Government Contracts

1. Government Contracts

3. Overview • What is a Government Contract? • Authority to Enter into Government Contracts • Four Phases of Government Contracts • The Role of the Government Contract Professional

4. Sources • Statutes • Federal Acquisition Regulation (FAR) • 48 C.F.R. Chapter 1 (FAR Council) • http://farsite.hill.af.mil/ • Don’t forget FAR Supplements… • Case Law—administrative cases and Federal cases

5. What is a Government Contract? • Offer, Acceptance, Consideration… • Government is a party (of course) • Specialized statutes, regulations, and case law • Many differences from common law: e.g., socioeconomic policy, contract changes, contract terminations, etc….

6. Offer • An offer is a response to a solicitation that, if accepted, would bind the offeror to perform the resultant contract. • The offer indicates an intention to be bound to an agreement. • Submitted in the form of “Bids” or “Proposals” • Either party can make “offers” • Distinction between offer and advertisement. • Advertisements are generally construed to be invitations for offers. • IFB, RFP, RFQ are advertisements. The contractor’s bid constitutes an offer that may or may not be accepted by the government.

7. Acceptance • Acceptance is an unequivocal communication to the offeror indicating the intention to be bound to the exact terms of the offer. • An unequivocal response to an offer is one that is certain, decided, and doubtless. • A conditional response or one that hedges, procrastinates, or leaves the offeror in doubt does not constitute an acceptance. • For an acceptance to occur there must be no question that the offeree intends to be bound to the exact terms of the offer. • Therefore, acceptance must be clearly communicated to the offeror to become effective.

8. Consideration • Something of value that one party of a contract gives to the other contract party in exchange for something else of value. • Sufficiency vs. adequacy • Sufficient consideration - when the consideration has some value that induces the other party to perform. • Adequacy relates to whether the exchange is a fair bargain. • The law will not look to the adequacy of the consideration. If a party makes a bad deal, the court will lend no assistance.

9. Competency of Parties • Parties to a contract must have the competency to enter into an agreement. If a person does not have the mental capacity to formulate the requisite intent to be bound, there can be no meeting of the minds and there can be no contract. • In government contracting the issue of whether a corporation is competent will generally be whether it is legally entitled to enter into the agreement. • The corporation may be acting outside its charter (stockholders may have the power to rescind the contract). • Relatedly, those who act on behalf of a company must have the authority to act!

10. Legality of Purpose • Violation of statute • Certain conduct may be expressly prohibited by statute • A contract that imposes a duty to perform such conduct is also illegal and will not be enforced. • Violation of public policy • Public policy applies to matters of public morals, health, safety, and welfare. • One cannot do that which has a tendency to be injurious to the public or against the public good.

11. Certainty of Terms • Lack of certainty concerning the terms and conditions of the contract mayrender an agreement unenforceable. • Terms must be clear enough to permit the courts to interpret the duties and obligation to be performed by either party. • “Rules of Construction” as applied by courts: • The ordinary meaning generally given to words applies. • Technical terms and words are given their technical meaning unless clearly indicated otherwise. • The contract must be read and interpreted as a whole. • Specific terms control over general terms when in conflict. • Ambiguities are interpreted against the drafter of the contract. • Best evidence of the parties’ intention is in the written contract. • Purpose is to bar oral evidence that contradicts, adds to, or otherwise varies the terms of the written contract.

12. FAR Definition of a “Contract” Definition: “...a mutually binding legal relationship obligating the seller to furnish the supplies or services (including construction) and the buyer to pay for them. It includes all types of commitments that obligate the Government to an expenditure of appropriated funds…” FAR 2.101

13. FAR--Uniform Contract Format • Sec A: Solicitation Form • Sec B: Supplies or Services and Prices/Costs • Sec C: Description/Specs/Work Statement • Sec D: Packaging and Marking • Sec E: Inspections and Acceptance • Sec F: Deliveries or Performance • Sec G: Contract Administration Data • Sec H: Special Contract Requirements

14. FAR-- Uniform Contract Format (Continued) • Sec I: Contracting Clauses • Sec J: List of Attachments • Sec K: Representations, Certifications, Exhibits, and Other Attachments • Sec L: Instructions, Conditions, and Notices to Offerors • Sec M: Evaluation Factors for Award

15. “Contracting” …purchasing, renting, leasing, or otherwise obtaining supplies (products) or services from nonfederal sources. Contracting includes reviewing descriptions of supplies and services required, solicitation and selection of sources, preparation and award of contracts, and all phases of contract administration/management.

