, the rule is not to certify
 If prospective contractor is a small business concern, contractor must comply with subpart 19.6 of the Certificates
of Competency and Determination of Eligibility
 Factors used to determine Eligibility:
 Adequacy of financial resources
 Capacity to do work on time, given other commitments
 Satisfactory record of contract performance and integrity in past dealings—inadequate performance isn’t likely to
lead to a suspension or debarment, but it must be given independent consideration in connection with the new
responsibility determination
 Sufficient management and technical capabilities
 Possession of necessary facilities and equipment
 NOTE: In a competitive negotiation, factors used to determine responsibility are ‘rating factors’ on a sliding scale
 Matter of SAFE Export Corporation (Comptroller General 1983)—deferential standard of review on the
determination of non-responsibility (reasonableness). No need to do a broad survey on responsibility
 Facts: Bid protest where SAFE’s responsibility determination was based on a contract in Europe where the
agency did not give a good review. It wasn’t a broad determination of responsibility.
 Analysis: Comptroller General found no abuse of discretion and upheld the CO’s determination of nonresponsibility. This isn’t a big-ticket contract, but if it were, there would have been a duty to look more
deeply into responsibility determinations. No requirement of a right to be heard or respond.
 Small Businesses
 When CO determines small business non-responsible, CO must withhold award and refer the matter to SBA to
certify responsibility - 48 CFR §19.602-1(a)
 SBA can override non-responsibility determination with Cert. of Competency
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 Agencies have the option of appealing SBA issuance of COC’s, but do not have the authority to disregard a COC
decision because the agency disagrees.
 Only if the SBA takes no action w/in 15 days can the agency go ahead and issue the contract to another
contractor - 48 CFR §19.602-4(c)
 Where amount of contract exceeds a specific amount, and the CO disagrees w/ the regional office’s issuance
of a COC, SBA regional office must refer a recommendation to issue a COC to SBA central office (48 CFR
§19.602-1(a)(3)) and so notify CO (48 CFR §19.602-2(b)).
 If the Central office concurs with regional office’s recommendation, Central Office is to notify CO of its
decision by phone, followed by a written confirmation (48 CFR §19.602-3(b)).
 Agency must notify SBA Central Office of decision to appeal within 10 days after receipt of SBA decision
 Matter of J.R. Youngdale Const. Co. (Comp. Gen. 1985): П is lowest bidder, but are deemed nonresponsible. П goes to SBA for a Certificate of Competency (COC). SBA informs agency that they don’t
have time to do a thorough investigation, & award COC. Agency wants to appeal the SBA’s issuance
of COC, but instead of waiting, they just go ahead and award the contract to next lowest bidder.
 Side note: if the agency hadn’t granted an extension to the SBA, they could have built
responsibility criteria into the source selection plan and screened Youngdale out that way
 But, if responsibility factors are used as rating factors in competitive negotiation, and a small business loses the
contract, SBA can’t do anything about that because they only deal with responsibility determinations.
 Essex shows the incentive to use competitive negotiation when there are small businesses that the
government thinks it would not approve but that the SBA might.
 Judicial Determination
 Forum Available: GAO and CoFC because a negative responsibility determination is just a bid protest
 Standard of Review—to overturn a non-responsibility determination, the protester must show bad taith by the
agency or lack of any reasonable basis for the determination Matter of SAFE.
 RULE: For a due process argument, there must be a recurring non-responsibility determination & a
stigmatizing result.
 Contractor has the right to be notified that of non-responsibility finding, and the right to respond
 Contractor doesn’t have the right to a formal hearing
 CO must give notice in a reasonable time & allow contractor to respond in practicable manner

This is semi de facto debarment

In actual debarment, there is a higher level of procedure available
 Old Dominion Dairy Products v. Secretary of Defense (DC Cir. 1980)—there are due process limits on
responsibility determinations. Contractor can be stigmatized by such a decision and go out of
business. Contractor must be given notice of the charges and an opportunity to respond. The SOR is
deferential to see if there is a rational basis on the merits. Here, due process was violated.
 Notice and opportunity to respond are not judicial hearings
 Case was close enough to a de facto debarment that more than notice was required
 A determination that the contractor doesn’t have the capacity for certain kinds of work would not
trigger a due process argument, even if it happens over and over again
 Determinations about integrity are more likely to trigger due process arguments if they are recurring
 If a disappointed bidder claims the competitor was improperly determined to be responsible
 Absent bad faith, they are unlikely to recover bid preparation expenses under Heyer Products theory
of breach of implied-in-fact contract Keco II (strong presumption against such claims)
 APA standard of arbitrary and capricious applies in the CoFC, not the Heyer Products. Impresa
Construzioni v. US (Fed. Cir. 2001) (SOR is APA not Heyer, but there is broad discretion that CO has in
making responsibility determination so the unwillingness of Keco II against the claim remains).
