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  • 7/31/2019 Performance Outline

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    Performance of Government Contracts

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    I. Contract Administration and Personnel

    II. Contract InterpretationA. Basic Objective of Interpretation

    Determine the intent of the parties Uncommunicated intentions are not relevant to the interpretation process Interpreted as a reasonably intelligent person familiar with the facts and circumstances

    B. Definition of Terms Three sources:o Definitions incorporated into the contract documentso Dictionarieso Common usage1. Definitions in the Document

    Mere inclusion of a definition does not solve all problems. The words in thedefinition must also be defined.

    2. Dictionary or Common Usage Definitionsa) Dictionary Definitions

    Courts/boards do use dictionaries to define words but they will be rejected ifthey are not useful or there is better evidence to define the meaning of a term

    b) Common Usage Courts/boards can determine a meaning based on their own understanding

    c) Limitation on the Dictionary and Common Usage Definitions Neither dictionary nor common usage definitions should be used when the

    contract terms indicate that another meaning is intended.

    3. Technical Terms When words have a clear or well defined special meaning in the trade or industry

    involved in the contract, the courts will defer to that technical meaning

    a) Trade Usage Technical terms and words of art are given their technical meaning when

    used in a transaction within their technical field

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    b) Government Forms and Regulations Special terms in government contracts are given their special meaning FAR definitions have been used in the contract interpretation process

    C. Analysis of Language of Contract Documents1. Plain Meaning

    The paramount means of interpreting a contract is to look for the plain meaningwhen the terms of the contract are clear

    2. Read the Writings as a whilea) Interpret and avoid rendering worlds meaningless

    An interpretation will be rejected if it leaves parts of the contract languagemeaningless, useless, ineffective, or superfluous

    b) Interpret to avoid conflict When the document is read as a whole, the provisions should be interpreted

    to be in harmony with each other

    c) Interpret to Fulfill principle purpose of the parties Gaps or omissions may be resolved by interpreting as a whole in conjunction

    with giving great weight to the principal purpose of the parties.

    3. Order of Precedencea) Order of Precedence Clausesb) Common Law Order of Precedence Rules

    4. Enumerated ItemsD. Extrinsic Evidence

    Facts and circumstances surrounding the formation and performance of the contract areused to determine the intent of the parties.

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    1. Discussions and Concurrent Actionsa) Requests for Clarificationb) Pre-Bid and Pre-Proposal Conferencesc) Pre-dispute interpretationsd) Pre-dispute Action Evidencing Interpretatione) Pre-dispute Interpretations Made Know to the Other Party

    f) Limitations on the Use of Discussions and Concurrent Actions(1) Authority(2) Post-dispute Conduct and Discussions Excluded(3) Parol Evidence Rule

    (a) Integrated Agreements(b) Complete or Partial Integration(c) Contradiction vs. Resolution of Ambiguities

    2. Prior Course of Dealinga) Interpretation

    (1) Actual Knowledge Required(2) Application to Changed law

    b) Custom and Trade usage(1) Interpreting Vague Language(2) Ambiguous Language Not Required(3)

    Clear Language Superior to Trade Claim

    (4) Proof of trade practice(5) Supplying Missing Terms

    3. Post-Interpretation Ambiguitiesa) Finding Ambiguous terms

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    b) Interpretation Against the Draftor(1) Reasonable interpretation(2) Identifiable Drafter(3) Reliance

    c) Duty to Seek clarification(1) Finding Ambiguous words(2) Government Obligation to Inform Bidders of Ambiguity(3) Failure to Respond to Inquiry

    III. Risk AllocationA. Government Promises (Warranties) of Future Events or Conditions

    1. Availability of Work Site Very difficult for a contractor to prove that a work site will be available at a given

    date because the governments ability to furnish the site is commonly recognized as

    being subject to numerous variables

    Finding a warranty of site availability is highly unlikelyo Importance of the site must be an important factor as well as the critical nature

    of the limited period for performing the work.o More prone to finding the warranty if the contract contains a Suspension of

    Work clause

    2. Means of Access to Site There is a warranty when the contract says that a specific access route will be

    available during performance

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    3. Availability of Utilities4. Issuance of Notice to Proceed

