Understanding Government Contract Law

Terrence M. O'Connor

• Publisher: Berrett-Koehler Publishers
• Year: 2018
• ISBN:
  9781523097760
• Edition: 2
• Topic: Law
• Subtopic: Contract Law
• Index: Law

This updated classic offers clear and concise explanations of the basic legal concepts of government contract law for professionals at any stage of their career. Written in straightforward language for contracting officers, contract administrators, contractors, subcontractors, and others in the procurement field, this new edition has been updated with new cases and regulations. The book breaks down the complex arena of government contract law into its three most basic parts: the contracting parties, the contract itself, and legal challenges. It begins by examining key aspects of the contracting officer's job and provides guidance for navigating its different and often conflicting demands. The government contractor's responsibilities and challenges are also outlined. Government contracts come in a lot more varieties than the typical commercial contract, and they also tend to be long and confusing. The second part of the book introduces the different types of legal agreements the government uses to buy the goods and services it needs—and addresses the challenges of writing a perfectly clear contract and guidelines for interpreting an ambiguous one. The book concludes with an overview of the government contract litigation process.This is an essential text for students preparing to do the work of government contracts, an indispensable guide for those new to the work, and a valuable reference for contracting personnel who seek solutions to specific issues they face in their day-to-day work.

PART I

THE PARTIES TO A GOVERNMENT CONTRACT

How’s this for an impossible job description:

Contracting officers are responsible for ensuring performance of all necessary actions for effective contracting, ensuring compliance with the terms of the contract, and safeguarding the interests of the United States in its contractual relationships.

This is the best summary of the contracting officer’s job in all the law dealing with contracting officers, and it’s from Federal Acquisition Regulation (FAR) 1.602-2. From this quote, it’s clear that a contracting officer is supposed to be a protector of the government’s interests—an advocate for the government in the same way lawyers are to be advocates solely for their clients.

But then this same FAR section goes on to throw the contracting officer a curve, or perhaps a U-turn. In “safeguarding the interests of the United States,” the contracting officer, according to FAR 1.602-2(b), is supposed to “ensure that contractors receive impartial, fair, and equitable treatment.”

So, a contracting officer is supposed to be a judge who treats a contractor fairly and reasonably.

But whose side is the contracting officer on—the government’s side, similar to a sheriff protecting the government’s interests? Or no one’s side (neither the government’s nor the contractor’s), just as a judge?

Unfortunately, FAR has no answer. Having created this tension between the contracting officer as a guardian of the government’s interests and the contracting officer as a judge, FAR does not say much about how the contracting officer is supposed to do this job. There is no instruction manual for contracting officers describing how to do the job FAR gives them.

And if there is no instruction manual for one party to the government contract—the contracting officer—how can the other party—the contractor—anticipate what the contracting officer is supposed to do?

Part I starts by looking at all aspects of the contracting officer’s job.

In chapter 1, we look at the contracting officer as a judge. In this role, contracting officers must follow two basic rules: they must be fair and reasonable, and they must make independent decisions—that is, decisions made without pressure from their lawyers, their bosses, or their auditors.

In chapter 2, we look at the other job the contracting officer has— safeguarding the government’s interests. We look at how a contracting officer protects the taxpayers and the U.S. Department of the Treasury.

In chapter 3, we look at one of the downsides of the contracting officer’s job—the contracting officer as defendant. An unfortunate and rare role a contracting officer might play is that of a defendant in a lawsuit brought by a contractor or by a member of the public injured during a contract.

In chapter 4, we look at the flip side—the uncertain, evolving law regarding the contracting officer as a plaintiff. One part of this role is bounty hunting. Because members of the public can turn into whistle-blowers and share in any fraud recovery to which they lead the government, a contracting officer may earn one of these lucrative recoveries as well. We also look at whether a contracting officer can sue members of the public for acts like defamation of character.

In chapter 5, we look at the government contractor and the most common problems a contractor finds. These include making sure the government employee involved has the authority to do the deal (because a deal made with unauthorized government employees typically ends in no contract with the government); avoiding the “bait and switch” tactic, which is defined as promising to provide one set of personnel and then switching to another set after the contract has been won; and avoiding fraud.

