It is important for contractors to understand the differences between “contracts” and “agreements.” The rules for winning and performing these contract vehicles can vary widely and are spread over numerous FAR sections. These different rules present risks to vendors who assume that the FAR rules for an agreement are similar to the FAR rules for contracts. Thus, bidders must know early in the solicitation process the specific rules – both FAR and agency specific rules – that will apply to performing the work if they win.
Legally, the label the agency gives to a solicitation – “This solicitation is for a Blanket Purchase Agreement (BPA)” – is not conclusive. For example, the Armed Services Board of Contract Appeals has held that what an agency called a Blanket Purchase Agreement (BPA) under FAR Part 13, Simplified Acquisition Procedures, was actually a requirements contract. Int’l Maint. Res., Inc., ASBCA No. 49789, Oct. 28, 1996. Thus, it is important for vendors to understand the differences between these contract vehicles and not rely solely on what it’s called by the agency.
One area of distinction between contracts and agreements are a contractor’s remedies for the government’s negligent estimates in the solicitations for these various contract vehicles.
The solicitation for a requirements contract under FAR Part 16 must include accurate estimates of expected work. If the work performed under the requirements contract falls well below the government’s estimate, the contractor can sue for breach of contract damages, because a requirements contract is just that – a binding contract.
Agreements, on the other hand, are not binding contracts. Perhaps the most commonly known type of agreement is the blanket purchase agreement, or BPA. It is the order issued under the BPA that is a contract; the holder of a BPA has only a generally non-enforceable “agreement” that might, or might not, lead to an enforceable document if the vendor gets an order under the BPA. Thus, if the solicitation for the BPA describes an estimated level of work that falls below the government’s estimate, the BPA holder cannot sue for breach of contract.
BPAs are not the only agreements described in the FAR. FAR Part 16 also includes Basic Ordering Agreements (BOAs) and Basic Agreements (BAs). All these different types of agreements – BPAs, BOAs, and BAs – have the procurement advantage of having already established the terms and conditions for any orders that may be awarded. They establish a “charge account” with the vendor, so purchases can thereafter be made without having to issue individual purchase documents each time.
Another important distinction between the two types of contract vehicles – contracts and agreements – is whether the winner must honor government orders. Clearly, in a requirements contract, the winner must provide all orders the government requires within the limits of the requirements contract.
But, can the BPA holder of a single-award BPA refuse to fulfill a government order? If the BPA is under FAR Part 13 that typically uses Requests for Quotations (RFQ), a vendor typically can refuse to fulfill the order, for example, at the price in the BPA. Whether the holder of a GSA FSS single-award BPA can do the same is not clear in FAR. In any case, a vendor should raise the issue during the Q&A of the BPA solicitation process. Doing so would certainly save the vendor from being forced to go through with a sale to the government on terms unfavorable to the vendor.
Berenzweig Leonard is teaming up with Red Team Consulting for a monthly newsletter featuring upcoming contracts, key protest decisions, legal updates, events, and more. This post was published in the November 2017 Monthly Insights newsletter. To sign up for Monthly Insights, please click here.