 Comparative Law Note on Responsibility and Pre-Qualification
 EU—does a responsibility check first of all the offerors with a presumption of non-responsibility
 In the US there’s a presumption that the contractor is responsible
 Range of selection criteria are similar
 EU awards criteria must relate to the product/performance rather than the contractor (responsibility criteria is not
an evaluation factor)
 Prequalification is allowed in the EU and GPA—EU tolerance for unregulated use of restrictive tendering
procedures, and the GPA’s use of selective tendering restrict competition.
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3. Pre-Qualification (Illegal in the United States)
 Definition: Government makes a list of qualified contractors; a generic determination of responsibility in advance
 Looks at present capabilities
 Way to generically determine present and future responsibility
 More efficient—agencies like it but Congress doesn’t
 Legally controversial because it undermines full and open competition
 In re Department of Agriculture Use of Master Agreement (Comp. Gen. 1975)—The Comptroller General found this list
impermissible because it was unduly restrictive on full and open competition. Sometimes devices like this are okay but
this is too restrictive.
 Facts: USDA wanted to hire a contractor to handle all of its projects estimated under $100,000 in the DC area. To do
so, USDA created a Master Agreement to narrow down the 127 firms that responded to the RFP based upon 8
factors in the agreement. The MA was basically a prequalification of contractors
 Analysis: Court asks if this “unduly” restricts competition b/c the USDA wanted to create the MA one time and use it
for all of its procurement needs in the future.
 10 USC § 2319—Encouragement of New Competitors—restrict the use of various prequalification devices including
qualified products lists, qualified bidders lists, and qualified manufacturers lists.
 Requires procuring agency to state in writing the reasoning for a prequalification device
 Applies the least restrictive means test
 Requires that pre-qualification devices allow new prospective offerors to try to qualify. The list of qualified offerors
cannot be treated as closed even at the time offers for a procurement are solicited as long as there’s time for
additional offerors to demonstrate they satisfy the prequalification criteria.
 Feedback must be given for those who failed to prequalify
Pre-Qualification Devices
OKAY
NOT OKAY
Those that deal with absolute qualification (those kept off the list Those that deal with relative qualification (those kept off the list
just can’t do the work)
may be able to do the work)
List open to potential responsible contractors
List closed to potential responsible contractors
Compelling justification
No compelling justification
 Multiple Award Schedules (MAS), Type Of Federal Supply Schedule (FSS)
 Federal Supply Schedule—General Services Administration (GSA), on behalf of itself and the rest of the executive
branch, creates a list and enters into indefinite quantities contract with multiple suppliers.
 Contractor is authorized as a provider for a product and lists a price.
 Any gov’t agency can buy from contractors on FSS. Effectively, GSA created something of a catalogue.
 Legally dubious because they are indefinite quantity contracts instead of requirements contracts but they
usually have some minimum guaranteed quantity to settle consideration
 Can argue that it is nominal and not real consideration
 No one argues that it’s illegal b/c contractors won’t burn the agencies they deal with
 Multiple Award Schedule—subset of Federal Supply Schedules
 Multiple contractors on list and operates same way as above, and tends to be for commercially available
products. This looks a lot like pre-qualification.
 This undercuts policies of F&OC.
 Why isn’t this actual prequalification? The contract is awarded at time a contractor is put on the schedule.
E. Types of Contracts: Allocation of the Risk of Uncertainty
 Types of Contracts:
 Fixed Price Contract—Government ideal
 Must be used in Sealed Bidding contracts (otherwise it wouldn’t make sense to award the contract to the lowest
price) and it’s optional in Competitive Negotiation Contracts
 Two types:
 Firm-Fixed Price—contract where there is an agreed upon fixed amount of money, unless there is an
equitable adjustment at the end; Used when:
 there is adequate price competition,
 price comparisons with prior purchases,
-41-
 cost or pricing information available, OR
 performance uncertainties are identifiable
 Fixed Price with an Economic Adjustment—when cost of performance is driven by a “Known unknown”
factor, this contract is used
 Payment occurs at completion
 Doesn’t need to be audited
 Cost-Reimbursement Contract—gets costs back after audit (since this type of payment encourages diseconomy and
there’s a disincentive to keep costs down) & determination of cost reimbursement; payment occurs in periodic payments
 These contracts are only permitted where the contractor has an internal auditing and accounting system that
allows the agency to determine whether the contractor is entitled to reimbursement it claims
 Cost-Plus Fixed Fee—the amount of the fixed fee cannot be more than 10% of costs
 Cost-Plus Percentage of Cost—PROHIBITED because they encourage contractors to spend more on the job
 Criteria to determine if the contract is a Cost Plus Percentage of Costs Contract:
 Payment is on a pre-determined percentage rate
 Predetermined percentage rate is applied to actual performance costs
 Contractor’s entitlement is uncertain at the time of the contracting
 Contractor’s entitlement increases commensurately with increased performance costs.
