Government Contracts – Schwartz – Fall 2011I. Statutes & RegulationsII. Power to Contract

i. Inherent Authorityii. Power of Agentsiii. Role of the GAO / Comptroller Generaliv. Appropriations

a. Timeb. Purposec. Amount

III. Government Exceptionalismi. Choice of Lawii. Equitable Estoppeliii. Sovereign Acts & Unmistakability Doctrinesiv. State Governments & the Contracts Clausev. Collateral Socioeconomic Policies in Government Contracts

IV. Government Contractor Exceptionalismi. Government Contractor Defenseii. Qualified Immunity for Government Contractorsiii. Immunity from State Taxes and Regulationsiv. First Amendment Protection for Government Contractorsv. False Claims Act & Qui Tam Suitsvi. Criminal Prosecution of Government Contractors

V. Congruencei. Offer & Acceptanceii. Considerationiii. Implied Contractsiv. Statute of Frauds

VI. Contract Formationi. Competition Policies

a. Statutory Requirementsb. Circumvention of Competition Policies

ii. Sealed Bidding vs. Competitive Negotiationiii. Sealed Biddingiv. Competitive Negotiationv. Responsiveness of a Bidvi. Qualification & Pre-Qualificationvii. Responsibility of a Contractorviii. International & Competitive Procedures

ix. Types of Contractsx. Audit Authority

VII. Formation Disputes – Bid Protestsi. Path for a Bid Protestii. Bid Protest Forums

a. GAOb. Court of Federal Claimsc. District Courtsd. Boards of Contract Appeals

iii. Relationship Between Bid Protest & Performance Dispute Foraiv. International Law & Bid Protests

VIII. Performance & Administration of Government Contractsi. Delays / Suspensionsii. Changes / Modificationsiii. Inspection & Acceptanceiv. Termination for Convenience

a. When the Gov’t May TFCb. Determining Contractor Compensation Following TFC

v. Termination for Defaulta. When the Gov’t May TFDb. Determining Contractor Compensation Following TFD

IX. Performance Disputesi. Path for a Claim / Performance Dispute Foraii. Role of Contracting Officersiii. “Claim” Requirementiv. Certification Requirementv. International Law & Performance Disputes

I. Statutes & Regulations Armed Services Procurement Act (ASPA) – 10 USC 2303

o Covers all armed services, and NASAo Regulations procurements by an agency “for its use or otherwise”

Closes loopholes where one agency would get another agency to buy for the first agency to avoid procurement regulations

o Applies to all property, other than land, and all services for which payment is to be made from appropriated funds the sole exception is military stores

Federal Property and Administrative Services Act (FPASA) – 41 USC 252o Civilian counterpart to ASPAo Governs procurement of all goods and serviceso Only governs executive agencies

Whether or not an entity is “public,” and thus covered by FPASA – Motor Coach Industries, Inc. v. Dole (holding trust fund created and operated by FAA paid into by airlines to buy new buses for Dulles airport is a public entity and is subject to federal procurement regulations.)- The purposes for which the entity was established- The public or private character of the institution which spearheads the entity's creation- The identity of the beneficiary of the entity- The identity of the administrator of the entity- The degree of control exercised by the public agency over disbursements and other

details of administration- The method of funding

o Courts will generally not override a requirement of an FPASA or consider another statute to create an exception to the FPASA (or any gov't contracts statute in general) unless the other statute does so extremely explicitly. - Andrus v. Glover Construction Co. 446 U.S. 608 (1980) This makes the "FPASA something of a super-statute which is to be given more than

ordinary weight when it arguably conflicts with another statute"

Competition in Contracting Act of 1984 (CICA) – 41 USC 253o Revised the FAR to encourage “full and open competition” in government contracting.

Contract Disputes Act of 1978 (CDA) – 41 USC 601o Governs all disputes with the gov’t over gov’t contracts involving procurement of goods/svcs

Does not govern disputes involving real property, unless the acquisition of real property is combined with a construction contract. - Harry N. and Rose C. Forman v. U.S.

o Superseded the Tucker Act

Federal Acquisition Regulation (FAR) – CFR Title 48o Regulations govern procurement under both the ASPA and the FPASA

Force and Effect Principle - Regulations have the force and effect of lawo Specifies standardized clauses that shall be written into contracts.

G.L. Christian Doctrine – where the FAR mandates that a clause should be written into a contract and it is absent, courts will read the contract as though it contains the mandated clause.

o Accardi Doctrine - Agencies shall be bound by their own regulations

G.L. Christian is like Accardi in reverse. Because agencies have to be bound by their own regulations, private contracting parties effectively get bound by agency regulations as well.

o Agencies can pass own supplements to the FAR, but supplements cannot contradict the FAR. Clauses in agency-specific supplements might be subject to the G.L. Christian Doctrine

- Some caselaw says G.L. Christian only applies to the FAR itself. - Schwartz thinks G.L. Christian does apply to supplements.

o The FAR is exempt from APA notice-&-Comment rulemaking. However, another statute requires that regulations in the FAR be made with certain public

participation, much of which is similar to what would be required were the APA to apply.

II. Power to Contracti. Inherent Authority

The United States gov’t needs no positive law in order to enter into contracts. Contracting is a part of the inherent authority of the U.S. gov’t. – U.S. v. Tingey

The gov’t has not only the power to make contracts, but also to modify them. – U.S. v. Corliss Steam

ii. Power of Agents Every interaction between the government and a contractor which binds the government must be

done by a person who has contracting authority.o “Contracting Officers”

Not contract specialists… contracting representatives… or any other nameo Contracting officers frequently have a limitation on the dollar-amount on contracts into which

they can enter the government.

Types of Authorityo Actual Authority

Express - written or oral delegation Implied - true authority given by conduct

- Both express and implied actual authority, exercised by a contracting officer, can bind the United States.

- One instance does not a pattern of behavior make.- Course of dealings evidence has low probative value in gov't contract disputes - General

Electric v. U.S.o Apparent Authority - Actions or statements of the principal cause a third party to reasonably

believe that authority has been conferred on the agent, whether or not the principal actually intended to confer such authority “Apparent” authority can NEVER bind the United States. – Gordon Woodroffe v. U.S.

- Apparent authority is a version of estoppel- See Federal Crop Insurance Corp v. Merrill and OPM v. Richmond

Determining Whether A Person Has Actual Authorityo Primary authority to contract is vested within the heads of each departmento There must be a delegation of the authority to contract from the head of the department

downwardo Staff organizations providing communications services often create confusion but are not likely

to be the recipients of contract authority

Ratification - If someone without authority acts, someone with authority must "ratify" that decision in order to make it binding.o Individual Ratification – When an otherwise unauthorized agreement is approved by one who

has contract authority. “[W]hen an authorized contracting officer expresses a definite opinion concerning the

merits of a claim with knowledge of the relevant facts, a decision has been made” - General Electric v. U.S.(Colonel who had contracting authority ratified an inferior’s recommendation that additional payment for cost overruns be paid to a contractor by signing the "concur in the recommendation" line).- Schwartz thinks the rationale of this case is wrong because the ratifying officer did not

intend to use his authority, nor did the contractor ever know about the Colonel’s recommendation, which was in a solely intra agency document.

o Institutional (Implied) Ratification – Occurs when the gov’t seeks the benefits of an otherwise unauthorized contract while officials with ratifying authority know of the promise. Williams v. U.S. (1955) – Finding an implied contract where superior officer with contracting

authority observed paving work which was being done under an unauthorized agreement and did not halt the work. - Although Professor Schwartz thinks this case is wrong, the Shepardization indicates it

has never been overruled and has only been distinguished. Arguably, if institutional or implied ratification could not occur, a contract implied-in-fact would almost never, if ever, be able to arise with the gov’t.

See Contracts Implied-in-Fact

iii. Role of the GAO / Comptroller General The Comptroller General is an agent of the legislature and therefore cannot perform executive

functions – Bowsher v. Synar

Competition in Contracting Act (CICA) empowers the Comptroller General to issue recommendations to procuring agencies on protests brought by disappointed bidders for federal contracts. The CICA mandates automatic stay of execution of a contract until the bid protest has been resolved in the GAO. The CG can end or extend the stay.

The automatic stay provisions are not unconstitutional because the CG is carrying out an oversight, not an executive function. – Ameron v. U.S. Army Corps of Engineers

The stays are automatic The CG is authorized to consider only the length of time needed to decide the merits of the

bid protest when extending the automatic stay Does not enable CG to determine what is bought and on what terms

- CG Opinions are “recommendations” only Nevertheless, GAO opinions are followed universally. Any agency who acts contrary

to a GAO recommendation must notify Congress, and will likely end up with curtailed appropriations.

- "CICA authorizes the executive to override the stay under limited circumstances" Not an impermissible disruption of executive function

- The initial stay is short- CICA does not authorize CG to extend stay any longer than necessary

- Executive override authorization

iv. Appropriations Appropriations Clause – U.S. Const. Art. I § 9: “No money shall be drawn from the treasury, but in

consequence of appropriations made by law” Anti-Deficiency Act – Statutorily enforces the appropriations clause by providing administrative and

penal sanctions for federal employees who make or authorize expenditure from public funds either excess in the amount appropriated, for a time in which the money was not appropriated, or for a purpose for which the funds were not appropriated.