    B. Incorrect Statements and Nondisclosures1. Incorrect Statements

    a) Factual Statementsb) Laws and Regulationsc) Estimates

    2. Nondisclosuresa) Government Knowledge of Vital Information

    (1) Vital Information(2) Government Knowledge

    b) Contractor Knowledge or Reason to Know(1) Actual Knowledge(2) Reason to Know

    c) Government Knowledge or Reason to Know of Contractor IgnoranceC. Implied Warranty of Specifications

    1. Basis of Government Responsibility2. Scope of the Warranty

    a) Type of Specification Language(1) Design Specifications(2) Performance Specifications

    b) Specified Alternativesc) Commercial Availabilityd) Degree of Accuracy Required

    3. Causation and Reliance

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    a) Mutual Mistake(1) Mutual Mistake as to a Basic Assumption

    (a) Basic Assumption(b) Mutuality(c) Material Effect(d) Assumption of Risk

    (2) Mutual Mistake in Integrationb) Unilateral Mistake

    (1) Type of Mistake(a) Business Judgment(b) Misreading Specifications(c) Clerical or Arithmetical Errors

    (2) Knowledge of Error and Verification(a) Knowledge or Reason to Know(b) Adequacy of Verification Request

    (3) Unconscionability(4) Remedies

    (a) Reformation(i) Mutual Mistake of Basic Assumption(ii) Unilateral Mistakes

    (b)

    Rescission

    F. Government Defenses1. Disclaimer and Exculpatory Clauses

    a) Public Policyb) Interpretation

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    c) Clear Disclaimersd) Misleading Statements and Nondisclosuree) Effect of Exculpatory/Disclaimer Clauses on Other Clauses

    f) Commonly Used Exculpatory/Disclaimer Clauses(1) Omissions and Misdescriptions Clause(2) Production Drawing Changes Clause(3) Preproduction Evaluation of Technical Data Clause(4) Verification Clause(5) Shop Drawings Clause(6) Coordination Clause

    2. Duty of Coordinationa) Omission of Informationb) Defective Drawings or Specifications

    3. Sovereign Acts Doctrinea) Public and General Actsb) Contractual Actsc) Implementation of Sovereign Actd) Impact of Contract Language

    G. Proportional Risk Allocation1. Joint Fault2.

    Joint Negligence

    3. Improper Default Termination4. Concurrent Delays

    IV. Changes

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    A. Purpose and Coverage of the Changes Clause1. Purposes Served2. Coverage

    a) Meaning of Within the General Scope(1) Disputes Between Contractor and Government

    (a) Nature of Work(b) Cost and Disruption

    (2) Third Party ProtestsB. Formal Change Orders

    1. Contractor-Originated Changes2. Government-Originated Changes3. Unilateral versus Bilateral Change Orders

    a) Policyb) Modifying Language in Unilateral Change Ordersc) Clause Permitting Only Bilateral Change Orders

    4. Procedure for Ordering Changesa) Requirement for Written Change Orderb) Standard Form 30c) Obtaining Proposal for Downward Adjustment

    C. Constructive Changes1. Basic Theory

    a) Continuing Vitality of the Doctrineb) Elements of the Doctrinec) Government Claims for Price Decreases

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    b) Government Claims2. Constructive Changes Claims

    a) Applicability of 30-Day Notice Requirementb) Construction Contract Notice Requirementc) Notification of Changes Claused) Accelerationse) Military Shipbuilding Contracts

    V. Pricing of AdjustmentsA. Basic Principles

    1. Price Adjustments Under Contract Clausesa) Basic Pricing Formula

    (1) Pricing the Deleted Work(a) Deductive Changes(b) Exceptions to General Rule

    (i) Compare Deletion of a Severable Item(ii) Ambiguous Specifications(iii) Special Contracting Agreements(iv) Deletion of Minor Items(v) Waiver of Buy American Act

    (2) Pricing the Added Workb) Cost Impact on Contractor

    (1) Incurrence of Costs(2) Value Measures(3) Allowable Costs

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    c) Subcontract Problems(1) Claims by Subcontractors in Contractors Name(2) Lack of Equitable Adjustment Clause

    2. Damagesa) Similarity to Equitable Adjustmentb) Methods of Computing Damages

    (1) Expectancy Damages(2) Reliance Damages(3) Restitutionary Damages

    c) Quantum Meruit(1) Value Standard(2) Value Measured by Contractors Costs

    B. Proof of Adjustment1. Burden of Proof

    a) Causationb) Reasonableness of Amount

    2. Methods of Proofa) Actual Cost Datab) Estimates

    (1) Vague Estimates(2)

