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“Ratification” Makes Agency Pay for Using Expired Software License

by | Jun 15, 2021 | Government Contracts

If the government benefits from something a contractor provides without contracting officer approval, there are only a few ways a contractor can force the government to pay. In a recent decision of the Civilian Board of Contract Appeals (CBCA), the Board used one of those ways and made sure the government did not “get something for nothing.”  Force 3, LLC v. Department of Health and Human Services, CBCA 6654, April 14, 2021.

The Department of Health and Human Services (DHHS) issued a solicitation for software covering a base year and 2 option years. When Force 3 submitted its proposal, its price was lower because Force 3 offered a 3-year non-cancellable deal offered by Force 3’s supplier. Force 3’s proposal also included a clause that required the agency, after the contract ended, to “certify in writing that it has deleted or disabled all files and copies of the software from the devices on which it was installed and is no longer in use” by the agency.  Force 3 won the contract which incorporated Force 3’s clause requiring certification of software deletion at contract end.

Force 3 performed the contract for the base year and the 1st option year, but the contract ended after the agency did not exercise the 2nd option year. The agency, however, did not give Force 3 the required certification after the contract ended. In addition, the agency continued to use Force 3’s software for months without paying for it. And, significantly, the contracting officer knew that the agency continued to use the software after the contract had expired.

Because Force 3’s deal with the supplier was a non-cancellable 3-year deal, Force 3 had to pay the supplier for the government’s continued use of the software. The agency, however, refused to pay for its continued use of the software under the expired contract. Force 3, therefore, filed a claim with the CBCA to force the agency to pay for using the software.

The Board agreed with Force 3 and made the agency pay under the legal theory of an “implied ratification.”

To understand the Board’s “implied ratification” reasoning, it’s necessary to first understand an “express ratification.” As defined in FAR 1.602-3(a), an express ratification is “the act of approving an unauthorized commitment by an official who has the authority to do so.” Typically, this is the way that a contracting officer gets a contractor paid for something a COR required a contractor to do without the contracting officer’s prior approval. It’s a retroactive government approval.

In this case, the contracting officer had refused to pay for the agency’s use of the software so there was no express ratification.

But a Board or a court can find an implied ratification. According to precedent, “the acceptance of benefits by [authorized] representatives of the Government with knowledge of the circumstances may, in the proper case, result in a ratification of an unauthorized act by implication.”

In the facts of this case, the Board found an implied ratification: “the contracting officer knew that HHS was using the support services and took no action to stop that use until nine months after the contract expired. HHS benefitted from the support services received at no cost, hiding behind its discretionary decision to not exercise the option period. The contracting officer’s failure to curtail the use of the support services once notified resulted in a ratification of that commitment by implication or inaction.”

The decision shows one way to enforce the basic principle that “nothing is for free.” Berenzweig Leonard advises its clients on ways to get paid for a benefit the government receives whether the contracting officer agrees to do so or refuses to do so.

Terry O’Connor is a Partner and Director of Government Contracts at Berenzweig Leonard.