 Urban Data Systems—Small businesses are not exempt from the inability to make cost plus percentage of
costs contracts and there is no estoppel against the government (Richmond though this was pre-Richmond).
The contract was void ab initio (Amdahl) because it was a Cost plus percentage of costs contract and the
government can’t make contracts like that
 Facts: SBA subcontracted with UDS where the price terms were that 10% profit on actual costs and
one was cost plus 5%
 Cost-Plus Incentive Fee—contract spells out in a determinative way the lower the costs, the higher the fee
 Cost-Plus Award Fee—government says if contractor does a good job, the government will set up a committee to
decide their fee. It’s similar to cost plus incentive fee, but more discretion is allowed and no formula is used
Sealed Bidding
Competitive Negotiation
Fixed Price
Cost Reimbursement
 Requirements/Indefinite Quantity Contract
 Time and Materials Contract—discouraged because they create no incentive for the contractor to control costs or ensure
that labor is efficiently employed; hybrid between fied price and cost reimbursement contracts
 Starts with a fixed rate for labor per hour
 Number of hours to finish the job isn’t predetermined.
 Add the additional material costs
 Factors in selecting contract types
 Price competition
 Price analysis
 Cost analysis
 Type and complexity of the requirement
 Urgency of the requirement
 Period of performance
 Contractor’s technical capability and financial responsibility
 Adequacy of contractor’s accounting system
 Concurrent contracts
 Extent and nature of proposed subcontracting
 Contracts and Bidding Process
 Sealed bidding always ends with a fixed-price contract because contract is awarded based on the lowest bid
 Competitive negotiation gives the CO a choice between fixed price and cost-reimbursement based on allocation of risk
 Allocation of Risk
 Government’s main goal is to minimize costs, but CO has a lot of discretion in choosing between a fixed price and costbased contract
 This will never be raised in a bid protest because there is no effective judicial review
 Congress does get involved once in a while and tries to for fixed price contracts
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 Low-risk, low uncertainty contracts (which is initial presumption for all contracts) yield a fixed-price contract
 Cost-based contracts are used where the cost of performance is highly uncertain and the risk is high
 Choice of contract is related to the cost of performance and allocation of risk; If the CO chooses to use a:
 fixed price contract where the risk and uncertainty are too high, the CO will get little competition or very high prices
(as insurance form a big cost overrun)
 cost-reimbursement contract, the government doesn’t have control of its liability and can create incentives to
diseconomy the government though it’s subtler under everything but the cost plus percentage of costs contracts
 cost plus incentive fee or cost plus award fee heighten the contractors’ incentives to hold costs down by shifting a
portion of the benefit to the contractor
 3 Types of Auditing Authority—
 Agency (41 USC § 254d(a))—An agency procuring something has the authority to audit performance of the contract under
cost-based contracts
 Subpoena power to enforce audit authority is generally vested in the agency Inspector General (or if it’s a military
contract, the Defense Contract Audit Agency)
 The only type of procurement that leads to cost-based contracts are competitive negotiations that contract for a
cost-based contract and not a fixed price. Sealed bidding always leads to fixed price, so agencies can’t audit.
 GAO/Comptroller General (41 USC § 254d(c))
 Comptroller General has authority whenever contract is the product of a process other than sealed bidding, so it
could be fixed price contracts as well as cost-based contracts that are the product of competitive negotiation
 Applies to negotiated fixed-price contracts and negotiated cost-reimbursement contracts
 Cost-reimbursement contracts permit access to information concerning direct and indirect costs
 Fixed price contracts allow access to direct cost information
 Indirect costs include research & development, marketing & promotion, distribution, administration, etc.
 Direct costs include manufacturing and overhead costs
 Truth in Negotiations Act (TINA) (41 USC § 254b)
 When an agency is going to enter into a contract other than by sealed bidding, and the contract $500k, then the
contractor (or the subcontractor) must provide government with certified cost and pricing data.