    Expert Testimony

    (3) Statistical Techniquesc) Total Cost Method

    (1) Not Favored(2) Safeguards for Use

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    (a) Other Methods of Proof Not Available(b) Realistic Contract Price(c) Reasonableness of Actual Costs(d) Contractor Not Responsible for Increases

    (3) Modified Total Cost Method3. Impact and Delay

    a) Theory of Recovery(1) Delays Preceding a Change(2) Delays Resulting from a Change or Differing Site Condition

    b) Impact on Other Workc) Consequential Damagesd) Unabsorbed Overheade) Idle Labor and Equipment

    (1) Labor(2) Contractor-Owned Equipment(3) Rented Equipment

    f) Loss of Efficiencyg) Escalation of Labor Rates and Material Pricesh) Miscellaneous Costs

    4. Overhead and Profita)

    Overhead

    b) Profit(1) Intermingled Changes and Suspensions(2) Deductive Changes(3) Breach of Contract Claims

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    (4) Amount of Profit(5) Construction Contract Clauses(6) Cost-Plus-Percentage-of-Cost Relationship

    5. Costs of Financing Adjustmentsa) Interest on Claimsb) Interest on Borrowings

    (1) Recovery When Cost Principles Not Applicable(2) Recovery When Cost Principles Applicable

    VI. Differing Site ConditionsA. General Rules Governing Application of the Clause

    1. Condition must Predate the Contract2. Physical Conditions3. At the Site4. Differing Materially5. Burden of Proof

    B. Unique Aspects of the two Categories of Conditions1. Category I Conditions2. Category II Conditions

    a) Unknown Conditionb) Unforeseeable Conditionc) Unusual Condition

    C. Breach of Contract Claims Related to Differing Site Conditions1. Misrepresentation and Category I Conditions2. Government Nondisclosure and Category II Conditions

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    D. Notice1. Nature of Notice2. Actual or Constructive Government Notice3. No Prejudice

    E. Procedure1. Contractors Duty to Proceed2. Governments Procedure

    F. Exculpatory Clauses1. General Exculpatory Clauses2. Specific Exculpatory Clauses3. Relation to Representation

    VII. DelaysA. Excusable Delays

    1. General Requirementsa) Beyond the Control of the Contractorb) Without Contractors Fault or Negligencec) Foreseeability

    2. Time Extensionsa) Causationb) Concurrent Delaysc) Delay of Overall Completion Required

    B. Compensable Delays1. No Applicable Clause2. Ordered Suspensions

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    3. Constructive Suspensions4. Reasonableness of Delays

    a) Unreasonable Delaysb) Reasonable Delaysc) Measuring the Amount of Delayd) Burden of Proving Unreasonableness

    5. Limitation on Recovery Concurrent Delays

    VIII. Inspection, Acceptance, and WarrantiesA. Inspection

    1. Government Inspectiona) Type of Inspection Test

    (1) Contractually Specified Test(2) Use of Unspecified Test

    (a) Increased Costs(b) Notice

    (3) Subjective Standards(4) Tests Imposing Higher Standards(5) Inspection Standards Established by Conduct

    b) Place of Inspectionc) Time of Inspection

    (1) Inspection During the Work(2) Acceptance Inspection(3) Time of Inspection Affecting Validity

    d) Number of Inspections

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    e) Manner of Inspectionf) Government Inspection Not for Contractor Benefit

    (1) No Waiver on Acceptance From Inspection(2) Basis for Government Liability

    g) Reinspection2. Contractor Inspection

    a) General Inspection Clauses3. Cost of Inspection

    a) Contractor Duty to Facilitate Government Inspectionb) Cost of Tearing Out Completed Work

    4. Special Inspection Techniques and Issuesa) Inspection by Sampling

    (1) Contractually Specified Sampling(2) Sampling Not Specified

    b) First Article Testingc) Safety Inspections

    (1) Responsibility for Safety InspectionsB. Rejection, Acceptance, and Remedies for Defects

    1. Rejectiona) Rejection Standards

    (1)