Funds Availability Clause – Conditions payment on availability of appropriations from Congress.o Will be read into every contract in which it is required under the G.L. Christian Doctrineo A contractor may be entitled to an equitable adjustment (for stand-by costs) for the

unreasonable suspension of work even where the cause of the suspension is lack of available funds. - C.H. Leavell & Co. v. United States (1976) See also Compensable Delay

Funds Availability and Multi-Year Contractso The government can bind itself beyond the year for which appropriation is available by making

the availability of funds a condition precedent. Once the condition precedent is satisfied—i.e. funds become available—the duty to perform kicks in.

o Because the government cannot be bound beyond the year for which there is an appropriation, multi-year contracts must contain a funds availability clause.

Funds Availability & Anti-Deficiency as an Interpretive Toolo Presence or absence of a funds availability clause in a contract whose type is ambiguous may be

an interpretive tool, because contracts should be interpreted so that they are not illegal. – Solar Turbines v. U.S. Because the ambiguous contract at issue in Solar Turbines did not contain a funds

availability clause, the court interpreted the contract to be a requirements contract, as opposed to a multi-year known requirements contract. - The contractor’s lawyers in Solar Turbines made the mistake of failing to argue that the

funds availability clause should be read in under the G.L. Christian Doctrineo Because indemnification is an open-ended promise, the cost of which is unknown at the time of

contracting, the court will not interpret an ambiguous contract to contain a promise for indemnification due to the Anti-Deficiency Act. – Hercules v. U.S.

Funds Availability and Multi-Year Leaseso Funds Availability Clauses with respect to multi-year leases work differently than they do for the

acquisition of goods and services. Unlike with most multi-year contracts, the government cannot bind itself beyond the year for which there is an appropriation when it comes to multi-year leases. – Goodyear Tire & Rubber Co. v. U.S. (U.S. gov’t cannot be bound for an additional year on a lease by reason of holding over).

a. Time The expenditure must be spent within the fiscal year for which it was appropriated.

o Replacement Contract Exception – Where an agency is using leftover money (which may exist where a contract for which there was an appropriation is terminated, for example,) to fund a

replacement contract the money may be spent outside the fiscal year for which it was originally appropriated. - Acting Comp Gen Weitzel to the Sec of the Interior 34 Comp. Gen. 239 (1954) Replacement Contract –

- Same need- Need exists continually throughout the period for which there was no contract- Same task to accomplish the need

o Whether a contract was fully formed by the end of the fiscal year is a matter of traditional private contract law. Each bid must be in writing Acceptance must have been communicated (remember mailbox rule) Acceptance may not be qualified (otherwise it would be a counteroffer)

Present Needs Doctrine - The services contracted for must serve a bona fide current need of the fiscal year in which the need arises current at the time the contracts were executed. - To the Secretary of State, 35 Comp. Gen. 319 (1955)o Bona fide - The need must be substantiated/more than just conjecture. There must be more

than a bare possibility of an obligation to pay.o Exception: when with 20/20 hindsight the agency finds out later that it did have a bona fide

current need which it didn't know about at the time Ex: in FY 1954 the embassy finds out that their property taxes were assessed in 1953.

Although they didn't know in 1953 that they owed the taxes, because with 20/20 hindsight in 1954 they are aware of a 1953 need, they can spend 1953 money in 1954.

No-Year Appropriations - The Constitution does not require appropriations to be done on a yearly basis. Sometimes, Congress will grant a no-year/any-year or a multi-year appropriation.o Where an appropriation is not time restricted, the GAO is more likely to construe the purpose

extremely strictly to prevent abuse. - To the Secretary of State, 42 Comp. Gen. 226 (1962)

b. Purpose 31 USC 1301(a) - Requirement that money be spent only for the statutorily designated purpose

o How broad the purpose is for which funds are appropriated is a matter of statutory construction.

o To the Secretary of State, 42 Comp. Gen. 226 (1962) (holding statute which appropriates money on a no-year basis for renovation and expansion of the State department does not authorize expenditure for the purpose of building a pneumatic tube system to the Whitehouse).

c. Amount The amount expended must match the amount appropriated.

o This is rarely, if ever litigated, because there is no room for ambiguity. $100K is $100K.

III. Government Exceptionalismi. Choice of Law

Rules:o 28 USC 1345: Dist. courts have original jurisdiction of all actions commenced by the U.S.o 28 USC 1652: (Rules of Decision Act) The laws of the several states, except where the

Constitution or treaties of the United States or Acts of Congress otherwise require or provide, shall be regarded as rules of decision in [federal courts], in cases where they apply.

Erie Doctrineo Even where federal law rules, where there is no federal statutory law, federal common law may

consist of "borrowing" the state law as long as there are no strong federal interests against the application of state law.

Which law applies?o If it's a gov't contracts case, federal law applies – Clearfield Trust v. U.S.o If federal law applies, what is the federal law?

Is there a federal statute or precedent which speaks directly to the question?- The FAR attempts to leave no wiggle room. Sometimes it fails.

If not, should federal law borrow state law?- Factors: (Kimbell Foods) * Almost always will weigh in creation of a uniform federal

common law as opposed to borrowing state law. The facts of Kimbell Foods were rare. Does state law even address the issue? Need for a nationally uniform body of law

o Do the agency’s own regulations incorporate state law in administration of the program at issue? U.S. v. Kimbell Foods – There is no strong need for uniformity for

prioritization of security interests where the government is a creditor where agencies already negotiate in particularized detail each loan transaction and follow state laws. "These lending programs are distinguishable from nationwide acts of the Federal Government emanating in a single form from a single source."

o If state law itself is uniform, it weighs in favor of borrowing state law U.S. v. Wegematic – where there was no standardized FAR clause or federal

law governing whether impossibility is a defense to termination for default, the court adopted state law because all states have adopted the UCC, which spoke to the question, and therefore borrowing state law to create federal law would not frustrate the objective of uniformity.

o Does the contract relate to national security? Amer. Pipe & Steel v. Firestone Tire & Rubber Co. – In a dispute over a

contract involving building missile containers, there is an extreme need for a uniform federal common law where the contract has anything to do with national security.a. Schwartz thinks this case should not have been one of federal law

because it was a dispute between the gen con and the sub con which did not result in any way from gov’t action. Therefore the dispute did not, by definition, “arise out of a gov’t contract” and Clearfield Trust should not have been applied in the first place.

Whether borrowing of state law would frustrate specific objectives of the federal programs (other than uniformity)?o U.S. v. Kimbell Foods – Allowing state law to determine prioritization of lien

holders would not frustrate federal objectives where the lending programs at issue were for social welfare and the gov’t is a voluntary creditor, as opposed to tax liens where the gov’t is an involuntary creditor whose goal is to recover money for protection of the public fisc.

Would state law discriminate against the federal gov't?

o U.S. v. Kimbell Foods – Borrowing state law for prioritization of security interests where the government is a creditor because “first in time” prioritization doesn’t necessarily put the federal government in a worse position than other creditors.

The extent to which application of a federal rule would disrupt commercial relationships predicated on state lawo U.S. v. Kimbell Foods – Creating a federal common law to re-determine lien

prioritization would disrupt the expectations of all other creditors who used state law to ensure the superiority of their liens.

ii. Equitable Estoppel How to Recognize an Estoppel Claim or Defense

o There is either a factual or legal reason why the gov't should win. Ex: OPM v. Richmond – legally, the man denied disability benefits was by statutory definition

not disabled because he busted the 80% salary capo The private party replies "even though the law is on your side, you are bad people."

Ex: Conceptually, apparent authority arguments are just estoppel arguments. “You didn’t have the authority to bind the U.S. gov’t and you said you did and I relied upon it.” That the gov’t cannot be bound by apparent authority is a per se application of the gov’t’s general immunity from estoppel.

o Do not confuse an estoppel argument with one of finality. Ex: Broad Ave Laundry & Tailoring v. U.S. – When contracting officer modified contract

under a situation which was neither required nor prohibited under regulations, mistakenly believing the adjustment was required, government was bound to abide by the modification because the contracting officer acted within her authority. - Here, there is no legal reason why the gov’t should win.

Federal Crop Ins. Corp. v. Merrill (1947) – The government is generally immune from estoppel but there might be an affirmative misconduct exception to gov't immunity from estoppel.

Office of Personnel Mgmt v. Richmond (U.S. 1990) – Four Different Holdingso Gov't can't be stopped in violation of an appropriations statute – Narrow

"Congress has appropriated no money for the payment of the benefits respondent seeks, and the Constitution prohibits that any money be drawn from the treasury to pay them."- Schwartz argues that if this is the true holding, then OPM v. Richmond has little

consequence because the appropriations statute at issue actually had a catchall provision authorizing expenditures for anything related to administering the program, which Schwartz thinks would cover this equitable expenditure.

o Gov't can't be estopped in violation of any statute - Middle Here, according to the statute, Richmond wasn't by definition disabled, so the payment

would be in violation of the authorization statute- This makes a huge difference as compared to the narrower holding, because there are A

LOT of authorization statutes passed, and very few appropriations statuteso Gov't can't be estopped in violation of law – Broader

"Law" as opposed to "statute" includes non-statutory law, i.e. the FAR and other regulationso Gov't can't be estopped in any case seeking the payment of money – Broadest

Money is the only thing you're going to get from the gov't in a gov't contracts case anyway, because injunctions ordering specific performance just won't be granted.

