Government Contracts
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Overview
• What is a Government Contract?
• Authority to Enter into Government
Contracts
• Four Phases of Government Contracts
• The Role of the Government Contract
Professional
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Sources
• Statutes
• Federal Acquisition Regulation (FAR)
• 48 C.F.R. Chapter 1 (FAR Council)
• http://farsite.hill.af.mil/
• Don’t forget FAR Supplements…
• Case Law—administrative cases and
Federal cases
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What is a Government
Contract?
• Offer, Acceptance, Consideration…
• Government is a party (of course)
• Specialized statutes, regulations, and
case law
• Many differences from common law: e.g.,
socioeconomic policy, contract changes,
contract terminations, etc….
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Offer
• An offer is a response to a solicitation that, if
accepted, would bind the offeror to perform the
resultant contract.
• The offer indicates an intention to be bound to an
agreement.
• Submitted in the form of “Bids” or “Proposals”
• Either party can make “offers”
• Distinction between offer and advertisement.
• Advertisements are generally construed to be invitations for
offers.
• IFB, RFP, RFQ are advertisements. The contractor’s bid
constitutes an offer that may or may not be accepted by the
government.
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Acceptance
• Acceptance is an unequivocal communication to the
offeror indicating the intention to be bound to the exact terms
of the offer.
• An unequivocal response to an offer is one that is certain,
decided, and doubtless.
• A conditional response or one that hedges, procrastinates, or
leaves the offeror in doubt does not constitute an acceptance.
• For an acceptance to occur there must be no question that the
offeree intends to be bound to the exact terms of the offer.
• Therefore, acceptance must be clearly communicated to the
offeror to become effective.
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Consideration
• Something of value that one party of a contract
gives to the other contract party in exchange for
something else of value.
• Sufficiency vs. adequacy
• Sufficient consideration - when the consideration has some
value that induces the other party to perform.
• Adequacy relates to whether the exchange is a fair
bargain.
• The law will not look to the adequacy of the consideration.
If a party makes a bad deal, the court will lend no
assistance.
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Competency of Parties
• Parties to a contract must have the competency to
enter into an agreement. If a person does not
have the mental capacity to formulate the requisite
intent to be bound, there can be no meeting of the
minds and there can be no contract.
• In government contracting the issue of whether a
corporation is competent will generally be whether
it is legally entitled to enter into the agreement.
• The corporation may be acting outside its charter
(stockholders may have the power to rescind the
contract).
• Relatedly, those who act on behalf of a company must
have the authority to act!
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Legality of Purpose
• Violation of statute
• Certain conduct may be expressly prohibited by statute
• A contract that imposes a duty to perform such conduct is
also illegal and will not be enforced.
• Violation of public policy
• Public policy applies to matters of public morals, health,
safety, and welfare.
• One cannot do that which has a tendency to be injurious
to the public or against the public good.
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Certainty of Terms
• Lack of certainty concerning the terms and conditions of the
contract may render an agreement unenforceable.
• Terms must be clear enough to permit the courts to interpret
the duties and obligation to be performed by either party.
• “Rules of Construction” as applied by courts:
• The ordinary meaning generally given to words applies.
• Technical terms and words are given their technical meaning
unless clearly indicated otherwise.
• The contract must be read and interpreted as a whole.
• Specific terms control over general terms when in conflict.
• Ambiguities are interpreted against the drafter of the contract.
• Best evidence of the parties’ intention is in the written contract.
• Purpose is to bar oral evidence that contradicts, adds to, or
otherwise varies the terms of the written contract.
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FAR Definition of a
“Contract”
Definition:
“...a mutually binding legal relationship
obligating the seller to furnish the supplies
or services (including construction) and
the buyer to pay for them. It includes all
types of commitments that obligate the
Government to an expenditure of
appropriated funds…”
FAR 2.101
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FAR--Uniform Contract Format
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Sec
Sec
Sec
Sec
Sec
Sec
Sec
Sec
A:
B:
C:
D:
E:
F:
G:
H:
Solicitation Form
Supplies or Services and Prices/Costs
Description/Specs/Work Statement
Packaging and Marking
Inspections and Acceptance
Deliveries or Performance
Contract Administration Data
Special Contract Requirements
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FAR-- Uniform Contract Format
(Continued)
• Sec I:
• Sec J:
• Sec K:
Contracting Clauses
List of Attachments
Representations, Certifications,
Exhibits, and Other Attachments
• Sec L:
Instructions, Conditions, and Notices
to Offerors
• Sec M: Evaluation Factors for Award
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“Contracting”
…purchasing, renting, leasing, or
otherwise obtaining supplies (products) or
services from nonfederal sources.
Contracting includes reviewing
descriptions of supplies and services
required, solicitation and selection of
sources, preparation and award of
contracts, and all phases of contract
administration/management.