    Strict Compliance

    (2) Nature of Specifications(a) Specifications not Suited to Strict Compliance(b) Brand Name or Equal Specifications(c) Brand Name and Proprietary Specifications

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    (3) Limitations on Strict Compliance(a) Construction Contracts(b) First Articles

    b) Proving Noncompliancec) Notice of Rejection

    (1) Content(2) Time

    d) Previous Action Limiting Rejection2. Acceptance

    a) Authority to Acceptb) Time and Place of Acceptancec) Methods of Acceptance

    (1) Formal Acceptance(2) Implied Acceptance

    (a) Late Rejection(b) Government Acts Inconsistent with Contractor Ownership

    (3) Payment Alone not Acceptance(4) Acceptance for a Limited Purpose(5) Use and Possession Under Construction Contracts(6) Conditional Acceptance

    3.

    Remedies

    a) Contractor Correctionb) Government Correctionc) Price Reduction

    C. Post-Acceptance Rights

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    1. Latent Defects, Fraud, and Gross Mistakesa) Known Defectsb) Reliance on Contractor Testing or Assurancesc) Nature of Specificationd) Ease of Government Inspectione) Past Experience

    2. Fraud3. Gross Mistake Amounting to Fraud

    a) Nature of Misrepresentationb) Reliancec) Injury

    4. Effect of Contractor Certification5. Notice and Proof of Defects

    a) Proof of Defectb) Notice of Defect

    6. Government Rights After Retraction of AcceptanceD. Warranties

    1. Scope of Warranty Clauses2. Specification Provisions and Implied Warranties3. Notice and Burden of Proof

    a)

    Government Notice of Nonconformance

    b) Governments Burden of Proof4. Remedies Under Warranty Clauses

    E. Cumulative Remedies

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    IX. Default TerminationA. Consequences of Default Termination

    1. Impact on Contractor2. Impact on Government3. Fixed-Price supply Termination Inventory

    B. Right to Terminate1. Grounds for Termination

    a) Failure to Perform or Deliver(1) Slight Delays in Performance(2) Timely Delivery of Defective Supplies

    (a) Timely Tender(b) Reasonable Belief That the Goods Conform(c) Defects Minor in Nature and Readily Correctable(d) The Cure Period

    (3)

    Limitations on Termination of All Work

    (a) Accepted Work(b) Substantial Completion

    (i) Construction Contracts(ii) Service Contracts

    (c) Severability(d) Installment Contracts Excepted

    (4) Preproduction Itemsb) Progress Failures

    (1) Basic Principle

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    (2) Evaluating Progress Failures(a) The Impossible Test(b) The No Reasonable Likelihood Test(c) Failure to Comply with the contract Quality and OtherRequirements

    (3) Proof of Endangered Performance(4) Construction Contracts

    c) Failure to comply with Other Provisions(1) Scope of Right(2) Application of Rule

    d) Failure to Proceed(1) Notification to Proceed(2) Scope and Nature of Obligation(3) Exceptions to the Duty to Proceed

    (a) Government Material Breach(b) Impractical to Proceed(c) Lack of Clear Direction

    e) Anticipatory Repudiation(1) Timing of Remedy(2) Evidence Considered(3) Examples of Anticipatory Repudiation

    (a) Express Refusal to Perform(b) Failure to Give Adequate Assurances(c) Express Statement of Inability to Perform(d) Actions Indicated Inability to Perform

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    (4) Retraction of Repudiationf) Subcontractor Termination

    2. Waiver of the Right to Terminatea) The Basic Concept

    (1) Construction Contracts(2) Waiver Prior to Due Date

    b) Reasonable Forbearancec) Government Election to Continue Performance

    (1) Unreasonable Delay(2) Acts on Government

    d) Contractor Reliancee) Reservation of Right to Terminate After Completion Date

    f) Reestablishment of the Right to Terminate After WaiverC. The Termination Decision

    1. Discretionary Functiona) Person Exercising Discretionb) Factors to be Considered

    (1) FAR Factors(2) Other Relevant Considerations(3) Alternatives

    (a)

    Convenience Termination

    (b) Negotiating a Schedule Extensionc) Improper Decision Makingd) Informational Deficienciese) Improper Motive

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    f) Other Objectionable Conduct by the Government2. Reconsideration of Default Termination