 All information that a reasonable buyer/seller would expect to affect the negotiations significantly (records
related to proposal, discussion, pricing, or performance)
 Information must be request at the time of the bidding process
 Contractors do not like this because it is a substantial deviation from the normal ‘arms-length’ bargaining
that go between parties to a private contract. REVERSE EXCEPTIONALISM
 Exceptions to TINA:
 (1) Where there are adequate price competitions—many competitive negotiations/fixed-price contracts can
get out because of this rule
 (2) Where prices are set by law or regulations
 (3) Where items or services are commercial
 (4) exceptional situations where agencies determine it should waive authority & provide written justification
 Consequences—Penalties may be imposed and contract prices may be readjusted if the data supplied is defective
 Bowsher v. Merck (US 1983)— Comptroller General can access direct costs, but not indirect costs. Court looks at
legislative history and finds that Congress did not want unrestricted snooping or privacy violations. Also, there is no
problem with Congress compiling information that it lawfully obtains, it doesn’t need statutory authorization
 Facts: A contract was entered into by negotiation; fixed price based on the commercial catalogue price (GAO
auditing authority). Comptroller General wanted all direct (manufacturing, overhead, delivery) and indirect costs
(marketing/promo, research/development, distribution, administrative). District Court says GAO can audit direct
records, but not indirect records
 Supremes split: two say that the cost is not at issue so only catalogue price should be given; two say that all records
should be given because indirect costs are defrayed through these contracts.
 extended GAO auditing authority:
 cost reimbursement contracts: agency can get all information that bears on costs
 fixed price contracts: agency can get only direct, and not indirect, cost information
 pre-Chevron cases have stare decisis effect even though they didn’t defer to the agency
 Congress has essentially ratified this decision when re-codifying the statute by not changing the language
 Blackmun dissent: nothing is directly pertinent if it is a fixed price contract
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Who is
auditing?
Procuring
Agency
Statutory
Authority
§254r6d(a)(1)
GAO
§254d(c)(1)
TINA
Auditing
Authority
TINA §254(b)
Types of procurement that they can audit?
What type of information can they audit?
Cost-based contracts (competitive
negotiation with cost-based contract)
 Includes prime & sub-contractors.
“Other than sealed bidding” (all competitive
negotiation contracts)
 This includes fixed price, cost-based
contracts
 Broader than agency authority
TINA applies when:
(1) the contract is not sealed bidding
(therefore, competitive negotiation)
(2) Over $ threshold ($500K)
(3) No exception applies (see below)
(4) Audit authority only available if cost &
pricing data were requested as part of the
negotiation (at time of contracting)
(5) Follow up audit available only for 3 years
after the final payment under the contract.
Exceptions:
 Adequate price competition
 Prices set by law or reg.
 Commercial item
TINA is most applicable when competitive
negotiation produces a cost-based contract
Government checks costs spent on contract to
make sure $ was really spent, & that $ correctly
charged.
 When contract is fixed price, GAO can get
direct cost information. (“directly pertain”)
 When contract is cost-based, both direct and
indirect information is available.
 See Bowsher above
 Cost and pricing data  Includes all info that
“a prudent buyer or seller would reasonably
expect to affect price negotiations
significantly.”
 Contractor must certify the data
 Audit authority extends for 3 years
 Greatest of gov’t audit authority to make sure
gov’t is getting best price
 Gov’t can then adjust price as result of this
audit
 For a fixed price K, direct cost information is
available, For a cost based contract, both
direct and indirect cost info is
available.(Indirect costs include: Promotion,
R&D, marketing, advertising, etc.)
F. Collateral Socio-Economic Policies
 Introduction
 Controversial doctrine that adds an element of subjectivity to the process
 Collateral socio-economic policies raise controversy because of the tradeoff between collateral objectives and achieving a
good value for the federal funds expended on procurement
 Economically—collateral socio-economic policies raise the cost of entering the marketplace, thereby lowering
supply and raising the costs the government must pay
 Is it fair for government contractors to be subject to dual regulations?
