Decision 4. Bring an FSS Dispute to the One Contracting Officer Who Can Resolve It

Berenzweig Leonard is beginning the New Year with a summary of four important government contract legal decisions handed down in 2013. We began by describing in two blog articles the problems a government contractor can get into as a result of “apparent authority”, a one-sided legal concept that does not apply to the government but that does apply to a  government contractor and can be costly if not closely monitored. Later, we dealt with the two most fundamental, and most-ignored, rules in government contracting: an enforceable government contract decision can only come from the contracting officer and only if that decision is in writing.

We have saved THE most important decisions for last: decisions that dealt with disputes involving purchases under the GSA Federal Supply Schedule (FSS). Because a previous blog article on October 17, 2013 discussed these decisions in detail, we will only summarize their important conclusions here.

Decision 4. Bring an FSS Dispute to the One Contracting Officer Who Can Resolve It

In the GSA FSS process, two contracting officers are involved: the GSA contracting officer and the ordering agency contracting officer. Each has a different contract vehicle to deal with: the GSA contracting officer is responsible for the FSS contract with a vendor and the ordering agency contracting officer is responsible for the delivery or task order the agency uses to buy something off that vendor’s GSA FSS contract. When a schedule vendor has a dispute with the government over a delivery or task order, only one contracting officer is the correct one for a contractor to file a claim under the Contract Disputes Act. Which one is it?

According to the new rules developed by the U.S. Court of Appeals for the Federal Circuit (CAFC) and the Armed Services Board of Contract Appeals (ASBCA) in the decisions described in the earlier blog:

Contract interpretation issues: the GSA contracting officer is the only contracting officer to handle a dispute involves interpretation of the terms and conditions of the FSS schedule contract. However, when the dispute is over the terms and conditions of the FSS order, the ordering contracting officer must resolve the dispute.

Performance issues: the ordering agency contracting officer is the only contracting officer that can decide performance issues not involving interpretation of the FSS contract such as whether the contractor’s default was excusable.

Terry O'Connor is the Director of Government Contracts with Berenzweig Leonard, LLP, a DC regional business law firm. He can be reached at toconnor@BerenzweigLaw.com.

Decision 3. Deal with the Contracting Officer and Get the Decision in Writing

Berenzweig Leonard is beginning the New Year with a summary of four important government contract legal decisions handed down in 2013. We began by describing in two blog articles the problems a government contractor can get into as a result of “apparent authority”, a one-sided legal concept that does not apply to the government but that does apply to a government contractor and can be costly if not closely monitored.   Today we deal with the two most fundamental, and most-ignored, rules in government contracting: an enforceable government contract decision can only come from the contracting officer and only if that decision is in writing. 

Decision 3. Deal with the Contracting Officer and Get the Decision in Writing

Every year, decisions show that government contractors break the two most critical rules in government contracting: if an agreement is to be binding on the government, it must be in writing and signed by the contracting officer.

No written document. 

A contractor thought it had reached a settlement agreement with the government on a termination for convenience because the government had agreed to a $485,000 settlement in a telephone conference with the contracting officer who advised the contractor that written confirmation of the amount would be forthcoming. When that written confirmation came, however, it said that the last signature on the currently unsigned agreement would have to be the government’s. When the government failed to go through with the settlement, the contractor tried to force the government to honor the oral settlement but lost. FAR Part 49 explicitly requires termination for convenience settlement proposals to be a written contract modification and the parties had not reached that point in their settlement process. Sigma Construction Co. v. United States, CFC No. 12-865, September 30, 2013.

No contracting officer approval. 

Getting to the contracting officer can be a serious problem. Because a contractor typically works closely with an agency’s technical personnel, the agency’s contract administration personnel, in particular the contracting officer, often is only in the distant background. This can be especially true for Department of Defense agencies that have multiple layers of authority: a contracting officer whose identity may change over the course of a multi-year contract,  a contracting officer’s representative (COR) or technical representative (COTR), plus perhaps some other contractors providing support to a project. However, regardless of how distant the contracting officer may seem to a contractor, it’s essential that the contracting officer be kept in the loop, especially when a contract clause demands it and warns a contractor that lack of contracting officer approval may be fatal.