Chapter 1

The Contracting Officer as Judge

A “Fair and Reasonable” Judge

Three Simple Rules for Always Being Fair and Reasonable

Being Fair and Reasonable in Awarding a Government Contract

Being Fair and Reasonable in Administering a Government Contract

An “Independent” Judge

What kind of relationship is a contracting officer supposed to have with a contractor?

FAR 1.602-2(b) answers this critical and fundamental question this way: a contracting officer is supposed to “ensure that contractors receive impartial, fair, and equitable treatment.”

In effect, this FAR provision adds black robes to the contracting officer’s wardrobe by making the contracting officer a judge. A judge’s decisions should be fair and reasonable, and they should be reached independently—without bias or pressure from someone else. As a judge, the contracting officer is not supposed to advocate for the government; that is, they are not driven by saving the government time or money or by making the process easier on the government. All decisions a contracting officer makes—those in the solicitation process and those in the contract administration process—have to be, first and foremost, fair and reasonable.

In the first section of this chapter, we will look at what this vague phrase means in day-to-day procurement. In trying to make this phrase understandable, we next look at the contracting officer’s duty to be fair and reasonable from three perspectives. We will discuss general rules for how a contracting officer can be fair and reasonable. We will next look specifically at what it means to be fair and reasonable in the contract award process and after that, in the contract administration process.

In addition to being fair and reasonable, a contracting officer should reach decisions independently. Just as judges should not be pressured into making decisions that are not truly their own, the decisions of a contracting officer should be their own opinion. So in the last section of this chapter, we will look at what makes a contracting officer an independent decision maker.

A “FAIR AND REASONABLE” JUDGE

The requirement in FAR 1.602-2(b) that a contracting officer must “ensure that contractors receive impartial, fair, and equitable treatment” is too vague to be of any real help in the day-to-day life of a contracting officer working with contractors. So it is not surprising that there is little law on what this FAR provision means.

Fortunately, laws passed by Congress—statutes—and decisions handed down by courts—case law—give the contracting officer a lot more guidance. One federal law gives the U.S. Government Accountability Office (GAO) the right to review decisions a contracting officer makes in the solicitation process.¹ The GAO’s test of the contracting officer’s actions is rationality or reasonableness, so good examples of what fair and reasonable means come from GAO decisions.

Other federal laws make courts the judge of whether a contracting officer’s decision is reasonable.² In legalese, courts ask whether a contracting officer’s decision was “arbitrary and capricious.” Thus, good examples of what fair and reasonable means come from court decisions dealing with the “arbitrary and capricious” test.

What does this almost clichéd phrase “arbitrary and capricious” mean? It means that a contracting officer must use a reasonable way (process) to reach a reasonable decision (substance).

To determine whether or not a contracting officer’s decision is arbitrary and capricious, precedent says that the contracting officer must consider “relevant data and provide a coherent and reasonable explanation of” the decision.³

When you think about it, having a contracting officer act reasonably can be both a blessing and a curse. It can be a blessing as it acknowledges that, in procurement, there is not only one decision that is the right decision. Courts use the phrase “zone of reasonableness” to show this.

For example, if you are buying a car to use in a neighborhood car-pool, it would be reasonable for you to buy an SUV, a minivan, or a six-passenger sedan. Each vehicle is in the “zone of reasonableness.” But it would be unreasonable to buy a two-seater sports car or a large bus. If a contracting officer chose a six-passenger sedan for a carpool vehicle, a judge who might have chosen an SUV for their carpool would have a hard time finding the contracting officer’s decision unreasonable. In a sense, the reasonableness test makes judges leave their personal preferences at home.

That’s the way the founding fathers wanted it. Under the theory of separation of government power, Congress (the legislative branch of government) has told judges (the judicial branch) to let the procurement people (the executive branch) do their job. Courts will generally defer to an executive branch decision, even if a particular judge might not agree with it and might prefer a different decision, as long as the contracting officer’s decision is “reasonable.”