 3 Types of Policies
 Small Business Preferences—certain contracts are restricted to small businesses
 Preferences for Disadvantaged Business Owners—constitutionality is debated
 Often rest on § 8 of the SBA authorizing SBA to enter into prime contracts with agencies and subcontract the work
 Adarand v. Pena (1995)—race based preference in government contracts are subject to strict scrutiny under the
Equal Protection Clause but it has never been fully litigated
 Gender preferences are only subject to heightened scrutiny so they might pass constitutional muster (as opposed
to race based contracts, which might not)
 Domestic Preference Policies—increasingly trumped by international trade agreements that the US has signed
 Ex: Buy American Act trumped by the Trade Agreements Act of 1979
 Equal Opportunity Employment Policies—Mandates inclusion of standardized anti-discrimination clauses in almost all
government contracts
 Labor Standards
 Davis-Bacon Act: requires federal construction contractors to pay prevailing wages
 Walsh-Healey Act—contracts over $10k must pay workers the minimum wage as determined by law
 Service Contract Act—requires federal service contractors to pay min. wages in locality where work is performed
 Comparative Law Note on Collateral Socio-Economic Policies
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 All other countries have issues with collateral socio-economic policies as well
 EU/GPA rules—cannot discriminate in favor of domestic firms. Countries often write rules that don’t look like they favor
domestic firms, but they do in practice
IV.
Administration of Government Contracts
A. General Approach to Contract Interpretation
 General Approach
 Write contracts without ambiguities that prepare for any contingency!
 Not always effective because it’s impossible to foresee everything and it’s not cost-effective
 Government drafters have the advantage of repetition
 Part 52 of the FAR—library of standardized contract clauses
 GL Christian doctrine—if a CO forgets a standard clause, it’s read into the contract anyway
 Interpretation problem—choice of law issues
 Kimbell Foods (uniformity was a factor) & Clearfield Trust show us this rarely happens but if it does courts
look to judge-made federal common law after the statutory and regulatory alternatives are exhausted if
there’s a gap in federal law.
 US v. Wegematic—Court, rather than make up federal common law, looks to the UCC because it’s uniform among the states.
 Here there is no federal case law on point. The court looks to UCC § 2-615 for law on impracticability that says that unless
the contract states otherwise, the party is excused if some event occurs that parties assumed would not happen (basic
assumption). The court find that the assumption was that they would perform or pay damages, not perform within cost
limits. The risk is on the contractor. They should have contracted out of risk, but here they expressly agreed to damages
for this contingency.
B. Contractor’s Rights
 Equitable Adjustment
1. Delay
 Excusable Delay—deal with events that cause the contractor’s performance to be tardy, like an “Act of God” provided the
cause was not foreseeable or the fault of the contractor (war, floods, fire, strikes, unusually severe weather, etc.)
 Governs whether the contractor should be excused from sanctions for late performance—including default
termination—that would otherwise be applicable
 Compensable Delay—goes beyond excusable delay and creates an affirmative right to additional compensation in the
form of an equitable adjustment; found in the suspension of work clauses
 (a) clause: power of CO to suspend work for convenience
 (b) Constructive suspension from work has same effect & consequences as actual suspension & relief is the same
 The CO has the power to suspend for convenience of government, but
 The delay is compensable if Freuhauf test.
 Contractor gets the costs, not profit(as opposed to change order which gets costs and profit)
 Freuhauf Test—to determine when extra costs are available as a result of compensable delay:
 Suspension serves the convenience of the government
 Creates a delay of an unreasonable amount of time/unreasonable cost on the contractor
 Not the fault of the contractor
 Delay resulted from the action of CO or wrongful inaction
 Freuhauf Corp. v. US (Ct. Cl. 1978)—contractor is entitled to an equitable adjustment because contractor
was not at fault, there was an unreasonable delay, & though the delay was not necessarily caused by the CO
(controversial), the CO should have acted & made it clear it was for the convenience of the government
 Contractor must give notice of the claim for equitable adjustment in writing within 30 days
 Used to be clearly that the contractor could get extra compensation if the delay was not the contractor’s fault and was the
government’s fault. Now, some forms of delays that are not the government nor the contractor’s faults are compensable
Excusable Delay
Compensable Delay—line is not clearly drawn between what is and isn’t
compensable anymore
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2. Changes
 Fundamental Requirement: A Written Change Order from the CO
 Except when there is a constructive change
 CO can change:
 Specifications
 Method of shipment or delivery
 Place of delivery
 Change must be within the scope of the original contract
 Contractor rarely objects to excessive change orders, but will ask for more money
 Would the change invoke a remarkably different field of competitors?