A contractor recently ended up working for the government for free because the contractor had failed to get the contracting officer’s approval to continue working as required by a contract clause.   Because the contractor’s task order would be funded in two to three month increments, the government wanted to carefully monitor how much money had been spent and how much remained in any increment.  Monitoring would be done via a DFARS clause, 252.232-7007, Limitation on Government Obligation (LOGO) that required the contractor to notify the contracting officer in writing at least 90 days before the date the contract work would reach 85 percent of the total amount then allotted. In addition, the clause prohibited the contractor from spending more than the allotted amount, stating expressly that the government “will not be obligated in any event to reimburse the contractor in excess of the amount allotted to the contract.”

Despite these clear requirements, the contractor did not comply with them. In fact, the contractor kept on working after 100 percent of the increment had been spent, believing what other government personnel were telling it: that the money was in the pipeline. The additional money, however, never came through and eventually the government issued a stop work order due to lack of funding. Although the government paid the contractor 100 percent of the funds allotted to the work, it refused to pay the contractor the additional $288,000 the contractor claimed it had spent based on assurances received from the government personnel other than the contracting officer. A board of contract appeals agreed with the government that the contractor was not entitled to payment so the contractor ended up working for free. Dynamics Research Corp., ASBCA No. 57830, March 26, 2013.

Terry O'Connor is the Director of Government Contracts with Berenzweig Leonard, LLP, a DC regional business law firm. He can be reached at toconnor@BerenzweigLaw.com.

Decision 2. Corporate Liability for Employee Kickbacks

Berenzweig Leonard is beginning the New Year with a summary of four important government contract legal decisions handed down in 2013. A previous blog article discussed the one-sided legal concept of “apparent authority” that applies to a government contractor but not to the government. Today we discuss another problem presented by “apparent authority”: how the management of a government contractor could be liable for kickbacks company employees receive.

Decision 2. Corporate Liability for Employee Kickbacks

Apparent authority can cost a contractor significant penalties under the Anti-Kickback Act (AKA). Regardless of whether a government contractor knew that its employees were violating the AKA), the company may be civilly liable – for each occurrence, double damages plus $11,000 – for kickbacks its employees received. Alternatively, regardless of what a government contractor knew, the contractor may be liable for the actual amount of the kickback. An appeals court held that the company could be liable for “double damages plus $11,000” for its employees’ violations of the AKA based on “apparent authority” if, later in the litigation, the government proved that the kickback-accepting employees had the apparent authority to implicate their employer. United States ex rel., David Vavra  v. Kellogg Brown and Root, U.S. Court of Appeals for the Fifth Circuit No. 12-40447, July 19, 2013.

Terry O'Connor is the Director of Government Contracts with Berenzweig Leonard, LLP, a DC regional business law firm. He can be reached at toconnor@BerenzweigLaw.com.

Decision 1. Do Not Create "Apparent Authority"

With so many government contract legal decisions handed down during any year, it’s helpful at the start of the New Year to summarize those handed down the previous year that impact a government contractor’s bottom line. Over the next four days, we will provide a summary of an important decision from last year, typically one that serves as a reminder of the costly consequences of ignoring the often-obscure rules of government contracting.  

Today, we describe “apparent authority”, a one-sided legal concept that does not apply to the government but does apply to a government contractor and can cost a government contractor dearly.   

Decision 1. Do Not Create "Apparent Authority"

If a contractor is not vigilant, it can be harmed by “apparent authority.”  This dangerous concept is best explained by the Seven Seas Shiphandlers, LLC.  Seven Seas had a contract for work with the U.S. government in Afghanistan.  For convenience, Seven Seas let one of its subcontractor’s employees deliver Seven Seas’ invoices to the government. Also, on several occasions, the government gave him Seven Seas’ payments in cash which he gave to Seven Seas. But in early June 2009, the government gave him over $240,000 as full payment for five Seven Seas contracts and he has not been seen since then. A board concluded that the government could avoid paying Seven Seas for those five contracts if the government could prove that Seven Seas had given the subcontractor’s employee “apparent authority” to receive Seven Seas’ payments. Seven Seas Shiphandlers LLC, ASBCA 57875-79, 26 November 2012.

Terry O'Connor is the Director of Government Contracts with Berenzweig Leonard, LLP, a DC regional business law firm. He can be reached at toconnor@BerenzweigLaw.com.