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General Categories
of Government Contracts
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Supplies
Construction
Services
Research and Development (R&D)
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Every Good Government
Procurement System Has…
• Competition
• Transparency
• Integrity
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Government Authority
• Who has the authority to bind the
Government with a contract?
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Government Authority
• General Rule: Only someone with
actual authority may bind the
Government
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Government Authority
• Agency Heads (FAR 1.601)
• By virtue of their positions (e.g., ecAF)
• Delegate down to Senior Center
Contracting Official (SCCO)
• Folks with warrants (FAR 1.602)
• Contracting Officers (COs)
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Government Authority
• HCAs appoint COs IN WRITING
(WARRANT)
• Warrant must be posted
• May include further limitations (e.g.
dollar limits)
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“CONTRACTING OFFICER”
- Person who has authority to enter into,
administer, or terminate contracts and to
make related determinations and findings.
- May bind the government only to the
extent of the authority delegated.
- CO authority is received from the
appointing authority with clear instructions in
writing regarding the limits of that authority.
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Government Authority
• What about other folks?
• Apparent authority—not recognized
• Ratification (of unauthorized act)
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Contractor Authority
• All types of authority apply:
• Actual
• Apparent
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4 Phases of Government
Contracts
• Acquisition Planning
• Pre-Award (Source Selection)
• Post-Award (Performance)
• Close-out
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4 Phases of Government
Contracts
• Acquisition Planning
• Pre-Award (Source Selection)
• Post-Award (Performance)
• Close-out
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Acquisition Planning
• KEY to successful procurement
• Basically, looking at:
• What do we need? (user)
• How are we going to get it? (contracting)
• How are we going to pay for it? (finance)
• Are we following the rules? (contracting/legal)
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Acquisition Planning:
Basic Contract TYPES
• Two Basic Types:
• Fixed Price
• Cost
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Fixed Price Contract (FAR
Subpart 16.2)
• Set, predetermined price
• Price not subject to any adjustment based on contractor
incurred costs
• Who bears the risk?
• Contractor bears risk of increased costs (bound to
perform at specified price)
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Fixed Price Types
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Firm Fixed Price
Firm Fixed Price with EPA
Fixed Price Prospective Redetermination
Fixed Price Retroactive Redetermination
Firm Fixed Price Level of Effort
Fixed Price Incentive Firm Target
Fixed Price Incentive Successive Target
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Cost Reimbursement Contract
(FAR Subpart 16.3)
•Government pays contractor’s costs of
performance
•Who bears the risk?
•Government bears risk of increased costs
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Cost Reimbursement Types
• Cost
• Cost Sharing
• Cost Plus Fixed Fee
• Completion
• Term
• Cost Plus Incentive Fee
NOTE:
(1) Contractor’s accounting system must be adequate for determining costs
(2) Government must have appropriate surveillance during performance
(3) Cost-reimbursement contracts are prohibited for acquiring commercial items
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Acquisition Planning:
Contract TYPES—What else?
• Time & Materials
• Provides for acquiring supplies or services on the basis of:
• Direct labor hours at specified fixed hourly rates that
include wages, overhead, general and administrative
expenses, and profit; and
• Materials at cost, including, if appropriate, material
handling costs as part of material costs
• Labor-Hour
• Variation of the time-and-materials contract, differing only
in that materials are not supplied
NOTE: May be used only when it is not possible at the time of placing the contract to
estimate accurately the extent or duration of the work or to anticipate costs with
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any reasonable degree of confidence.
Acquisition Planning:
Contract METHODS
• Negotiated Procurements (FAR Part 15)
• Sole Source Acquisitions
• Competitive Acquisitions
• Best value
• Tradeoff
• Lowest Price Technically Acceptable
• Oral Presentations
• Request for Proposals (RFPs)
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Acquisition Planning:
Contract METHODS
• Sealed Bidding (FAR Part 14)
• Price is the only basis for
award
• Invitation for Bids (IFBs)
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Acquisition Planning:
Contract METHODS
• Acquisition of Commercial Items (FAR Part 12)
• Definition of CI and Services (Section 2.101)
• Simplified Acquisitions (FAR Part 13)
• Under $3,000 (Micro-purchase)
• $3,000 to $100k (Simplified acquisition
threshold--SAT)
• Up to $5.5M (SAT for commercial items)
• Fair Opportunity (FAR Part 16.505)
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4 Phases of Government
Contracts
• Acquisition Planning
• Pre-Award (Source Selection)
• Post-Award (Performance)
• Close-Out
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Pre-Award (Source Selection):
Competition
• Law requires, with certain limited exceptions, that
contracting officers promote and provide for full
and open competition
• Micro-purchases (under $3,000)
- “reasonable price”-FAR 13.202
• Between $3,000 and Simplified
Acquisition Threshold (SAT)
- “reasonable number of
sources” (“Rule of 3”)-FAR 13.104
• Over SAT-Competition in Contracting Act
- Full and open competition-FAR 6.101
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Pre-Award (Source Selection):
Competition
• Full and open competition AFTER EXCLUSION OF
SOURCES FAR Subpart 6.2
• e.g., contracts set aside for small business, etc.
