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Posted on Wednesday, January 15, 2014

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.

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