So, estoppel might occur in administrative law cases, but not gov't contract cases.

Analysiso Apply all four holdings of OPM v. Richmond. Is the estoppel claim barred under any or all?o If a holding of OPM v. Richmond does not bar the estoppel claim, is there a cognizable argument

for the existence of affirmative misconduct? If so, under Federal Crop Ins., an estoppel claim might go forward. Caselaw seems to indicate that mere employee negligence (i.e. in giving incorrect or out-of-

date information) is not sufficient to amount to affirmative misconduct- Would probably have to amount to some kind of purposeful action.

o Schwartz’s Argument: Relief should be or is available if - The agency had authority under pertinent statutes and regulations to waive the

requirements the agency is seeking to enforce The claimant made a timely request for such waiver to the agency Refusal of the waiver is an abuse of discretion that may be overturned on judicial review

under the APA.

iii. Sovereign Acts & Unmistakability Doctrines SAD & Unmistakability will generally NOT apply in traditional procurement contracts because all

other contracts will have a Termination for Convenience clause in them or read into them by the G.L. Christian Doctrine. Through TFC, the gov't has a much easier way of getting out of its obligations in procurement contexts, so it would never have to resort to this. Therefore, SAD and unmistakability will only be outcome determinative in non-traditional non-procurement contracts.

Sovereign Acts Doctrine (SAD) - the United States is not liable for breach of contract when its [other] "public and general" acts as a sovereign have the effect of violating contracts that it enters with private parties – Horowitzo Public & general - private contracts are affected the same as gov't contracts

“Spent Nuclear Fuel Cases” - The gov't contracts w/ nuclear power plant operators to dispose of spent nuclear fuel. Technological, environmental, and political difficulties delay opening of repository. Held: The breach does not appear to be caused by a sovereign public and general act. - The government’s action only affects gov't contracts, and - It's not an act of precise legislation causing the government to be in breach.

Unmistakability Doctrine - Contracts to which a governmental entity is a party should not be interpreted to immunize the government's contracting partner from subsequent exercises of sovereign authority, unless the contract has surrendered the terms to exercise that authority against the contracting partner in "unmistakable terms" - Bowen v. Public Agencies Opposed to Social Security Entrapmento Expressio Unio and Unmistakability Doctrine - if the contract says "if A, B, and C, happens, you

are exempt" but E, D, or F happens, then via expressio unio, the contractor is not exempt.

United States v. Winstar - Gov't promised future lax regulations for banks to buy insolvent institutions. Gov't then passed the regulations anyway.

o Souter (plurality): Merges the SAD & Unmistakability Doctrine - Unmistakability Doctrine means that private

parties that enter into contracts with the government are not implicitly exempted from the application of the government's subsequent exercises of [public and general] sovereign authority unless any exemption is clearly stated.- An act is "public and general" only if releasing the gov't from its own contractual

obligations is an incidental effect of a much more widely applicable change in law- In other words, SAD cannot apply whenever a significant consequence of the gov’t

action is to free the gov’t from its own contractual undertakings. The unmistakability doctrine does not apply as a threshold matter unless…

- The contract is about the exercise of a sovereign power Unmistakability doctrine should not apply to routine supply contracts

- The contractor is seeking an injunction (as opposed to monetary compensation where the contract can be construed to allow such compensation) which would in effect bar application of a statute Plurality interprets contract at issue in this case to promise indemnification in the

event of a change in the law and therefore unmistakability doctrine does not apply. The SAD is a version of the impossibility doctrine

- Therefore, the limitations on impossibility congruently apply here Nonoccurrence of the performance-obstructing circumstance that actually arose

was a basic assumption of the parties contract Defense can be waived - if the gov't and the private party agree that a change in the

law will not excuse liability then the defense is not available.o Scalia:

Concurs in judgment, but with different reasoning and explicitly rejects Souter's reasoning. Unmistakability Doctrine should apply to all gov’t contracts, even routine supply contracts. For Unmistakability Doctrine to apply, the contract need only be reasonably clear to find

that the government has promised a contractor that it will be exempt from future changes in the law- If contract says a contractor will have the benefit of a particular course of regulatory

treatment, it need not also promise that the contractor will continue to receive the promised regulatory treatment even if the law applicable to others changes

Treats the Sovereign Acts Doctrine as though it adds little to the Unmistakability Doctrine properly construed

o Rehnquist: Sovereign Acts Doctrine and Unmistakability Doctrine should be integrated Unmistakability Doctrine applies to all gov't contracts and cannot be avoided by re-

characterizing a contract as promising indemnification in the event of a change in the law, as the plurality did.- Ginsburg joins

Thinks which acts qualify as "public and general" is much broader than the plurality

"Justice Souter's version of the unmistakability doctrine is narrow in application but offers the government substantial protection when it applies, while Justice Scalia's version is broad in its application, but offers a shallower defense to the government when it applies."o A mix of congruence and exceptionalism with different proportions of each

"Rehnquist and Ginsburg … concluded that the unmistakability doctrine offered the government a defense that is both broad in application and difficult to overcome where applicable."

o Hyperexceptionalism

iv. State Governments & the Contracts Clause Contract Clause, U.S. Const., Art. I, Sec. 10, Cl. 1 - No State shall enter into any Treaty, Alliance, or

Confederation; grant Letters of Marque and Reprisal; coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts; pass any Bill of Attainder, ex post facto Law, or Law impairing the Obligation of Contracts , or grant any Title of Nobility.o "The Contract Clause prohibits states from enacting any law that retroactively impairs contract

rights. The Contract Clause applies only to state legislation, not court decisions." Impairment is not the same thing as actual injury to contract rights

- In United States Trust Co. of NY v. New Jersey, the bond holders are able to sue before they have even tried to sell back their bonds. They haven't technically suffered an injury yet, but can sue anyway.

o Factors – Energy Reserves Group v. Kansas Power & Light, 459 U.S. 400 (1983) the state regulation must not substantially impair a contractual relationship. the State "must have a significant and legitimate purpose behind the regulation, such as

the remedying of a broad and general social or economic problem." If the law has the effect of modifying private contracts, the law must be reasonable and

appropriate for its intended purpose. If the law has the effect of modifying public contracts, the law must be reasonable and

necessary - U.S. Trust Co of NY v. NJ- Where the government is modifying its own contracts, as opposed to private contracts, a

less deferential standard applies.- Necessary:

Were there alternative means of achieving the same purpose? Was the situation which necessitated the law unanticipated?

Reserved Powers Doctrine - The Contract Clause does not require a State to adhere to a contract that surrenders an essential attribute of its sovereignty. If the State does enter into a contract which purports to surrender an essential attribute of sovereignty, the contract is void ab initio.o Spending Power and the Reserved Powers Doctrine - Typically, courts find that a state's entry

into a binding, purely financial contract does not void the contract, although technically it might be characterized as a surrender of the spending power.

Analysiso Is the contract one into which a state has entered?

The Contracts Clause does not apply to the federal government.o Is the allegedly impaired contract void ab initio under the reserved powers doctrine because it

surrenders an essential attribute of sovereignty?o If not, does the government action at issue…

Impair contractual relationship only insignificantly, if at all? Have a significant and legitimate purpose behind it? Have no alternative, less drastic means of achieving it or was precipitated by an

unanticipated situation? If the state gov't can't win under the reserved powers threshold, they're probably not going to win at

all, because it's so easy to imagine an alternative means and that the problem resulting in the breach could have been anticipated.

v. Collateral Socioeconomic Policies in Government Contracts The goal of most federal procurement is to get the best value for the U.S. government, but the

government also seeks to encourage certain social and economic policies through its procurement.

Types of Collateral Socio-Economic Policies: o Small Business Preferences

41 USC 253(b), “Set asides” are an exception to full and open competition -See Dyneteria- Under the Federal Acquisition Streamlining Act (FASA), all procurements below the new

“Simplified Acquisition Threshold” will be set asides. Extra protection for small businesses in responsibility determinations -See In re JR Youngdale Required use of small businesses as subcontractors on larger contracts

o Preferences for Disadvantaged Business Owners Under Small Business Act, 15 USC 637(a), SBA can enter into prime contracts with other

federal agencies and subcontract to small business concerns. In Ray Baillie Trash Hauling v. Kleppe, the 5th cir. Held that the SBA could use this statute to prefer small businesses owned by disadvantaged persons.

Adarand Constructors v. Pena – all affirmative action programs that employ race-based presumptions of eligibility are subject to strict scrutiny review under Equal Protection.

o Domestic Preference Policies Ex: Buy American Act, 41 USC 10a-d Increasingly irrelevant due to numerous international trading agreements

o Equal Employment Opportunity Policies Executive Order 11246 – bars discrimination in employment by gov’t contractors on the

basis of race, sex, religion, or nat’l origin. Requires affirmative action to ensure nondiscrimination. Mandates standardized clause in all contracts.- Violation can result in contract cancellation and debarment

o Labor Standards Policies Construction Contracts: Davis Beacon Act, 40 USC 276a. For all construction contracts over

$2K the procuring agency must seek a determination from the Secretary of Labor of the prevailing wage levels in the construction site community and the contractor must pay that amount.

Goods Contracts: Walsh-Healy Act, 41 USC 35. Employees for contracts for production of goods must be paid national prevailing minimum wage under the FLSA.