16. General Categories of Government Contracts • Supplies • Construction • Services • Research and Development (R&D)

17. Every Good Government Procurement System Has… • Competition • Transparency • Integrity

18. Government Authority • Who has the authority to bind the Government with a contract?

19. Government Authority • General Rule: Only someone with actual authority may bind the Government

20. Government Authority • Agency Heads (FAR 1.601) • By virtue of their positions (e.g., ecAF) • Delegate down to Senior Center Contracting Official (SCCO) • Folks with warrants (FAR 1.602) • Contracting Officers (COs)

21. Government Authority • HCAs appoint COs IN WRITING (WARRANT) • Warrant must be posted • May include further limitations (e.g. dollar limits)

22. “CONTRACTING OFFICER” - Person who has authority to enter into, administer, or terminate contracts and to make related determinations and findings. - May bind the government only to the extent of the authority delegated. - CO authority is received from the appointing authority with clear instructions in writing regarding the limits of that authority.

23. Government Authority • What about other folks? • Apparent authority—not recognized • Ratification (of unauthorized act)

24. Contractor Authority • All types of authority apply: • Actual • Apparent

25. 4 Phases of Government Contracts • Acquisition Planning • Pre-Award (Source Selection) • Post-Award (Performance) • Close-out

26. 4 Phases of Government Contracts • Acquisition Planning • Pre-Award (Source Selection) • Post-Award (Performance) • Close-out

27. Acquisition Planning • KEY to successful procurement • Basically, looking at: • What do we need? (user) • How are we going to get it? (contracting) • How are we going to pay for it? (finance) • Are we following the rules? (contracting/legal)

28. Acquisition Planning:Basic Contract TYPES • Two Basic Types: • Fixed Price • Cost

29. Fixed Price Contract (FAR Subpart 16.2) • Set, predetermined price • Price not subject to any adjustment based on contractor incurred costs • Who bears the risk? • Contractor bears risk of increased costs (bound to perform at specified price)

30. Fixed Price Types • Firm Fixed Price • Firm Fixed Price with EPA • Fixed Price Prospective Redetermination • Fixed Price Retroactive Redetermination • Firm Fixed Price Level of Effort • Fixed Price Incentive Firm Target • Fixed Price Incentive Successive Target

31. Cost Reimbursement Contract (FAR Subpart 16.3) • Government pays contractor’s costs of performance • Who bears the risk? • Government bears risk of increased costs

32. Cost Reimbursement Types • Cost • Cost Sharing • Cost Plus Fixed Fee • Completion • Term • Cost Plus Incentive Fee NOTE: (1) Contractor’s accounting system must be adequate for determining costs (2) Government must have appropriate surveillance during performance (3) Cost-reimbursement contracts are prohibited for acquiring commercial items

33. Acquisition Planning: Contract TYPES—What else? • Time & Materials • Provides for acquiring supplies or services on the basis of: • Direct labor hours at specified fixed hourly rates that include wages, overhead, general and administrative expenses, and profit; and • Materials at cost, including, if appropriate, material handling costs as part of material costs • Labor-Hour • Variation of the time-and-materials contract, differing only in that materials are not supplied NOTE: May be used only when it is not possible at the time of placing the contract to estimate accurately the extent or duration of the work or to anticipate costs with any reasonable degree of confidence.