• OTHER THAN full and open competition FAR
Subpart 6.3
• requires JUSTIFICATION & APPROVAL (J&A);
• e.g., only one source exists
• e.g., “unusual and compelling urgency”
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Pre-Award (Source Selection):
Advertising
• Over $25,000
• Government-wide Point of Entry
(GPE) -- www.eps.gov or
www.fedbizopps.gov
• $10,000 to $25,000
• Posting in a public place
• Under $10,000
• No requirement
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Pre-Award (Source Selection):
Evaluation of Offers
• Responsibility (FAR 9.103)
• A Government contract shall be
awarded only to a RESPONSIBLE
contractor
• Responsiveness (FAR 14.301)
• Offers must meet ALL essential
requirements of the solicitation
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Pre-Award (Source Selection):
Bid Protests
• What are they?
• Basically, offerors or potential offerors
challenging a solicitation or a contract
award
• Various Remedies—inc. possible STAY…
• Of Award—Pre-Award
• Of Performance—Post-Award
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Pre-Award (Source Selection):
Bid Protests
• Where are they filed?
• Agency Protests (FAR Subpart 33.1)
• Government Accountability Office
(GAO)
• Court of Federal Claims (COFC)
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4 Phases of Government
Contracts
• Acquisition Planning
• Pre-Award (Source Selection)
• Post-Award (Performance)
• Close-out
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Post-Award (Performance)
• The “Life” of the Contract
• Contract Administration
• Contract Changes
• Claims/Disputes
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Post-Award (Performance):
Contract Administration
• Contract Administration
• Primarily conducted by contracting office personnel
(along w/Program Management and functional
quality assurance folks)
• Government should not wait until there is a problem
to involve JA or DCMA
• KEY: Foster strong relationships with
all resources available
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Post-Award (Performance):
Changes/Modifications
• Contract Changes (FAR Subpart 43.1)
• Changes Clause allows “minor” changes
• EQUITABLE ADJUSTMENT in price
• Change must be:
• WITHIN SCOPE (of work), and
• Made by one with PROPER AUTHORITY (CO)
• Unilateral Modifications
• Bilateral Modifications
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Post-Award (Performance):
Contract Disputes
• Contract Disputes (FAR Subpart 33.2) - Administrative
or judicial litigation between the contractor and the
agency, relating to contract performance
• Reasonable efforts should be made to resolve
controversies prior to submission of claim
• Use Alternative Dispute Resolution (ADR) to
maximum extent practicable
• If contractor initiates claim, CO must issue written
decision
• Adverse final decision by CO perfects appeal to the
Armed Services Board of Contract Appeals (ASBCA) or the
Court of Federal Claims (COFC)
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4 Phases of Government
Contracts
• Acquisition Planning
• Pre-Award (Source Selection)
• Post-Award (Performance)
• Close-Out
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Close-Out
• “Natural” Causes
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Close-Out
• Early Termination
• Convenience
• Default
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Close-Out
• Termination for Convenience of the
Government (T4C) (FAR Part 49)
• May be for any reason
• Contractor entitled to submit settlement
proposal
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Close-Out
• Termination for the Default
(T4D) (FAR Part 49)
• Contractor’s unexcused, present or
prospective failure to perform
• Contractor may have to pay for
Gov’t re-procurement costs
• Risk of debarment
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Role of the Government
Contract Professional
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Legal Reviews
Legal Advice
Business Counsel
Litigation Support
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Role of the Government Contract
Professional: Legal Reviews
• Contract File Review
• Funding Document
• Contract Document
• Statement of Work (SOW)/Statement of
Objectives (SOO)/Performance Work Statement
(PWS)
• Price Negotiation Memorandum (PNM)
• Technical Evaluation
• Other Contract Documents
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Final Thoughts
• Don’t be intimidated by the process
• Do assure that the Government person with whom you are dealing has
actual authority to bind the Government--Only the Contracting Officer
may change or agree to changes in the contract
• The contract is interpreted as a whole--Read the entire contract
including special contract provisions and the attachments (i.e.,
SOW/SOO, CDRLs, etc.)
• Requirements or material changes must be approved and documented
• “No funding” means “no requirement”
• The contract Schedule takes precedence over contract clauses
• Contract clauses take precedence over other documents, exhibits and
attachments
• Other documents, exhibits and attachments take precedence over the
specifications
• Use “Plain English” versus technical language.
• Avoid Ambiguous language--ambiguity is interpreted against the drafter!
• Don’t be intimidated by the process
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