Services Contracts: Service Contract Act, 41 USC 351. For all service contracts over $2500, employees must be paid either a locale-specific wage determination created by the Department of Labor, a standing wage determination published in the Department of Labor register, or if neither of the above are available, the FLSA minimum wage.

Chamber of Commerce v. Reich - D.C. Cir held that Clinton Executive order barring use of federal gov’t contractors who hire permanent replacements for employees who go out on a strike is preempted by the NLRA, which allows the practice.

IV. Government Contractor Exceptionalismi. Government Contractor Defense

Federal Tort Claims Act - 28 USC 2674, Waives the federal gov’ts sovereign immunity for tort claims o Exceptions - 28 USC 2680

Discretionary Function Exception - (a) Any claim based on an act or omission of an employee of the government, exercising due care, in the execution of a statute or regulation . . . or based upon the exercise or performance or failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Gov’t, whether or not the discretion be abused.- The gov't can only be sued under tort law for an injury caused by the govt's failure to

perform a ministerial action Combatant Activities Exception – (j) Any claim arising out of the combatant activities of the

military or naval forces, or the Coast Guard, during time of war.- Feres Doctrine - prevents service members from suing for injuries suffered in the course

of military duty even if the injuries are due to the federal govt's negligence Foreign Country Exception – (k) any claim arising in a foreign country

Boyle v. United Technologies Corp. – The Supreme Court extends tort immunity to government contractors under certain conditions, reasoning that the price of contracting will go up if contractors can be held liable, so the cost of litigation would be passed from the contractor to the gov't, which frustrates the goal of the discretionary function exemption of the Federal Tort Claims Act, which is to prevent the gov't of incurring litigation costs due to its performance of discretionary functions.

Factors for When the Gov’t Contractor Defense Applies: Boyle It doesn't matter whether it is called/labeled a manufacturing defect or a design defect

claim. Strict application of the Boyle factors will determine whether the defense applies, no matter what the claim is called. – Bailey v. McDonnell Douglas

o the United States approved reasonably precise specifications; Doesn't matter whether the U.S. or the contractor created the specifications

o the equipment conformed to those specifications; and The requirements of "reasonably precise specifications" and conformity with them refer to

the particular feature of the product claimed to be defective. –Bailey v. McDonnell Douglas- A plaintiff doesn't lose just because the product as a whole has reasonably precise

specifications. o the supplier warned the United States about the dangers in the use of the equipment that were

known to the supplier but not to the United States.

Gov’t Contractor Defense and Other Types of Contracts:o Boyle applies to civilian as well as military procurement.o Will probably not apply in contracts for routine office supplies, because they likely do not have

reasonably precise specifications. (Just send me pencils!)o Applies to service contracts, although a service contract is less likely to achieve the three factors,

also because they are unlikely to have extremely precise specifications.

SAFETY Act - a Congressionally-created tort defense for manufacturers (who may or may not be federal contractors) of equipment determined and certified as “qualified antiterrorism technology”

ii. Qualified Immunity for Government Contractors Tort Claims for Violations of Constitutional Rights

o Against employees of the federal gov’t, an implied cause of action created by Bivenso Against employees of state gov’t, under 42 USC 1983

Qualified Immunity - Gov't employee defendant is immune from liability for violation of a person’s constitutional rights unless a reasonable person in the employee’s shoes would have known that the action violated clearly established law.

Qualified Immunity and State Gov’t Contractorso Richardson v. McKnight - prison guards employed by a private firm that had contracted with the

state to manage a Tennessee prison, are not entitled to a qualified immunity defense against a constitutional tort claim brought by prisoners under 42 USC 1983.

Qualified Immunity and Federal Gov’t Contractorso Correctional Svcs Corp v. Malesko - Bivens' implied cause of action does not apply to federal

contractors. B/c there is no cause of action the court doesn't need to decide whether the qualified immunity defense applies to federal contractors.

Analysiso What is the cause of action based upon?

If a constitutional tort (a violation of some federal statutory or constitutional right) ….- Is the defendant a state contractor?

The cause of action arises under 42 USC 1983 Probably no qualified immunity defense - Richardson

o Court in Richardson did not answer whether there are contexts other than contractor prisons in which the qualified immunity defense might apply

o Court in Richardson implied that there might be something called a "good faith" defense

- Is the defendant a federal contractor? The cause of action against a gov't employee would arise under Bivens, which

established a private right of action No cause of action against federal gov't contractors, Bivens does not extend to

contractors - Maleskoo Court in Malesko does not answer whether Richardson would be applied by

analogy to deny a qualified immunity defense for federal contractors if Bivens did allow a cause of action

o Unclear whether Boyle's rationale & analysis would apply if there were a cause of action

If a state tort action (negligence, manf. defect, design defect…)- Is the defendant a state contractor?

Claims and defenses controlled by state law- Is the defendant a federal contractor?

Apply Boyle's factors no matter what the claim or type of contract Defenses under Barr v. Mateo and Westfall v. Ervin might apply (absolute immunity

for discretionary acts and qualified immunity for nondiscretionary acts).o Westfall v. Ervin was superseded as to federal gov't employees only by the

Westfall v. Ervin Act, an amendment to the FTCA, which states that the U.S. must be substituted as defendant in all tort claims against gov't employees who were acting within the scope of their employment at the time of the tort.

Defenses under the SAFETY Act may apply if it is a registered contractor developing QATT.

iii. Immunity from State Taxes and Regulations Immunity from State Taxes - In order to have tax immunity a contractor must show that a tax on it

is effectively a tax on the federal gov'to McCulloch v. Maryland – the states may not tax the federal gov’t

Alabama v. King & Boozer – when a tax on a contractor is a tax on the federal gov’t:o The court rejects the "economic incidence" test

"They were not relieved of the liability to pay the tax either because the contractors, in a loose and general sense, were acting for the gov't in purchasing the lumber or … because the economic burden of the tax imposed upon the purchaser would be shifted to the gov't by reason of its contract to reimburse the contractors."

o The court adopts a "legal incidence" test - In order to be immune from taxation under state law, the contractor must have been an agent of the gov't capable of binding the gov't Look at the temporal flow of money

- If it had an intermediate stop, probably not an agent- Ex: Under the contract at issue, title to the lumber didn't pass to the gov't until the gov't

inspected and accepted the lumber at the build site. Gen Con buys timber and THEN gov't reimburses.

Immunity from State Regulation – government contractors are only immune from state regulation where the state regulation would amount to de facto regulation of the federal gov’t. – Paul v. United States ("While federal procurement policy demands competition, the California [minimum wholesale price for milk] effectively eliminates competition.").

iv. First Amendment Protection for Government Contractors Relevant Cases Interpreting First Amendment

o Perry v. Sindermann - the gov't "may not deny a benefit to a person on a basis that infringes his constitutionally protected … freedom of speech" even if he has no entitlement to that benefit.

o Pickering - Gov't employees' first amendment rights depend on the "balance between the interests of the [employee], as a citizen, in commenting upon matters of public concern and the interest of the State, as an employer, in promoting efficiency of the public services it performs through its employees"

Brd of Cnty Comm. v. Umbehr o Arguments for extending the Pickering test to contractors:

Gov't contractors' speech is less likely than gov't employees' speech to be mistaken for the official positions of the gov't and therefore there is less reason to constrain gov't contractors speech

o Arguments against extending the test: The gov't doesn't have the traditional ways of controlling speech which it uses over its

employees (demotions, warnings, etc.) and therefore it needs the ability to terminate to prevent gov't contractors from saying things which can be mistaken for the official gov't position

o The court extends the Pickering balancing test from gov't employees to gov't contractors

Threshold: Plaintiffs must initially show that his speech, on a matter of public concern, was a substantial factor in the motivation to terminate

Gov't Threshold Defense: the government can show that it would have terminated anyway for a non-prohibited reason

Balancing test: Employee interests v. gov't interestso Scalia, Dissent:

This test is the slippery slope Regulations which govern contract awards already are enough to control this issue

- "These laws and regulations have brought to the field a degree of discrimination, discernment, and predictability that cannot be achieved by the blunt instrument of a constitutional prohibition."

Political favoritism does happen and in some instances SHOULD happen Individual employees do deserve more protection than contractors

- Employees lose their entire livelihood, contractors can just move on to the next contract This opinion is not clear as to whether or not this protection applies only to termination of extant

contracts, or also applies against discrimination in awarding contracts. o There is a companion case which suggests that first amendment protection would attach in the

hiring as well as the firing context.

v. False Claims Act & Qui Tam Suits False Claims Act - provides a cause of action against people who knowingly

o Provide a false claim for payment OR Falsity can go to the existence of the work or quality of performance certifications

- Ex: “we tested this missile and it will do X Y and Z!" and the tests weren't performed, even if the missile can in fact do X Y and Z.

o Present a false record in support of a claim for payment Gov't contractor might be liable for certifying that its subcontractor did something that the sub

didn't actually accomplish. Damages are high - for each false act, trebel damages AND a penal sum.

o Treble damages - a statute permits a court to triple the amount of the actual/compensatory damages to be awarded to a prevailing plaintiff, generally in order to punish the losing party for willful conduct.