34. Acquisition Planning: Contract METHODS • Negotiated Procurements (FAR Part 15) • Sole Source Acquisitions • Competitive Acquisitions • Best value • Tradeoff • Lowest Price Technically Acceptable • Oral Presentations • Request for Proposals (RFPs)

35. Acquisition Planning: Contract METHODS • Sealed Bidding (FAR Part 14) • Price is the only basis for award • Invitation for Bids (IFBs)

36. Acquisition Planning: Contract METHODS • Acquisition of Commercial Items (FAR Part 12) • Definition of CI and Services (Section 2.101) • Simplified Acquisitions (FAR Part 13) • Under $3,000 (Micro-purchase) • $3,000 to $100k (Simplified acquisition threshold--SAT) • Up to $5.5M (SAT for commercial items) • Fair Opportunity (FAR Part 16.505)

37. 4 Phases of Government Contracts • Acquisition Planning • Pre-Award (Source Selection) • Post-Award (Performance) • Close-Out

38. Pre-Award (Source Selection):Competition • Law requires, with certain limited exceptions, that contracting officers promote and provide for full and open competition • Micro-purchases (under $3,000) - “reasonable price”-FAR 13.202 • Between $3,000 and Simplified Acquisition Threshold (SAT) - “reasonable number of sources” (“Rule of 3”)-FAR 13.104 • Over SAT-Competition in Contracting Act - Full and open competition-FAR 6.101

39. Pre-Award (Source Selection):Competition • Full and open competition AFTER EXCLUSION OF SOURCES FAR Subpart 6.2 • e.g., contracts set aside for small business, etc. • OTHER THAN full and open competition FAR Subpart 6.3 • requires JUSTIFICATION & APPROVAL (J&A); • e.g., only one source exists • e.g., “unusual and compelling urgency”

40. Pre-Award (Source Selection):Advertising FAR 5.101 • Over $25,000 • Government-wide Point of Entry (GPE) -- www.eps.gov or www.fedbizopps.gov • $10,000 to $25,000 • Posting in a public place • Under $10,000 • No requirement

41. Pre-Award (Source Selection):Evaluation of Offers • Responsibility (FAR 9.103) • A Government contract shall be awarded only to a RESPONSIBLE contractor • Responsiveness (FAR 14.301) • Offers must meet ALL essential requirements of the solicitation

42. Pre-Award (Source Selection):Bid Protests • What are they? • Basically, offerors or potential offerors challenging a solicitation or a contract award • Various Remedies—inc. possible STAY… • Of Award—Pre-Award • Of Performance—Post-Award

43. Pre-Award (Source Selection):Bid Protests • Where are they filed? • Agency Protests (FAR Subpart 33.1) • Government Accountability Office (GAO) • Court of Federal Claims (COFC)

44. 4 Phases of Government Contracts • Acquisition Planning • Pre-Award (Source Selection) • Post-Award (Performance) • Close-out

45. Post-Award (Performance) • The “Life” of the Contract • Contract Administration • Contract Changes • Claims/Disputes

46. Post-Award (Performance):Contract Administration • Contract Administration • Primarily conducted by contracting office personnel (along w/Program Management and functional quality assurance folks) • Government should not wait until there is a problem to involve JA or DCMA • KEY: Foster strong relationships with all resources available

47. Post-Award (Performance):Changes/Modifications • Contract Changes (FAR Subpart 43.1) • Changes Clause allows “minor” changes • EQUITABLE ADJUSTMENT in price • Change must be: • WITHIN SCOPE (of work), and • Made by one with PROPER AUTHORITY (CO) • Unilateral Modifications • Bilateral Modifications

48. Post-Award (Performance):Contract Disputes • Contract Disputes (FAR Subpart 33.2) - Administrative or judicial litigation between the contractor and the agency, relating to contract performance • Reasonable efforts should be made to resolve controversies prior to submission of claim • Use Alternative Dispute Resolution (ADR) to maximum extent practicable • If contractor initiates claim, CO must issue written decision • Adverse final decision by CO perfects appeal to the Armed Services Board of Contract Appeals (ASBCA) or the Court of Federal Claims (COFC)

49. 4 Phases of Government Contracts • Acquisition Planning • Pre-Award (Source Selection) • Post-Award (Performance) • Close-Out

50. Close-Out • “Natural” Causes