If the court finds a reasonable basis for the agency’s action, the court should stay its hand even though it might, as an original proposition, have reached a different conclusion as to the proper administration and application of the procurement regulations.⁴

So, it’s a blessing that a court won’t force a contracting officer to follow a judge’s personal belief.

But “reasonable” is also a curse. First, it seems too vague to work with as a practical matter. Aren’t we all reasonable? Or, at least, aren’t we reasonable? (It’s usually the other person who isn’t being reasonable, right?) It is hard for everybody to agree on what is reasonable and what is not. Second, people always have a reason for doing something. By this logic, isn’t everything, therefore, automatically reasonable? It’s at this point that the apparently redundant word “good” has to be added to “reason.”

Although there might be gray areas allowing reasonable people to disagree, sometimes a contracting officer’s decision is clearly unreasonable, whether the decision is made in the solicitation process or in the administration process.

Three good rules for reasonable decisions can be found in the decisions of the courts, boards, and GAO.

Three Simple Rules for Always Being Fair and Reasonable

Rule 1: To be reasonable, the contracting officer’s decision must be in writing.

One of the surest ways for a contracting officer to be found “unreasonable” is to make an important decision and have nothing in writing to explain it. According to GAO:

It is able to assess the reasonableness of an agency’s source selection process only where adequate documentation of that process exists. Without such documentation, we cannot be certain that the agency action was not arbitrary.⁵

The Defense Logistics Agency (DLA) sent out Requests for Quotations (RFQ) for sheet metal. The low bidder lost the best value award, protested, and won. There was no documentation showing that the contracting officer had performed any kind of analysis comparing the vendors with respect to which vendor was the best value.⁶

Without documentation, a contracting officer’s decision is unreasonable.

Rule 2: To be reasonable, the contracting officer’s written decision must show that the contracting officer actually thought about the decision instead of making a thoughtless, knee-jerk decision.

One judge made this point nicely when he said, “Procurement officials must use judgment . . . ; they cannot act as ‘automatons.”’⁷

A construction contractor asked the government to allow it to substitute “in the public interest,” as allowed by a contract clause, an item not in the specification. The contracting officer refused to even consider alternatives, insisting on the contractor’s following the specification. A court concluded that the contracting officer’s decision to reject the substitution without considering the alternatives the contractor had presented was arbitrary and capricious.⁸

Rule 3: To be reasonable, the contracting officer’s written, thoughtful decision must follow the rules for making a decision.

FAR gives good advice here. For example, a contracting officer’s decision on who won a contract should follow the rules in FAR 15.308:

The source selection decision shall be documented, and the documentation shall include the rationale for any business judgments and tradeoffs made or relied on by the SSA [Source Selection Authority], including benefits associated with additional costs.

A contracting officer’s documentation on a contract award has to compare the pros and cons of the offers.

The Department of Veterans Affairs issued a best value solicitation for prescription glasses. Classic scored 180 and Opti-Lite scored 170. The award memorandum that the contracting officer prepared concluded that Classic should get the contract because it had the highest combined total score. GAO sustained Opti-Lite’s protest. The contracting officer’s documentation had to include the rationale for any trade-offs made, including the benefits associated with additional costs. “It is improper to rely, as the agency did here, on a purely mathematical price/technical trade-off methodology. Because there was no qualitative assessment of the technical differences between the two proposals, the award was improper. Without this assessment, there was no way to determine whether Classic’s technical superiority justified the cost premium involved.”⁹

In addition to these general rules, there are specific rules for being reasonable in each of the two phases of government contracting—the contract solicitation phase and the contract administration phase.

Being Fair and Reasonable in Awarding a Government Contract

The contracting officer must reasonably carry out every step in the solicitation process. From the start of the solicitation process (drafting the solicitation, getting it out on the street, receiving bids or offers, and evaluating them) to the end of the solicitation process (choosing the winner and deciding whether or not the winner is responsible), the contracting officer must be fair and reasonable.

For example, a losing vendor can challenge the contracting officer’s use of a firm fixed-price contract instead of a cost-reimbursement contract or the use of a negotiated procurement instead of a sealed bid process. The test for the contracting officer is “How reasonable was the choice I made?”

Although the solicitation process has many steps, the fou...