Qui tam provisions - allow people with personal knowledge / private information of the fraud to whistleblow and sue (civilly) on behalf of the gov't and receive a cut of any damages.o The gov't can take it over and dismiss it, settle it, or litigate it. Or, the gov't can choose not to

take it over, and just sit back and watch; the gov't can intervene later for good cause.o What counts as "personal knowledge / private information" is the subject of satellite litigation.o Constitutionality of Qui Tam Provisions - U.S. ex rel Kelly v. Boeing

Standing- Injury in fact is that of the government, not the relator and "the qui tam plaintiff

effectively stands in the shoes of the gov't"- There is a causal connection - Redressability is established

Separation of Powers- There is no absolute rule that only the executive may enforce the law.- The FCA permits a degree of executive control sufficient to satisfy the Morrison standard

Whether congress has infringed on executive depends on "whether… the provisions accord the Executive Branch 'sufficient control' over the conduct of realtors to ensure that the President is able to perform his constitutionally assigned duties." – Morrison

Gov't can take over the case and request that the court limit relator participation- The fact that the judiciary has control over whether the gov't may intervene later in a

qui tam action through the good cause requirement does not contravene separation of powers b/c it's a narrow discretion

Appointments Clause- The relators only have power over a single claim, not broad prosecutorial authority

Due Process- It doesn't matter that the relator has a "dog in the fight" aka financial incentive.- "Indeed, the only private interest at stake in a qui tam action is the interest which

Congress has created in a reward for successful prosecution; thus the public's interest in successfully enforcing the FCA and the relator's private interest are intertwined rather than conflicting."

vi. Criminal Prosecution of Government Contractors 18 USC 287 – Criminal Provisions of the False Claims Act 18 USC 1001 – False Statements Act

o May cover false certifications accompanying claims (see performance disputes) and false statements w/ regard to compliance w/ specifications

18 USC 201(b) – Bribing gov’t officials 18 USC 371 – conspiracy to commit an offense or to defraud the U.S. 18 USC 641 – Conversion or embezzlement of money or property of the U.S.

o U.S. v. Matzkin – bid information is both property of the United States and a thing of value. It is not necessary for the U.S. gov’t to have the sole interest in the property or sole knowledge of the bid information for prosecution for improper use of confidential bid information under this section to occur.

18 USC 1341 & 18 USC 1343 – Mail Fraud & Wire Fraud. Using mails or wire communication for purposes of any scheme to defraud.o Provides a device for prosecution of state and local gov’t officials under federal law for

corruption in state gov’t procurement.

V. Congruencei. Offer & Acceptance

Offer + Acceptance = Contracto Offer & Acceptance in Sealed Bidding: - U.S. v. Purcell Envelope Co.

When a company submits a bid, it is an offer When the government sends a blank contract to the company that wins the bid, the

government has notified the winning bidder of its acceptance. The bidder need not actually have signed the contract and sent it back for a contract to have

been formed.o Offer & Acceptance in Competitive Negotiation:

When the gov’t issues a request for proposals, it has done nothing more than request offers When a bidder sends its signed contract back to the gov’t, that is an offer When the gov’t signs the contract, acceptance is completed.

ii. Consideration Gov’t contracts need consideration unless a statute or regulation says otherwise – Torncello v. U.S.

o When contracts are ambiguous, they should be interpreted such that consideration is preserved.o Even though consideration is required, nominal consideration is almost always okay. There is

basically no litigation on whether consideration is sufficient.o In gov't contracts law, there is no requirement that options have separate consideration from

the contract.

Types of Contractso Definite Quantity Contracts - Have a maximum and a minimumo Indefinite Quantity Contracts - Have only a minimumo Requirements Contracts - Have neither a max or minimum

consideration is in the fact that the gov't promises to get all its specified needs from a single contractor, thus giving up its power to choose.

iii. Implied Contracts Contract Implied-in-Law - Created by the courts for equitable remedial purposes even though there

was in fact no agreement. o The U.S. gov’t has only waived is sovereign immunity with regard to contracts implied-in-fact

and not contracts implied-in-law. Therefore, contracts implied-in-law are not actionable in the government contracts context. – Hercules v. U.S. (interpreting jurisdiction under the Tucker Act, but the same holds true for the superseding Contract Disputes Act).

Contract Implied-in-Fact - a real contract. The court is finding that the parties actually had an agreement. It may not have been manifested, but it was based on "a meeting of the minds." As long as an objective observer can discern by the parties' conduct and words that an agreement existed, a contract implied-in-fact has been formed.o Requires All the Elements of an Express Contract

Mutual intent to contract Offer & Acceptance Consideration Formation or Ratification by a Person w/ Actual Authority to Bind

- See discussion of Williams v. U.S. (1955) under Institutional Ratificationo U.S. v. Amdahl - “Where a benefit has been conferred by the contractor on the gov’t in the form

of goods or services, which it accepted, a contractor may recover . . . the value of the conforming goods or services received by the gov’t . . .”

o Algonac Manufacturing Company v. United States – a contract-implied-in-fact for the continued storage of gov’t furnished materials existed where there are numerous provisions imposing obligations on the plaintiff to maintain, repair, and protect government furnished materials so long as they were in his possession, the gov’t issued a form to the contractor requesting information as to how much storage space he had for the materials, which the contractor returned, and the gov’t accepted by its conduct by leaving the materials on site for many years.

o Hercules v. U.S. – finding no implied-in-fact contract to indemnify contractor against losses for third-party claims where the CO can be charged with knowledge of both statutory mechanisms which existed under which a CO could provide indemnity and the Anti-Deficiency Act, which would prohibit such an open-ended promise.

o Heyer Products v. U.S. - By soliciting the bids, the gov't made a unilateral implied-in-fact contract based on a promise that each bid would be honestly considered and that the bid which, in the honest opinion of the contracting officer, was most advantageous to the gov't would be accepted. This offer was accepted by the submission of a bid. This case was used to create Court of Federal Claims bid protest jurisdiction before the CoFC

was granted bid protest jurisdiction by the Tucker Act (which awkwardly codified Heyer) and the Contract Disputes Act (which fixed the problems which resulted from the Tucker Act’s awkward codification.)

iv. Statute of Frauds Numerous provisions of the US Code and the FAR require gov’t contracts to be in writing.

o "The requirement of a written contract protects both sides from the possibility of fraud or misrepresentation by the other."

If only the private party had to have a written contract to enforce, and the gov't didn't, there would be no consideration.o "If the gov't could avoid its part of the bargain by asserting lack of a written contract, the gov't

would be making merely an illusory promise: the gov't would pay the agreed price for the services only if it wished and if it had complies with the statute."

Therefore, the contract must be written for the gov’t to enforce. – U.S. v. Amer. Renaissance Lines

The requirement that contracts be in writing to be enforced does not bar enforcement of an implied-in-fact contract – Narva Harris Construction v. U.S.

VI. Contract Formationi. Competition Policies

a. Statutory Requirements Requirements: 10 USC 2304(a)

(1) Except as provided in subsections (b), (c), and (g) and except in the case of procurement procedures otherwise expressly authorized by statute, the head of an agency in conducting a procurement for property or services—

(A) shall obtain full and open competition through the use of competitive procedures in accordance with the requirements of this chapter and the Federal Acquisition Regulation; and (B) shall use the competitive procedure or combination of competitive procedures that is best suited under the circumstances of the procurement.

(2) In determining the competitive procedure appropriate under the circumstances, the head of an agency—

(A) shall solicit sealed bids if— (i) time permits the solicitation, submission, and evaluation of sealed bids; (ii) the award will be made on the basis of price and other price-related factors; (iii) it is not necessary to conduct discussions with the responding sources about their bids; and (iv) there is a reasonable expectation of receiving more than one sealed bid; and

(B) shall request competitive proposals if sealed bids are not appropriate under clause (A).

* * * *

Exceptions: 10 USC 2304(c) The head of an agency may use procedures other than competitive procedures only when—

(1) the property or services needed by the agency are available from only one responsible source or only from a limited number of responsible sources and no other type of property or services will satisfy the needs of the agency;

(2) the agency’s need for the property or services is of such an unusual and compelling urgency that the United States would be seriously injured unless the agency is permitted to limit the number of sources from which it solicits bids or proposals;

(3) it is necessary to award the contract to a particular source or sources in order (A) to maintain a facility, producer, manufacturer, or other supplier available for furnishing property or services in case of a national emergency or to achieve industrial mobilization, (B) to establish or maintain an essential engineering, research, or development capability to be provided by an educational or other nonprofit institution or a federally funded research and development center, or (C) to procure the services of an expert for use, in any litigation or dispute (including any reasonably foreseeable litigation or dispute) involving the Federal Government, in any trial, hearing, or proceeding before any court, administrative tribunal, or agency, or to procure the services of an expert or neutral for use in any part of an alternative dispute resolution or negotiated rulemaking process, whether or not the expert is expected to testify;

(4) the terms of an international agreement or a treaty between the United States and a foreign government or international organization, or the written directions of a foreign government reimbursing the agency for the cost of the procurement of the property or services for such government, have the effect of requiring the use of procedures other than competitive procedures;

(5) subject to subsection (k), a statute expressly authorizes or requires that the procurement be made through another agency or from a specified source, or the agency’s need is for a brand-name commercial item for authorized resale;

(6) the disclosure of the agency’s needs would compromise the national security unless the agency is permitted to limit the number of sources from which it solicits bids or proposals; or

(7) the head of the agency— (A) determines that it is necessary in the public interest to use procedures other than competitive procedures in the particular procurement concerned, and (B) notifies the Congress in writing of such determination not less than 30 days before the award of the contract.