 Cardinal change—outside the scope of the contract
 Notice requirements
 Applies to both express and constructive changes
 Must give contemporaneous notice stating that extra costs will be incurred
 More difficult with constructive change
 Generally must be in writing
 When there is an oral change order and the contractor has completed performance with respect to
that oral change order, the government is bound
 WH Armstrong v. US (Ct. Cl. 1943)— where there has been performance based on reliance on an oral
change order by someone with authority, the government must pay additional compensation
 Facts: Armstrong contracted to build an office’s quarters for the government. It submitted its
bid after seeing the kind of bricks that the government would provide and making its price
based on that. After a month of performance, the CO directed Armstrong to stop using the
nice bricks and to use (and clean) the nasty bricks. The nasty bricks required cleaning and
extra mortar (cost more). Armstrong protested to CO, who orally agreed to pay extra costs
 Be careful because estoppel doesn’t usually work & contractor has to call it something else.
 Standard of Compensation
 Delay—extra costs only, though under suspension there may be extra cost for acceleration if the completion
date isn’t also moved
 Change—extra costs PLUS a reasonable profit
Express
Constructive
Suspension/delay
No contemporaneous notice requirement
File timely claim
Contemporaneous Notice Requirement
File timely claim
Changes
Contemporaneous notice requirement
File timely claim
Contemporaneous notice requirement
File timely claim
3. Constructive Changes
 Not recognized by FAR Changes Clause, but has gradually been accepted by government contracts law
 Four Categories of Constructive Changes:
 (1) Government incorrectly interprets contract, forcing contractor to perform more extensively or with more
expense/difficulty
 Equitable adjustment for constructive change is alternative to liability for breach
 Additional compensation is incentive to continue performance
 (2) Defective specifications or governmental nondisclosure (Transamerica)
 Government misleads contractor as to nature/extent of performance
 Construction: special provisions for equitable adjustment for differing site conditions
 (3) Acceleration—There are circumstances for excusable delay, but government insists on on-time performance
imposing additional costs
 (4) Lack of appropriate government cooperation in facilitating performance—Government fails to take reasonably
expected measures to facilitate performance
 Any disputes that arise from Changes Order will go through the process of the CDA
 If government and contractor can’t decide on compensation
 Government says contractor incurred no additional expense, so contractor shouldn’t get anything, etc.
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C. Government Prerogatives
1. Termination for Convenience of Government (Exceptionalism!)
 Termination for Convenience
 Whenever the CO determines that the termination in is the interest of the government
 Procedure:
 CO must give WRITTEN notice to contractor
 Termination can be in whole or in part
 Contractor submits a Termination Settlement Proposal
 Compensation Available to the Contractor:
 Contract price for work delivered and accepted
 Cost of performance up to the time of termination for any work that hasn’t yet been delivered and accepted (also
costs of subcontracts)
 Fair and reasonable profit on cost of performance up to the time of termination unless government can prove that
had the work gone forward to completion, the contractor would have suffered a loss
 Situations Warranting a Termination For Convenience
 Amdahl—contractor one already behave performance and contractor 2 won the bid
 No-Cost Termination For Convenience when:
 It is known that the contractor will accept one,
 Government property was not furnished, and
 There are no outstanding payments, debts due to the government or other contractor obligations
 Constructive Termination For Convenience
 Erroneous termination for default is a termination for convenience. Torncello
 Default—stop work, if successful in litigation, the default will turn into a termination for convenience
 Constructive TFC is also applicable when the government wrongful performance under requirements contract, but
could have TFC. The result protects the government from liability for breach of contract
 Often used, as in Amdahl, when procuring agency, b/c of a bid protest, determines that the bid was made unfairly.
This keeps the government from being liable for breach of contract where a court holds that a termination for
default had been unjustified
 College Point Boat case discussed in Torncello—if the government erroneously terminates for default, the termination is to
be treated as a constructive termination for convenience. This prevents the government from being liable for breach of
contract where a court later holds that a termination for default was unjustified
 Government fails to abide by the contract
 Torncello v. US (Ct. Cl. 1982)—invented the idea that there must be changed circumstances for a termination for
convenience to be valid.
 Termination for convenience should be limited to unforeseen or altered circumstances. Suggests that TFC
should not be available simply because the government now realizes that it chose the wrong offer based on
more careful consideration of information that had been available at the time of contract formation. TFC
shouldn’t even be allowed just because a better deal becomes available.
 The Termination for Convenience was wrongful and in dictum, suggests bad faith is the test (terminating for
a better price) but is unclear about terminating when the price for the product is greatly reduced
 Krygoski Construction Co. v. US (Fed. Cir. 1996)—appears to be law today; changed circumstances demonstrated justify
termination for convenience when government entered the contract intending not to honor its provisions
 Facts: government discovered work involved was bigger than they thought, so they cancelled the earlier solicitation
to encourage more competition (nothing wrong with that)
 Fed. Cir: TFC based on changed circumstances is only improper if the government intended from the outset not to
honor the contract. Bad Faith Test
 Bad faith: (95%)
 TFC to get a better price is bad faith (better for contractors than Torncello)
 you’re the contractor I’m using, even if another one that is cheaper comes along
 In some cases, don’t need bad faith (5%)
 the court also say the changed circumstances test only applies when the government entered into
the contract all along intending from the outset not to honor the contract (this is really about bad
faith)
 if there are changed circumstances, that is good faith, then the TFC is valid
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
if government starts out in bad faith, but then there is a good reason, like changed circumstances,
then that can be good faith
 What is unclear is in what circumstance is there bad faith?
