Understanding Government Contract Law

Terrence M. O'Connor

• Publisher: Berrett-Koehler Publishers
• Year: 2007
• ISBN:
  9781523096367
• Edition: 1
• Topic: Business
• Subtopic: Project Management
• Index: Business

A "back-to-basics" guide to government contract law
Finally! A plain-English presentation of the basic legal concepts of government contract law for professionals at any stage in their careers.
Until now, anyone in the procurement field has had to trudge through dense and complex texts written in hard-to-follow "legalese" in their quest to understand procurement law. With Understanding Government Contract Law, they finally have a source of clear and concise explanations of the legal principles involved in government contract law, written by an authority on the subject.
Part I of the book focuses on the unique problems facing each of the parties to a government contract – the contract officer and the contractor – and offers insight to the many roles played by the contract officer in the procurement process. Part II describes why and how the government contract is different from commercial contracts. Part III explores the ins and outs of a government contract lawsuit.
The author presents key legal principles of government contract law by:
• Stating a legal principle
• Specifying where in the Federal Acquisition Regulation (FAR) that principle is found
• Offering the rationale, context, and any public policy behind the principle
• Describing, with case law examples, situations where the government applied the law correctly and situations where the government came to that conclusion incorrectly

Part I

The Parties

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.”

In all the law dealing with contracting officers, this is the best summary of the contracting officer’s job. It’s at 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 trying to treat a contractor fairly and reasonably. But whose side is the contracting officer on—on the government’s, as a sheriff protecting the government’s interests, or on neither the government’s nor the contractor’s, as a judge?

Unfortunately, FAR has no answer. Having created this tension between the contracting officer as a guardian of the interests of the government 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 really 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 decisions that are independent—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 interests of the government. We look at how a contracting officer protects the taxpayers and the U.S. 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 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 they lead the government to, perhaps a contracting officer can 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: making sure the government employee involved has authority to do the deal (because a deal made with unauthorized government employees typically ends in no contract with the government); avoiding promising to provide one set of personnel and then switching to another set after the contract has been won; and avoiding getting involved in fraud.

Chapter 1

The Contracting Officer as Judge

CONTENTS

A “Fair and Reasonable” Judge

Three Simple Rules for Always Being Fair and Reasonable

Being Fair and Reasonable in Awarding a Contract

Being Fair and Reasonable in Administering a Contract

An “Independent” Judge

According to FAR 1.602-2(b), a contracting officer is supposed to

“Ensure that contractors receive impartial, fair, and equitable treatment.”

This FAR provision adds black robes to the contracting officer’s wardrobe. It makes 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.

So in this role, the contracting officer is not supposed to narrowly advocate for the government: he should not be 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, fair and reasonable. So in the first section of this chapter, we look at what this vague phrase means in day-to-day procurement.

We look at the contracting officer’s being fair and reasonable from three perspectives. First, we discuss general rules for how a contracting officer can be fair and reasonable. We next look specifically at what it means to be fair and reasonable in the solicitation process and, finally, 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 his own opinions. So in the second section of this chapter, we 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. So it’s 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 Government Accountability Office (GAO) the right to review decisions a contracting officer makes in the solicitation process.¹ GAO’s test of the contracting officer’s actions is rationality or reasonableness. 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.” So, 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).

In determining whether 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

But when you think about it, making a contracting officer act reasonably can be both a blessing and a curse. It’s a blessing because 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 carpool, buying an SUV, a minivan, or a six-passenger sedan would all be reasonable. It would be unreasonable to buy a sports car or a bus. If a contracting officer chose a six-passenger sedan for a carpool vehicle, a judge who herself would have chosen an SUV would have a hard time finding the contracting officer’s decision unreasonable. So, because a contracting officer simply has to make a reasonable decision to be right, the test of reasonableness is a blessing.

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 generally defer to an executive branch decision, even if the 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 the other person who isn’t reasonable.) Isn’t it hard for everybody to agree on what is reasonable and what is not? Second, people always have a reason for doing something, so isn’t everything, therefore, automatically reasonable? It’s at this point that the apparently redundant word good has to be added to reason.

But although there might be gray areas allowing reasonable people to disagree, some decisions are clearly unreasonable, whether the decision is made in the solicitation process or in the administration process.

Three Simple Rules for Always Being Fair and Reasonable

Decisions of courts, boards, and GAO show three good rules for reasonable decisions:

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.

“[GAO] 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 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 thought-less, 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 often 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 m...