    D. Termination Procedures1. Delinquency Notices

    a) Cure Notices(1) Circumstances for Use(2) Form of Cure Notice(3) Effect of Denial of Cure Period(4) Adequate Assurances

    b) The Show Cause Notice2. Termination Notice

    E. Excess Costs of Reprocurement1. The Fulford Doctrine2. Reasonableness of Government Action

    a) Similarity(1) Changes Reducing Cost of Work(2) Test for Determining Similarity(3) Changes in Inspection and Testing(4) Changes in Terms and Conditions(5) Changes in Method of Procurement

    b) Effect of Relaxed Specifications That Contractor Could have Metc) Variations in Quantity Reproducedd) Mitigation

    (1) Lack of Negotiation or Price Analysis(2) Lack of Competition

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    (3) Soliciting Original Bidders(4) Delayed Award of Reprocurement Contract(5) Effect of Failure to Mitigate(6) Refusal to Deal with Original Contractor

    F. Liquidated Damages1. General Policy2. Enforceability of Liquidated Damages Clause

    a) Reasonableness of the Forecast(1) Time of the Forecast(2) Accuracy of Measurement of Forecast Damages

    (a) Proportional Application(b) Fixed Daily Rates(c) Inclusion of Administrative Expenses(d) Maximum Assessment(e) Use of Standard Formulae

    b) Difficulty of Accurate Estimation3. Relief from Liquidated Damages

    a) Excusable Delaysb) Substantial Completion

    4. Relationship with Default Terminationa)

    Concurrent Running of Liquidated Damages and Excess Costs of

    Reprocurement

    b) Effect of Waiver

    X. Termination for Convenience

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    A. BackgroundB. The Right to Terminate

    1. Termination Clauses2. Exercising the Right to Terminate

    a) The Decision to Terminate(1) The Governments Interest(2) Special Situations(3) Terminations in Support of Competition

    b) Limitations on the Right to Terminate(1) The Kalvar Test Government Bad Faith or Abuse of Discretion(2) The Torncelo Test No Change in Circumstances(3) The Krygoski Test No Intention to Fulfill Promis(4) Violation of Paramount Government Policies

    3. Partial Terminations4. Procedural Requirements

    a) Notice of Terminationb) Termination for Default versus Termination for Convenience

    5. Finality of Termination for Convenience6. Deletion of Work Through Termination for Convenience, Changes, or OtherClauses

    C. Constructive Termination1. Wrongful Default Terminations2. Governments Failure to Perform Under an Indefinite Delivery Contract3. Cancellation of Award

    D. Termination Settlements

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    1. Proceduresa) Obligations of the Partiesb) Basis for Settlement Proposalsc) Time of Submission of Proposalsd) Imperfect Proposalse) Terminations for Convenience Settlement Proposals Under a Termination

    for Default

    f) Negotiation of Final Settlementg) Unilateral Determinationh) Appeal of Convenience Terminations

    2. Nature and Amount of Settlementsa) Basic Principlesb) Recoverable Costsc) Settlement Expensesd) Overhead, Profit, and Loss Contracts

    (1) Post-Termination Overhead(2) Profit or Loss Adjustment

    (a) Profit(b) Loss Adjustment

    XI. Payment and DischargeA. Types of Payment

    1. Payment of the Pricea) Partial Paymentsb) Billing Prices

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    2. Progress Paymentsa) Progress Payments Based on Costsb) Progress Payments Based on Percentage of Completionc) Performance-based Payments

    3. Other Financing Techniquesa) Advance Paymentsb) Commercial Item Financingc) Provisional Payments

    B. Payment Procedures1. Documentation and Authority

    a) Invoices and Vouchersb) Documentation of Acceptancec) Assignment of Paymentd) Payment Authoritye) Overpayment

    f) Discounts2. Electronic Payment3. Time for Payment of the Price

    a) Other Than Simplified Acquisitionb) Fast Payment

    4.