 Changed circumstances must not be the fault of the government, or if it is, it cannot be the fault of the government
in the administration of the contract
Yes.
Yes. Like no more
pests
LIke Torncello
TFC in bad faith?
Are there changed
circumstances?
Did gov’t enter
contract intending
not to honor it?
(bad faith?)
No. Intended to
comply wihth
contract?
Krygoski
TFC in bad faith?
No – invalid TFC
Yes – invalid TFC
No – valid TFC
Yes – invalid TFC
No (ie, changed circumstances
or a resolicitation) – valid TFC
Grounds for Termination for Default
Cure Notice Requirements10 day notice to "cure" is needed?
NO should be obvious that the contractor is not performing on time.
- However, Devito is an exception: government can waive right to TFD
- Time is always of the essence, unless waived by the government
2.Failure to reasonably progress so as to endanger ability to perform
YES, 10 day notice needed – however, see substantial compliance
Sub-variety of "time problems"
doctrine
Allows govt to terminate for default w/out waiting for breach to occur
If the K has numerous interim benchmarks, this will be unnecessary
3.Failure to perform any specification of the contract (quality
YES, 10 day notice needed – however, see substantial compliance
performance)
doctrine
Ground
1.Failure to Perform on Time
includes failure to satisfy contract-based benchmarks
FAR clause
Grounds for
using
TERMINATION FOR CONVENIENCE V. TERMINATION FOR DEFAULT
TFC
TFD
48 CFR § 52.249-2
48 CFR § 52.249-8
 CO authority to terminate if w/in gov’t’s
 Contractor fails to meet deadline for performance (no
interest.
cure notice req’d, but see DeVito). (Time off essence,
gov’t can terminate if 15 mins late.)
 There must be a change of circumstances, not
just a better deal. (Krygoski)
 Failure to make progress, endangering timely
performance. (Cure notice required) high burden on Gov
 Gov’t must not use TFC in bad faith.
 Otherwise fail to perform (goes to quality; cure notice
(Krygoski)
required
 If gov’t enters K in bad faith, but then
 Substantial Compliance Doctrine
terminated because of changed circumstances
Only applies when contractor delivers substandard goods
that is OK.
delivered on time. You get benefit of cure notice if there is
 Gov’t never has a duty to TFC (Wegematic)
substantial compliance:
 When gov’t fails to perform on K, gov’t is
 Defects are minor
allowed to treat it as a constructive TFC. (See
 Defects are remediable
Torncello).
 Contractor reasonably believed in good faith that
 If a gov’t improperly terminated for default, it
you had met the qualitative requirements
is treated as a TFC.
 Gov’t must TFC if bid protester wins and K is
already being performed by someone else
(Amdalh)
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Procedure
Constructive
Required
Authority
Compensation
Available for K’or
 Gov’t must give written notice to contractor.
(person giving notice must have CO authority)
 Termination/Settlement Proposal (TSP)
composed by contractor.
 If gov’t agrees, this is the end.
 If not, goes up under CDA (BCA or CoFC)
 When gov’t fails to perform on K, it is treated
as constructive TFC. (Torncello)
 When gov’t erroneously termed contract, it is
constructive TFC.
 CO!
 Price for work delivered and accepted before
TFC.
 Cost of performance for work done before
TFC.
 Reasonable profits on cost of performance for
work done before TFC. (unless gov’t can show
that contractor would have lost $ if K
completed).
 Anticipated profit on work that hasn’t been
performed (different from expectancy
damages in private contract situation).
 If contractor fails to make progress or fails to perform
(quality), then gov’t must issue cure notice prior to TFD
and allow contractor 10 days to cure. If contractor misses
deadline for performance, gov’t can just TFD.
 If there is valid TFD, contractor is liable for cost of cover
(getting same goods/services from others).
 If there is a missed time deadline, and gov’t by words or
conduct, encourages contractor to continue, TFD for
failure to meet deadline is now waived.
 In this situation, gov’t can still set another deadline, but
then must give a cure notice.