Procedures When an Exception is Invoked: 10 USC 2304(e) & (f)(e) The head of an agency using procedures other than competitive procedures to procure property or services by reason of the application of subsection (c)(2) or (c)(6) shall request offers from as many potential sources as is practicable under the circumstances. (f) (1) Except as provided in paragraph (2), the head of an agency may not award a contract using procedures other than competitive procedures unless—

(A) the contracting officer for the contract justifies the use of such procedures in writing and certifies the accuracy and completeness of the justification; (B) the justification is approved— (i) in the case of a contract for an amount exceeding $500,000 (but equal to or less than $10,000,000), by the competition advocate for the procuring activity (without further delegation) or by an official referred to in clause (ii) or (iii); (ii) in the case of a contract for an amount exceeding $10,000,000 (but equal to or less than $75,000,000), by the head of the procuring activity (or the head of the procuring activity’s

delegate designated pursuant to paragraph (6)(A)) . . . etc.

* * * * b. Means of Circumventing Competition Policies

Task Order Contracts /Indefinite Delivery Indefinite Quantity Contracts/Framework Contractso Somewhat like an option contract, it says "if we call you, deliver X at Z price within W days."o Are supposed to be used in emergency situations, such as when FEMA expects a hurricane

However, FEMA did not use these contracts the way they should have during Katrinao Have sometimes been misused to circumvent full and open competition.

Especially under the GSA system (whereby one agency can order through another agency's task order contracts) where the hosting agency and the ordering agency is not the same agency and it's not clear which one is responsible for ensuring full and open competition.

Gov't Purchase Cardso Competition is supposed to be ensured by the operation of the free market.o Nothing stops an employee from going to a favored retailer and buying at a higher price.

Excessively Narrow Specificationso Where the government has no reasonable basis for its stated needs, and the requirements

exceed the government's minimum needs, the scope of the procurement is excessive and unwarranted. – Memorex (benchmark for reliability as measured by a third party is an impermissible restriction on competition when it is a pass/fail requirement). When a specification is framed as merely a factor for consideration, as opposed to a

required element, it is less likely to be considered an undue restriction on competition.o The gov't can express specs in terms of a commercial product, i.e. "it must have all bells and

whistles of the Brand Name Product" However, when using a brand-name-or-equivalent requirement in an invitation for bids,

the gov't has to at least also express the features of that brand name product which it is interested in, so that bidders can evaluate whether their product is equivalent. – In re Computer Network

Contracts of Excessive Duration or Breadth – Improper Bundlingo Illegal bundling - putting too many items together in a contract to make something (for example

that the contractor is the sole source) true that wouldn't otherwise be true. Administrative convenience is not a sufficient reason alone to justify bundling which

effectively limits competition – Pacific Sky Supplyo Where the agency anticipates new sources for the good or service will come into being during

the contract, the contract should not be of such length as to effectively limit competition. – Pacific Sky Supply (“breakout clause” authorizing the Air Force to get parts currently under a five-year sole source contract from new contractors as they come online effectively turns ensuring full and open competition into a discretionary function).

"Other Transactions Authority" (OTA) - proposed alternative to the gov't procurement system. An agency is given the authority to do some kind of alternate agency-specific procurement.

Ex: Lead Systems Integrators (LSI) - The gov’t contracts someone to do the procurement.

- After a near-disaster regarding the CoastGuard’s Deepwater project restrictions were placed on the use of this practice

ii. Sealed Bidding vs. Competitive Negotiation 10 USC 2304(a)(2)(A) Sealed Bidding should be used if all four criteria are satisfied:

o Sufficient time is available Waiting until the last minute and “creating” an emergency is not a legal reason to use

competitive negotiation over sealed bidding.o The award will be made on the basis of price and other price-related factors

A non-price factor must be real and not a phony method of avoiding sealed bidding. Track record is an okay factor when it is used as weighted factor and not pass/fail element.

o There is no bona fide need for discussions with bidders bout their bids The GAO will not question the judgment of the agency which determines that certain specs

are sufficiently important to warrant discussions and thus negotiated procurement unless the determination is shown to be unreasonable. – Essex Electro Engineers

The possibility that the bidders will not fully understand the request/invitation is not a good reason to have competitive negotiation – In re Racal Corp- That's what the Bidder’s Conference is for.

The possibility that bidders will not be able to produce is supposed to be handled in the responsibility investigation. – In re Racal Corp

Possible changes in quantity, delivery schedules, opening dates, are supposed to be handled using cancelling of the invitation for bids and reissuing a new invitation for bids, even if it's inconvenient. Inconvenience is the price we pay for full and open competition. – In re Racal Corp

o There is a reasonable expectation that there will be more than one bidder If any one of these four conditions is not met, the agency should use competitive negotiation.

AnalysisI. Is the procurement subject to Full and Open Competition?

o Procurement for goods &/or services Land procurement is not subject to full and open competition - see Motor Coach

o Not within one of the seven statutory exceptions Only available from one or a few sources AND no other product will satisfy need – 2304(c)(1) Bona fide emergency exception – 2304(c)(2) / Necessary to award the contract to a particular source or sources in order to…

- maintain facilities / suppliers for national emergency or to achieve industrial mobilization – 2304(c)(3)(A)

- establish & maintain research & development – 2304(c)(3)(B)- hire an expert witness for the gov’t in litigation – 2304(c)(3)(C)

Internat’l agreement / treaty requires non-competitive procedures – 2304(c)(4) Statute requires it or need is for a brand-name item for resale (commissaries) – 2304(c)(5) Nat’l security exception – 2304(c)(6) The Omnibus exception – 2304(c)(7)

- Head of the agency determines that it is necessary in the public interest, and - Notifies the Congress in writing at least 30 days before the award of the contract.

II. If it's under the statutory exception, did the gov't adequately justify?o Contemporaneously

Either / Or!

No post hoc rationalizationo Writteno Certified

How much money is involved decides who in the agency must certify. – 10 USC 2304(f)(B)o The court must decide the adequacy of the justification on the basis of the gov'ts written

reasoning. The court may not substitute its own reasoning to find the exemption from full and open competition justified.

III. If it's not an exception and is subject to full & open competition, what competitive procedure is the procurement subject to?o Sealed Biddingo Competitive Negotiation

IV. If the agency did follow the right competitive procedure, was the procedure done right?o Sealed Bidding

Was the winning bid responsive?- Or, did the contracting officer waive a nonmaterial deviation from the IFB?

Was it awarded to the lowest priced bid?- Only price and price-related factors may be considered in sealed bidding

o Competitive Negotiation Was the contract awarded to the contractor with the "best value"?

- This is different than cheapest. In competitive negotiation other factors than just price, which are published in the solicitation with their relative weight to the bidders, are considered.

- If after receiving the bids the gov't realizes it wants to apply different factors, or accord different relative weight to them, it must cancel the solicitation and re-advertise. The gov't can increase its requirements from one invitation for bids to another in

response to an anticipated change in needs. – In re Computer NetworkV. Was the award made to a responsible contractor?

o Debarred & non-responsible bidders have standing to challenge their own statuso No bidder has standing to challenge failure to debar or deem non-responsible a competing

bidder

iii. Sealed Bidding 10 USC 2305(b) – Procedures for Sealed Bidding (1) The head of an agency shall evaluate sealed bids and competitive proposals and make an award based solely on the factors specified in the solicitation. (2) All sealed bids or competitive proposals received in response to a solicitation may be rejected if the head of the agency determines that such action is in the public interest. (3) Sealed bids shall be opened publicly at the time and place stated in the solicitation. The head of the agency shall evaluate the bids in accordance with paragraph (1) without discussions with the bidders and, except as provided in paragraph (2), shall award a contract with reasonable promptness to the responsible bidder whose bid conforms to the solicitation and is most advantageous to the United States, considering only price and the other price-related factors included in the solicitation. The award of a contract shall be made by transmitting, in writing or by electronic means, notice of the award to the successful bidder. Within three days after the date of contract award, the head of the agency shall notify, in writing or by electronic means, each bidder not awarded the contract that the contract has been awarded.

Summary of Sealed Bidding Processo Synopsis of proposed procurement is published online. o In response to the synopsis, people who want to bid can request an invitation.o Then, agency sends an invitation to bid to all who request one.o The IFB contains all the terms of the contract, and more details than the synopsis.

Offerors submit their bids simply by filling in the price and schedule of performance, attaching any necessary certifications, and signing the bid. (see Offer & Acceptance)

o If a bid is submitted even 1 second late, the gov't is free to reject it.o Bids are opened publically and evaluated without discussion with bidders.o Bidders' Conference before the bids where bidders ask questions about the IFB in front of all the

other bidders and receive answers from the agency. "Level playing field". Possibility that the bidders will not understand the invitation is not a good reason to have

competitive negotiation, that’s what the Bidder’s Conference is for. – In re Racal

Withdrawal of Bids – Refining Assocs v. U.S.o "Bids may be withdrawn on written or telegraphic request received from bidders prior to the

time fixed for opening. Negligence on the part of the bidder in preparing the bid confers no right for the withdrawal of the bid after it has been opened."

o Exceptions: When the government should have known the existence of a mistake in the bid. When the government unreasonably delays in awarding a contract.

o Policy: If bidders were allowed to withdraw & correct their bids after bids are opened, contractors could cheat to increase profits while still maintaining the lowest bidder status, or to achieve lowest bidder status.

iv. Competitive Negotiation 10 U.S.C Sec. 2305(b) – Procedures for Competitive Negotiation(1) The head of an agency shall evaluate sealed bids and competitive proposals and make an award based solely on the factors specified in the solicitation. (2) All sealed bids or competitive proposals received in response to a solicitation may be rejected if the head of the agency determines that such action is in the public interest.

