1 government contracts. 2 3 overview what is a government contract? authority to enter into...

1Government ContractsGovernment 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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• An offer is a response to a solicitation that, if An offer is a response to a solicitation that, if accepted, would bind the offeror to perform the accepted, would bind the offeror to perform the resultant contract. resultant contract.

• The offer indicates The offer indicates an intention to be bound to an intention to be bound to an agreementan agreement. .

• Submitted in the form of “Bids” or “Proposals”Submitted in the form of “Bids” or “Proposals”• Either party can make “offers”Either party can make “offers”• Distinction between Distinction between offeroffer and and advertisementadvertisement..

• Advertisements are generally construed to be Advertisements are generally construed to be invitations for offersinvitations for offers. .

• IFB, RFP, RFQ are IFB, RFP, RFQ are advertisementsadvertisements. The contractor’s bid . The contractor’s bid constitutes an offer that may or may not be accepted by constitutes an offer that may or may not be accepted by the government.the government.

Offer

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• Acceptance is an Acceptance is an unequivocal communicationunequivocal communication to to the offeror indicating the intention to be bound to the the offeror indicating the intention to be bound to the exact terms of the offer.exact terms of the offer.

• An unequivocal response to an offer is one that is An unequivocal response to an offer is one that is certain, decided, and doubtless.certain, decided, and doubtless.

• A conditional response or one that hedges, A conditional response or one that hedges, procrastinates, or leaves the offeror in doubt does not procrastinates, or leaves the offeror in doubt does not constitute an acceptance.constitute an acceptance.

• For an acceptance to occur there must be no question For an acceptance to occur there must be no question that the offeree intends to be bound to the exact that the offeree intends to be bound to the exact terms of the offer. terms of the offer.

• Therefore, acceptance must be clearly communicated Therefore, acceptance must be clearly communicated to the offeror to become effective.to the offeror to become effective.

Acceptance

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• Something of value that one party of a Something of value that one party of a contract gives to the other contract party in contract gives to the other contract party in exchange for something else of value.exchange for something else of value.

• Sufficiency vs. adequacySufficiency vs. adequacy• Sufficient consideration - when the consideration has Sufficient consideration - when the consideration has

some value that induces the other party to perform. some value that induces the other party to perform. • Adequacy relates to whether the exchange is a Adequacy relates to whether the exchange is a fairfair

bargain.bargain.• The law will not look to the adequacy of the The law will not look to the adequacy of the

consideration. If a party makes a bad deal, the court consideration. If a party makes a bad deal, the court will lend no assistance.will lend no assistance.

Consideration

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• Parties to a contract must have the Parties to a contract must have the competency to enter into an agreement. If a competency to enter into an agreement. If a person does not have the mental capacity to person does not have the mental capacity to formulate the requisite intent to be bound, formulate the requisite intent to be bound, there can be no meeting of the minds and there can be no meeting of the minds and there can be no contract.there can be no contract.

• In government contracting the issue of In government contracting the issue of whether a corporation is competent will whether a corporation is competent will generally be whether it is legally entitled to generally be whether it is legally entitled to enter into the agreement.enter into the agreement.• The corporation may be acting outside its charter The corporation may be acting outside its charter

(stockholders may have the power to rescind the (stockholders may have the power to rescind the contract).contract).

• Relatedly, those who act on behalf of a company Relatedly, those who act on behalf of a company must have the must have the authorityauthority to act! to act!

Competency of Parties

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• Violation of statuteViolation of statute• Certain conduct may be expressly prohibited by Certain conduct may be expressly prohibited by

statutestatute• A contract that imposes a duty to perform such A contract that imposes a duty to perform such

conduct is also illegal and will not be enforced. conduct is also illegal and will not be enforced.

• Violation of public policy Violation of public policy • Public policy applies to matters of public morals, Public policy applies to matters of public morals,

health, safety, and welfare. health, safety, and welfare. • One cannot do that which has a tendency to be One cannot do that which has a tendency to be

injurious to the public or against the public good. injurious to the public or against the public good.

Legality of Purpose

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• Lack of certainty concerning the terms and conditions of Lack of certainty concerning the terms and conditions of the contract maythe contract may render an agreement unenforceable.render an agreement unenforceable.