    Progress Payment Procedures

    a) Cost-Based Progress Payments(1) Time for Payment(2) Delays in Payment(3) Suspension or Reduction of Progress Payments

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    (4) Liquidation of Progress Paymentsb) Construction Progress Payments

    (1) Time For Payment(2) Liquidation of Progress Payments(3) Subcontract Payments(4) Retainage

    5. Payment Under Incrementally Funded Contracts6. Withholding

    a) Government Right to Withholdb) Limitations on Withholdingc) Discretionary Actions

    C. Setoff1. Right to Setoff2. Limitations on Setoff

    a) Rights to Payment Assigned to Financing Institutionsb) Performance-Bond Suretyc) Separate Debts of Partners or Joint Venturesd) Bid Deposits

    D. Debt Collection Procedures1. FAR Debt Collection Procedures

    a) Debt Determinationb) Negotiation and Demandc) Deferment Agreementd) Contracting Officer Decisione) Withholding or Setoff

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    2. The Debt Collection Act3. The Contract Disputes Act

    E. Remedies1. Contractor Remedies for Delayed Payment

    a) Interest(1) Prompt Payment Act

    (a) Coverage(b) Interest Penalty(c) Procedures

    (2) The Contract Disputes Act(a) Time of Accrual of Interest(b) Rate of Interest(c) Delay in Payment(d) Conversion into a Claim(e) Settlement(f) Government claims

    b) Injunctions and Other Remedies2. Government Remedies for Overpayment and Improper Claims

    a) Interest on Overpayments(1) Statutory Requirement(2)

    Contract Clause

    b) Fraudulent Claims for Payment(1) Civil Fraud(2) Criminal Fraud

    F. Discharge

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    1. Final Paymenta) Delay in Contract Closeoutb) Legal Effect of Final Payment

    (1) The Contractors Release of Claims(2) Effect of Release(3) Government Claims(4) Clauses Barring Claims After Final Payment

    2. Mutual Agreement and Recission3. Contract Modifications

    a) Accord and Satisfactionb) Modifications Without Specific Release Languagec) Modifications with Release Language

    4. General Releases5. Techniques for Avoiding Releases

    a) Lack of Considerationb) Mistakec) Economic Duressd) Fraud and Misrepresentatione) Lack of Authority

    XII. DisputesA. Coverage of Disputes Process

    1. Claims Relating to the Contracta) Remedy Granting Clausesb) Breach of Contract Claims

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    c) Mistakes Alleged After Award2. Subcontractor Controversies

    a) Direct Subcontractor Claimsb) Indirect (Sponsored) Subcontractor Claims

    B. Assertion of Claims1. Nonroutine Requests for Price Adjustment

    a) Distinguishing Routine and Non-Routine Requests for Paymentb) Routine Request Converted into Claimc) REA Submissions Converted into a Claimd) Convenience Termination Settlement Proposalse) Continued Negotiations

    2. Assertion of Contractor Claima) Party Entitled to Assert Claim

    (1) Dissolved Contractors(2) Separate Entities

    (a) Assignees(b) Sureties(c) Merged Contractors(d) Agents of a Contractor

    b) Claim Contentc)

    Request for Sum Certain

    d) Request for Contracting Officer Decisione) Submittal to the Contracting Officer

    f) Certification(1) Threshold

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    (2) Significance of Defective Certification or Absence of Certification(a) Correctable Defective Certifications(b) Intentional or Negligent Disregard(c) Absence of Certificate(d) Certification or Combination

    (3) Revision of Claim(4) Claims Not Involving Quantum(5) Authorized Signature

    g) Conversion into a Claim3. Time for Submittal

    C. Contracting Officers Role1. Negotiated Settlement

    a) Policy Favoring Settlementb) Settlement Authority

    (1) Negotiation after Issuance of Final Decision(2) Settlement During Litigation

    2. Final Decision of the Contracting Officera) Time for Issuance of Decisionb) Failure to Issue a Timely Decision

    (1) An Order to Issue a Decision(2)

    Appeal of Deemed Denial Decisions

    c) Form and Content of Decision(1) Written Decision(2) Notification(3) Responsive to the Claim

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    (4) Reasons for the Decision(5) Decision in Wrong Form May Bind the Government

    d) Quality of the Decisional Process(1) Replacement of Contracting Officer(2) Advice from Other Officials(3) Orders of Superior(4) Review of Decisions(5) Unbiased and Impartial Decision

    D. Litigation of Disputes Act Claims1. The Decision to Appeal or Bring Suit2. Choice of Forums

    a) Election of Forum Bindingb) Fragmentation and Consolidation of Claimsc) Bankrupt Contractors

    3. Timely Appeal or Suita) Receipt of Decisionb) Date of Appeal or Suit