* * * *

(4) (A) The head of an agency . . . may award a contract— (i) after discussions . . . with all responsible offerors . . . within the competitive range; or (ii) based on the proposals received, without discussions with the offerors . . .

(B) If the contracting officer determines that the number of offerors that would otherwise be included in the competitive range under subparagraph (A)(i) exceeds the number at which an efficient competition can be conducted, the contracting officer may limit the number of proposals in the competitive range, in accordance with the criteria specified in the solicitation, to the greatest number that will permit an efficient competition among the offerors rated most highly in accordance with such criteria.

(C) . . . the head of the agency shall award a contract with reasonable promptness to the responsible source whose proposal is most advantageous to the United States, considering only cost or price and the other factors included in the solicitation. The head of the agency shall award the contract by transmitting, in writing or by electronic means, notice of the award to such source and, within three

days after the date of contract award, shall notify, in writing or by electronic means, all other offerors of the rejection of their proposals. This subparagraph does not apply with respect to the award of a contract for the acquisition of perishable subsistence items. (5) (A) When a contract is awarded by the head of an agency on the basis of competitive proposals, an unsuccessful offeror, upon written request received by the agency within 3 days after the date on which the unsuccessful offeror receives the notification of the contract award, shall be debriefed and furnished the basis for the selection decision and contract award. The head of the agency shall debrief the offeror within, to the maximum extent practicable, five days after receipt of the request by the agency. * * * * (6)

(A) When the contracting officer excludes an offeror submitting a competitive proposal from the competitive range (or otherwise excludes such an offeror from further consideration prior to the final source selection decision), the excluded offeror may request in writing, within three days after the date on which the excluded offeror receives notice of its exclusion, a debriefing prior to award. The contracting officer shall make every effort to debrief the unsuccessful offeror as soon as practicable but may refuse the request for a debriefing if it is not in the best interests of the Government to conduct a debriefing at that time.

(B) The contracting officer is required to debrief an excluded offeror in accordance with paragraph (5) only if that offeror requested and was refused a preaward debriefing under subparagraph (A).

(C) The debriefing conducted under subparagraph (A) shall include— * * * *

Summary of Competitive Negotiationo Issuance of a Request for Proposals

Source Selection Plan says what the non-price related factors are and how they're going to be weighted.

o The gov't tends to reserve the right to award immediately on the initial round of proposals, but the gov't is always free to talk to the parties, or do a series of rounds winnowing the offerors, in which each surviving offeror "in the competitive range" is requested to submit a new proposal. The gov’t must explicitly to reserve the right to award immediately on the initial round in

order to do so The CO pushes each competitor to do better in its contract on certain factors.

o The offers are not opened publically because bids tend to include proprietary information.o A losing bidder can request a debriefing as to why it lost.

Forms basis for bid protest

Performance-Based [Service] Acquisition - an extreme version of competitive negotiation in which instead of technical specifications, the request for bids contains performance-based specifications, leaving it more open to the contractors how to accomplish that performance.

v. Responsiveness of a Bid A contract which is awarded to a non-responsive bid is in effect one issued without competitive

bidding and is therefore invalid. – Prestex v. U.S.o Remedy is payment for goods already delivered and received under an implied-in-fact contract.

Responsive - Bid meets all the terms, conditions and specification of the invitation for bids or requests for proposals.o In competitive negotiation, there is not a hard and fast rule that a "non-responsive" bid be

rejected, unlike sealed bidding. In competitive negotiation the gov’t should see whether a technically non-responsive bid achieves the functional needs of the gov’t at the best value.

o Non-responsiveness may not be cured after bids have been opened – In re Computer Network Policy Rationale: if we allowed contractors to place illegal conditions on a bid and later cure

them, they could use it to game the system.

When is a Bid Non-Responsive?o Deviations from the specs in the invitation for bids may be waived by the contracting officer

provided they do not go to the substance of the bid or work an injustice to other bidders.o A substantial deviation is defined as one which affects either price, quantity, or quality of the

article offered. – Prestex v. U.S. (contract for military uniforms where cloth submitted was of lower thread count was invalid because the bid was nonresponsive).

vi. Qualification & Pre-Qualification Qualification - a determination, based on past conduct, that a potential bidder should be generally

ineligible to receive government contracts. Qualification determinations cannot be challenged in a bid protest jurisdiction because they are not tied to a particular contract.o Suspension - temporary ineligibility based on the pendency of investigation that may lead to

debarmento Debarment - longer ineligibility

Debarred contractors are not even allowed to bid Each agency has its own special debarment official. The debarment process is not a part of

the contract award sequence. It can happen at any time, and is not supposed to be initiated by a bid.

Usually results in executive-branch wide debarment. - The GSA maintains a central list of debarred contractors

Potential Challenges to Debarment- Procedures didn't accord due process -- unlikely to succeed due to regulations- Decision was arbitrary and capricious -- unlikely to succeed due to deferential review- Agency didn't follow its own procedures - No one has standing to challenge failure to debar a competitor.

o De facto debarment - actions which have the practical effect of debarment although the agency has not formally recognized them as methods of or reasons for debarment – see Old Dominion

Pre-qualification techniques - used to make a generic determination of responsibility and capability to perform a particular class of contract in advance, so as to winnow the field of contractors to be considered when an actual solicitation is made.o Usually not legal in the U.S. because it's anti-competitive.

It can be done, but there has to be an extremely well-justified reason for doing so Mere administrative expediency and efficiency are not a good reason to be able to do this

- In re Dep't of Ag's Use of Master Agreement o 10 USC 2319 - "Encouragement of New Competitors"

If you must do prequalification, - Written justification

- Can't limit the bidding to those not on the list of qualified bidders-- must give room for contractors to try and show they are qualified

- This effectively removes the incentive to do prequalification, on purpose.

Many U.S. procedures are effectively a form of pre-qualification, but not admittedly so.o Multiple Award Schedules - Pretense that they actually represent the award of an umbrella

contract -- under which the gov't has the right to order, or not-- at prices that the contractors have offered.

- There is a lack of consideration issue that no one seems to pay attention to. - Supposed to be competition to get on the list , but not in reality

o Defining the problem out of existence: FAR 8.404(a) -"orders placed against a [Multiple Award Schedule], using the procedures [provided for the MAS] are considered to be full and open competition."

vii. Responsibility of a Contractor

Responsibility – a contractor’s present and future capability to perform a specific contracto Responsibility determination is the last step in the process; first the competitiveness of bids

must be definitively decided. However, technical capability and financial responsibility may be factors which go into the

type of contract which is selected - FAR 16.104(g)o Responsibility can be challenged in any bid protest forum because it is tied to a contract.

A contractor can challenge its own determination of non-responsibility Losing bidders can challenge another’s determination of non-responsibility

- Agencies are unlikely to wrongly affirm responsibility because that will saddle them with an incompetent contractor. Therefore, it is easier to challenge your own determination of non-responsibility than it is to challenge someone else's determination of responsibility. – Keco Industries

o FAR 9.103 & 9.104-1 (a) adequate financial resources (b) be able to comply w/ proposed performance schedule (c) satisfactory performance record (d) record of integrity & business ethics (e) organization, experience, accounting and operational controls, technical skills . . . (f) production, construction, & technical equipment & facilities (g) otherwise qualified and eligible –see Collateral Socioeconomic Policies

o If contractor hasn't bought the equipment, but promises it will, that's not good enough.o Past-behavior can be evidence of present and future capability to perform the contract.o Pre-award surveys are used to ask bidders information about their responsibility.

Responsibility and Non-Small Businesseso The GAO will generally not question a non-responsibility determination unless the protestor can

demonstrate bad faith by the agency or a lack of any reasonable basis for the determination.o The nature and extent of the information needed to assure a CO that a firm will meet its

contractual obligation is for the contracting officer's judgment. The dollar value of the contract seems to be a factor in determining how much the

contracting officer has to investigate before deciding non-responsibility– In re SAFE Export

Responsibility and Small Businesses – FAR 9.104-3(e)o Small-businesses have been protected by Congress against determinations of non-responsibility

through the Small Business Administration. Under 15 USC 637(b)(6) - a decision of the SBA regarding the size status of a business is

conclusive and may not be ignored by the GAO. – In re Dyneteria Small businesses get notice of determination of non-responsibility and can appeal to SBA. The SBA can override a determination of non-responsibility by issuing the bidder a

Certificate of Competency (COC).- Neither the agency nor the GAO can second guess the SBA’s decision to issue a

certificate of competency. – In re JR Youngdale If SBA has not issued a COC within 15 business days or such longer time as may have been

agreed upon by the agency and the SBA, the contracting officer is authorized to proceed with the acquisition and award the contract to another offeror.

o Agencies might be able to get around this procedure by using competitive negotiation instead of sealed bidding and making responsibility-sounding factors as factors in source selection. It isn't clear whether a prospective bidder would be successful in the GAO claiming that the

agency is doing this b/c GAO is so deferential.