• Terms must be clear enough to permit the courts to Terms must be clear enough to permit the courts to interpret the duties and obligation to be performed by interpret the duties and obligation to be performed by either party. either party.

• ““Rules of Construction” as applied by courts:Rules of Construction” as applied by courts:• The ordinary meaning generally given to words applies.The ordinary meaning generally given to words applies.• Technical terms and words are given their technical meaning Technical terms and words are given their technical meaning

unless clearly indicated otherwise.unless clearly indicated otherwise.• The contract must be read and interpreted as a whole.The contract must be read and interpreted as a whole.• Specific terms control over general terms when in conflict. Specific terms control over general terms when in conflict. • Ambiguities are interpreted against the drafter of the Ambiguities are interpreted against the drafter of the

contract.contract.• Best evidence of the parties’ intention is in the written Best evidence of the parties’ intention is in the written

contract. contract. • Purpose is to bar oral evidence that contradicts, adds to, or Purpose is to bar oral evidence that contradicts, adds to, or

otherwise varies the terms of the written contract. otherwise varies the terms of the written contract.

Certainty of Terms

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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

FAR--Uniform Contract Format

• Sec A: Solicitation Form• Sec B: Supplies or Services and Prices/Costs• Sec C: Description/Specs/Work Statement• Sec D: Packaging and Marking• Sec E: Inspections and Acceptance• Sec F: Deliveries or Performance• Sec G: Contract Administration Data• Sec H: Special Contract Requirements

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FAR-- Uniform Contract Format (Continued)

• Sec I: Contracting Clauses• Sec J: List of Attachments• Sec K: 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 purchasing, renting, leasing, or otherwise obtaining supplies otherwise obtaining supplies (products)(products) or services from or services from nonfederal sources. Contracting nonfederal sources. Contracting includes reviewing descriptions of includes reviewing descriptions of supplies and services required, supplies and services required, solicitation and selection of sources, solicitation and selection of sources, preparation and award of contracts, preparation and award of contracts, and all phases of contract and all phases of contract administration/management. administration/management.

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General Categories of Government Contracts

• 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”CONTRACTING OFFICER”

- Person who has authority to enter Person who has authority to enter into, administer, or terminate contracts into, administer, or terminate contracts and to make related determinations and and to make related determinations and findings. findings. - May bind the government - May bind the government only to the only to the extent of the authority delegatedextent of the authority delegated. . -- CO authority is received from the CO authority is received from the appointing authority with clear appointing authority with clear instructions in writing regarding the instructions in writing regarding the limits of that authority.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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• 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

Fixed Price Types

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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• Cost Sharing• Cost Plus Fixed Fee

• Completion• Term

• Cost Plus Incentive Fee

NOTE: 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

Cost Reimbursement Types

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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 May be used only when it is not possiblenot possible at the time of placing the contract to at the time of placing the contract to estimate estimate accuratelyaccurately the extent or duration of the work or to the extent or duration of the work or to anticipate costsanticipate costs with any reasonable degree with any reasonable degree of confidence.of confidence.

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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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• 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”

Pre-Award (Source Selection):Competition

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• 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

Pre-Award (Source Selection):Advertising

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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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• 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)

Post-Award (Performance):Contract Disputes

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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

• 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 ThoughtsFinal 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 Only the Contracting Officer may change or agree to changes in the contractOfficer may change or agree to changes in the contract

• The contract is interpreted as a whole--Read the entire contract The contract is interpreted as a whole--Read the entire contract including special contract provisions and the attachments (i.e., including special contract provisions and the attachments (i.e., SOW/SOO, CDRLs, etc.)SOW/SOO, CDRLs, etc.)

• Requirements or material changes must be approved and Requirements or material changes must be approved and documenteddocumented

• ““No funding” means “no requirement”No funding” means “no requirement”• The contract Schedule takes precedence over contract clausesThe contract Schedule takes precedence over contract clauses• Contract clauses take precedence over other documents, exhibits Contract clauses take precedence over other documents, exhibits

and attachmentsand attachments• Other documents, exhibits and attachments take precedence over Other documents, exhibits and attachments take precedence over

the specificationsthe specifications• Use “Plain English” versus technical language.Use “Plain English” versus technical language.• Avoid Ambiguous language--ambiguity is interpreted against the Avoid Ambiguous language--ambiguity is interpreted against the

drafter! drafter! • Don’t be intimidated by the process