ARE YOU ENTITLED TO AN EQUITABLE ADJUSTMENT?

It is not possible to delineate all situations where a contractor is entitled to an equitable adjustment in price and/or time to perform the contract. However, under the Federal Acquisition Regulation (“FAR”), contractors are eligible for numerous different equitable adjustments arising out of the performance of their contracts and the actions of the government. Typically, a contractor can receive an equitable adjustment for a constructive change, delay or other government caused increase in its costs. It is generally advisable to assert your right to the various equitable adjustments permitted by the FAR. You must comply strictly with the equitable adjustment requirements in the FAR and in your contract. What is an equitable adjustment: Although the FAR defines a claim (see below), it does not define … Continue reading

BEWARE OF GOVERNMENT “BEST EFFORTS” ON OPTIONS

A previous blog, “The Government Controls the Options,” makes clear that contractors cannot demand that the Government exercise an option in the contract, and that the Government has the sole right to exercise or not exercise the option. Two recent cases demonstrate that the contractor will also lose a claim where the government fails to exercise an option, even though both contracts required the government to make “best efforts to obtain funds” for the options. In Mach I AREP Carlyle Center LLC, ASBCA No. 59821, June 1, 2016, Mach I entered into a lease with the Corps of Engineers for office space in the Northern Virginia suburbs of Washington, DC. The lease contained a base year, and nine separate option years, and the Corps was obligated “to … Continue reading

THE GOVERNMENT CONTROLS THE OPTIONS

Virtually all government contract options (for more quantities of goods, or for an extension of services), are generally priced unilateral options which the Government may exercise or not exercise at the Government’s discretion. When it does exercise an option, the Government must follow the requirements in the option clause, but contractors may not successfully complain about the failure of the Government to exercise that option. JRS Management v. Dept of Justice, CBCA 3288 (May 28, 2014) is an excellent example of the Government’s discretion. The JRS contract was for culinary arts instructor services to the Department of Justice for a base year running through Aug. 7, 2012, with four option years. The contract specified certain experience and qualification requirements for each of the instructors. The … Continue reading

CAN YOU SELL A GOVERNMENT CONTRACT: ASSIGNMENT, NOVATION, CHANGE OF NAME AND ASSIGNMENT OF CLAIMS

Contractors frequently ask if they can sell or transfer (assign) their government contract to another company.  The sale or assignment of a purely commercial contract is very common and well recognized at law. But for a Government contract, there are special rules.  Although a transfer can be made through a process known as “novation,” the contract can be annulled if the rules are not carefully followed. Commercial Contracts May Generally Be Sold: Generally, commercial contracts can be sold or transferred to a third party.  Indeed, Article 2-210 of the Uniform Commercial Code (“UCC”) explicitly permits this, by stating: § 2-210. Delegation of Performance; Assignment of Rights. (1) A party may perform his duty through a delegate unless otherwise agreed []. (2) Unless otherwise agreed all … Continue reading

THE SALES ARTICLE OF THE UNIFORM COMMERCIAL CODE APPLIES TO GOVERNMENT CONTRACTS

The Uniform Commercial Code (“UCC”) was developed between 1942 and 1952 by the National Conference of Commissioners on Uniform State Law and the American Law Institute, with assistance from lawyers, judges, law professors, and businessmen, in order to simplify and clarify the law and make it uniform.  It has been adopted by all 50 states and the District of Columbia (only in part in Louisiana).  Of particular importance to private contracts throughout the United States is UCC Article 2, Sales. Even though the Federal Acquisition Regulation (“FAR”) controls government contracts, “ the Uniform Commercial Code provides useful guidance in applying general contract principles. Hughes Commc’ns Galaxy, Inc. v. United States, 271 F.3d 1060, 1066 (Fed. Cir. 2001).  And, the Federal Circuit has said that the … Continue reading

WHEN IS A CHANGED CLAIM A “NEW” CLAIM?

In order to bring an appeal of a claim before the Court of Federal Claims or a Board of Contract Appeals, that claim must be presented to the contracting officer for decision.  The claim must be specific enough to give the officer notice of the basis of the claim and allow him/her to make an informed judgment about it. Typically the contracting officer will issue a final decision on a claim, but even if he or she does not, the claim will be “deemed denied” by law, and the contractor may appeal to a Board or the Court.  The Contract Disputes Act requires that a claim that is appealed be the same as the claim presented to the contracting officer.  In Affiliated Const. Group, Inc. … Continue reading

GOOD FAITH AND FAIR DEALING BY THE GOVERNMENT

A recent Federal circuit case, Metcalf Const. Co, Inc. v. United States, No. 2013-5041 (Fed Cir. Feb. 11, 2014), explains in some detail the covenant of good faith and fair dealing.  The covenant is important because it impose reasonable duties on both the government and the contractor. The formulation of the covenant, which applies to federal contracts, is:  “every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement.”  Restatement (Second) of Contracts Sec. 205 (1981).  Failure to abide by that duty constitutes a breach of contract, as does failure to fulfill a duty imposed by a promise stated in the agreement. Restatement Sec. 235.  This covenant imposes both a duty not to hinder and a duty … Continue reading

“NO-COST” MODIFICATIONS

Government contracting officers frequently seek to make a unilateral unilateral modification, but insist that it be “no-cost,” i.e., there will be no equitable adjustment in the contract price as permitted by the changes clause (FAR 52.243-1).  The Army even came up with a scheme to try to force a contractor to accept six unilateral modifications without being able to appeal these modifications to the Armed Service Board of Contract Appeals (“ASBCA”).  However, the Board recently put the kibosh on the Army’s tactic, ruling that such no-cost modifications were a government claim that could be immediately appealed.  DynPort Vaccine Co., LLC, ASBCA No. 60119, Sept. 30, 2015.   Many contracting officers who seek changes would like to have a contractor agree that they are “no-cost” so … Continue reading

RATIFICATION

This blog has frequently explained that generally, the government can only be bound contractually by a person with actual authority, normally a written delegation of authority known as a “warrant,” hence use of the term “warranted contracting officer” (e.g., Dept of State Acq. Reg. 48 CFR § 601.601–70, Dept of Veterans Affairs Acq. Regulation 48 CFR § 801.690–5). Although it does not use the phrase “warranted contracting officer,” the Federal Acquisition Regulation (“FAR”) states that only “Contracting Officers have authority to enter into…[and] may bind the government only to the extent of the authority delegated to them.” FAR 1.602-1.  The question for this blog is whether a contractor can be paid if it has performed work or delivered a product without a properly signed contract?  … Continue reading

CHANGE ORDERS AND EQUITABLE ADJUSTMENTS

You are a construction company that receives a contract to modernize the Internal Revenue Service center.  Among other things, the contract requires you to provide a security system.  As explained below, the security cabling for that system is required to be “concealed or in conduit (EMT) [Electrical Metal Tubing].”  Your contract states the following: General Provisions: 1.17 Conduit is required in all unfinished areas where cables cannot be concealed above the ceilings on raceways or in hollow walls or placed in existing cable trays.  Cables are concealed when they are run below the raised flooring and above the drop ceiling. 12. All security system cabling shall be enclosed in conduit when exiting the protected (limited access) area. Definitions and Instructions 7. “Concealed” (as applied to … Continue reading