 If contractor is in default of a fixed price contract the
contractor is entitled to payment for accepted work
 CO!
 Price for goods delivered and accepted
2. Inspection and Acceptance
 Two basic kinds of problems w/ performance:
 Timeliness
 Quality—compliance with specifications where inspection and acceptance provisions are central
 Contract Clause imposes two layers of quality control:
 In-house Inspection—government requires contractors to establish quality control plans, which they can review
 Government Inspection—broad right to carry out its own inspections
 Right to inspect does not relieve contractor of perform the contract
 Government doesn’t waive any rights by failing to inspect properly or at all
 Inspection clause—acceptance is conclusive on the government with exceptions for latent defects, fraud (on
the part of the contractor, not the government), gross mistake, or as otherwise provided in the contract.
 Government inspections must be reasonably calculated to insure conformity w/ government
specifications. If the inspection require the contractor to perform in excess of the contract, then this
amounts to a constructive change
 Government can select the place and time of inspections at place of manufacture or point of delivery
 Government doesn’t have a warrant of merchantability so if they accept they’re stuck. McQuagge
was fraudulent but still the government had already accepted
 Exception for latent defects or fraud (unless the government was involved in the fraud)
 Each party pays for its own inspections
 Government’s remedies when goods fail inspection:
 Government can reject or require correction
 If contractor fails to cure:
 Gov’t can secure replacements at cost to contractor,
 Terminate for default, OR
 Order the delivery of the goods w/o having it treated as acceptance, and reduce price (treated as a
constructive change)
3. Strict Compliance
 RULE: There must be strict compliance even if there is no material breach
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 CO can’t accept a nonconforming bid, because we want to have F&OC (Prestex).
 Arrow Lacquer Corp., (ASBCA, 1958)—Government has right to terminate contract for smallest non-compliance; fairness to competition:
CO shouldn’t be forced to accept something that doesn’t meet specifications, contractor may be doing it cheaper, thus violating F&OC
 Facts: contract for paint; it was oh-so-slightly off color and government wanted contractor to change it. The contractor wanted
government to accept it as it was
 Notes: influence of military procurement: many developing nations want to exclude military procurement from government
contracts law—courts and BCAs were very reluctant to second-guess the CO’s judgment on a military contract; because of that
reluctance courts have not been willing to second-guess the CO’s judgment on non-conforming goods (law has backed this up)
4. Termination for Default 48 CFR § 52.249-8
 Reasons for Termination For Default (a)(1):
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





(i) Failure to perform on time at any deadline, final or interim,
(ii) Failure to progress reasonably so as to endanger the ultimate completion, OR
 If contractor have a lot of interim benchmarks, this won’t really be a problem
 It is also harder to prove; it is a fallback
 (iii) Otherwise failure to perform any provision of the contract quality problems
De Vito—deals w/ doctrines of waiver when government doesn’t speak up after a deadline has passed. New deadline or cure notice
Cure Notice—Right to TFD may be exercised where contractor doesn’t cure failure within 10 days (or more, discretion of CO) after
receipt of cure notice. If you’ve missed a deadline (i), there’s no need for a cure notice. Many cases it’s just a formality
Substantial Compliance Doctrine—where nonconforming goods are delivered in a timely fashion, substantial compliance bars an
immediate default termination, though government has the right to insist on correction of nonconformity
 (1) Contractor must deliver on time
 Except where failure to terminate within a reasonable time after the default under circumstances indicating
forbearance, OR
 Reliance by the contractor on the failure to terminate and continued performance by him under the contract with the
government’s knowledge and implied or express consent (DeVito v. United States Ct. Cl. 1969)
 (2) Defects must be minor
 (3) Defects must be readily correctible
 (4) Contractor must have reasonably believed that it had performed correctly
 All substantial compliance gets you is a right to a cure notice, doesn’t get your goods accepted.
Financial Provisions
 If contractor is terminated for default, government is entitled to excess cost (cost of re-procurement)
 Gov’t is still obligated to pay for goods that were delivered and accepted before the termination for default
 Aside from that, it is only obligated to pay for materials and half-built stuff that the gov’t chooses to accept
 Contractor would get no increased cost and any profit element that would have appeared under TFConvenience
 Disputes about amount due are subject to Contract Disputes Act
Politically-Influenced Terminations – A-12 Litigation
 Agency doesn’t want to terminate: really is a default, but the real reason for the termination is political pressure
 Court treats this as a TFC
 Just because the head of an agency makes the decision to TFD, however, doesn’t mean it’s for policy reasons
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