Due Process and Non-Responsibility Determinationso Unless a bidder is a small business, no bidder requires notice or due process measures prior to a

determination of non responsibility.o Narrow Exception: - Old Dominion Dairy Products v. Sec. of Defense

Bidders have a right grounded in the due process clause to some kind of opportunity to be heard (Not a hearing. The court makes clear it is not requiring an oral evidentiary hearing) "within whatever time is available" when the non-responsibility determination is based on a recurrent and stigmatizing claim, such as engaging in illegal or unethical behavior—as opposed to simply not having the right equipment.

o Old Dominion is an old district court claim. After the 2001 sunset provision, it is unclear whether such a claim can still be brought in district court. A bid protest challenge for which there is arguably no more district court jurisdiction? Or a challenge to agency action under the APA which has constitutional implications?

- There is a question as to whether Congress could deny Article III jurisdiction for a constitutional question. Courts, when in doubt, tend to construe statutes such that they do not have constitutional problems, so a court might say that even under the sunset provision this limited kind of claim could be brought in a district court.

viii. International Law & Competitive Procedures

Procurement in EUo Open Tendering – any interested entity may bid for the contract

Permits selection criteria based on either lowest price or best value (“most economically advantageous tender – MEAT) based criterion specified in the solicitation for bids.

Unclear whether negotiations are allowed - European Commission thinks they are not

o Restricted Tendering – competition occurs only among those invited to participate by contracting authorities

Lowers the cost of procurement administration by reducing number of bids EU directives do not specify a minimum number of invitation Allow complete discretion to select the invitees

- Criticism: this method is abused to circumvent full & open competition- But, the list of invitees must be drawn up on an ad hoc basis for every procurement.

Unlike under the GPA, there are no standing lists of qualified bidders allowed. In the EU, countries would rather engage in prequalification because they are suspicious of a

post-hoc responsibility determination which favors one country's contractors over another's Unclear whether negotiations are allowed

- European Commission thinks they are noto Non-competitive Procurement (aka “negotiated procedures”) – Only allowed in limited defined

circumstances which are roughly comparable to the seven exceptions to full & open competition in U.S. law Requires written justification

o Competitive Dialogue – closely approximates U.S.-style competitive negotiation Permitted only for “particularly complex contracts” where procuring authority is objectively

unable to specify its requirements at the outset Unlike in the U.S., where significant non-price criteria are a sufficient basis for use of

competitive negotiation, this is not a good enough reason in the EU to use competitive dialogue

Brand new procedure, not yet often used

Procurement Under the Government Procurement Agreement (GPA)o Open Tendering – Similar procedures to Open Tendering under the EU: highest level of free and

open competition. Permits selection criteria based on either lowest price or best value based criterion specified

in the solicitation for bids. Negotiations are permitted in an open tendering if the intent to conduct negotiations is

indicated in the solicitation or if “no one tender is obviously the most advantageous”- U.S. practice appears to be a legitimate form of open tendering under GPA

o Selective Tendering – Permits use of previously established standing lists of qualified bidders in selection of invitees or qualification and selection of the invited bidders on an ad hoc basis. Bids must be invited from “the max number . . . consistent with efficient operation of the

procurement system”o Limited Tendering – like the EU’s “non-competitive procurement,” only allowed in limited

defined circumstances which are roughly comparable to the seven exceptions to full & open competition in U.S. law

In the rest of the world, pre-qualification is the preference b/c in the developing world, many companies are not qualified

ix. Types of Contracts Sealed bidding must result in one of two types of fixed price contracts – FAR 16.102(a) Competitive negotiation can result in any valid type of contract – FAR 16.102(b)

o The contracting officer is given discretion in choosing a type of contract, although the FAR indicates a preference for fixed-price contracts.

Fixed Price Contracts - Two typeso Firm Fixed Price – FAR 16.202-2

"The price for 1000 widgets is $10,000" Should be used when the risk involved is minimal or predictable – FAR 16.103(b)

o Fixed Price w/ Economic Price Adjustments – FAR 16.203-2 “The price for 1000 widgets is $10,000, but if your widgets are made primarily out of copper

and the price of copper is volatile, then we can change it by X amount under Y circumstances."- Encourages contractors not to increase their bid price to cover the uncertainty. We'd

rather get the lower price for the gov't at the outset and have to adjust later. This allocates some of the risk to the gov't away from the contractors.

Time & Materials Contracts - A hybrid between fixed price and cost-reimbursement contracts. o Fixed hourly rate X number of hours contractor personnel worked + cost of materialso Criticism: Create no incentive to control costs.

FAR requires a ceiling price above which the contractor cannot exceed w/o securing an adjustment from the gov’t

o May not be used absent a written determination by the CO that b/c it’s impossible to estimate the amount of labor required or the costs, no other form of contract is suitable.

o Personal Services Contracts - a subspecies of T&M contracts, where contractors are hired to effectively just be regular employees. No materials, just time. Why not federalize the employee? Technically a prohibition on this, but obviously flagrantly violated.

Cost Reimbursement Contractso Only in the gov'ts interest when the risk attributable to uncertainty about the cost of

performance is SO great that either . . . there will not be a vigorous market of offerors under a fixed price contract, or bidders will bid in such a risk averse manner that the price will be way too high

o Cost plus a percentage of cost contracts (CPPC) are unlawful. – FAR 16.102(c) Creates an incentive for the contractor to run up their cost base.

o Cost plus incentive fee contracts A formula makes it so the fee proportion goes up as the cost base goes down

- The more money you save in performance, the more fee you get at the end The formula is effectively the opposite of cost-plus-a-percentage-of-cost

- Awards efficiency, not inefficiencyo Cost plus award fee contracts

A panel decides how good a job a contractor did, and then gives them an award

x. Audit Authority 41 USC 254d – Examination of Records of Contractor 41 USC 254b – Truth in Negotiations Act

Entities w/ Auditing Authorityo GAO

To identify gov't waste and investigate the reasonableness of the prices gov't is paying Extends only to contracts formed from competitive negotiation

- Extends to both fixed-price and cost-reimbursement contracts which were the product of competitive negotiation

- GAO cannot audit any contract created by sealed bidding When auditing, records must "directly pertain" to the contract

- Fixed-Price Contracts: Under a fixed-price contract "the comp gen should be permitted to access records of direct costs. He should be barred, however, from inspecting records of costs incurred in the areas of research and development, marketing and promotion, distribution, and administration, except to the extent the contractor has allocated these costs as attributable to the particular contract." - Bowsher v. Merck

- Cost Reimbursement Contracts: the GAO can request everythingo Procuring Agency – Two Types of Audit Authority

Audit authority under the ordinary course of procurement- Can ONLY audit cost-reimbursement contracts, cannot audit fixed-price contracts

The purpose of this audit authority is to make sure the contractor is being honest about which costs are attributable to which contract, and that all costs are legally eligible to be reimbursed.

Audit Authority Under Truth in Negotiations Act (TINA)- Applies only to competitively negotiated contracts above a certain price threshold

(currently $500,000)- Applies to both fixed-price and cost-reimbursement contracts resulting from

competitive negotiation- Under TINA, the agency can request cost and pricing data during contract formation

and if the agency does, then there is audit authority to back that up. If the agency couldn't (because TINA didn't apply) or didn't (simply because it chose

not to) request the data, then there is no audit authority. TINA's audit authority only exists where it was USED to demand cost and pricing data during contract formation. o The purpose of this isn't to determine how much should be reimbursed, but to

determine the original disclosure at the time of contracting was honest and accurate.

Covers all facts a prudent buyer or seller would expect to affect the price significantlyo Labor, capital, equipment, facilities, research… "the whole nine yards"o It's extremely intrusive

Submissions must be certified as accurateo Makes certifier on the hook under the False Claims Act, etc.

- Exceptions to TINA Audit Authority: Contracts under 500,000 Where there is "adequate price competition"

o Effectively makes TINA typically not applicable to fixed price contracts which result from competitive negotiation b/c there is a marketplace

o So as a factual matter, TINA is applied primarily to cost-reimbursement contracts created by competitive negotiation

Where prices are fixed by (federal) law Commercial items

o There is some controversy about what a commercial item is

VII. Formation Disputes – Bid Protestsi. Path for a Bid Protest

Potential Path for a Bid Protest | V (Agency) [optional, sometimes not even allowed by the agency] | | V V GAO ---> COFC (Go to COFC if you aren't happy with GAO's finding, or go straight to COFC) | V Fed. Cir. | V SCOTUS

Award disputes / bid protests - a challenge by the contract loser as to how the winner acquired the contract.

ii. Bid Protest Forumsa. GAO

Jurisdiction: Competition in Contracting Act (CICA) 31 USC 3552o Not exclusive

Standing: Competition in Contracting Act (CICA) 35 USC 3551(2)o Standing in the GAO is in the definition section- "The term interested party … means an actual

or prospective bidder or offeror whose direct economic interest would be affected by the award of the contract or by failure to award the contract" You don't have to show that you would have had the contract had the law been followed

to have standing at the GAO. There is no injury in fact requirement because this is not an Article III court.

Recently GAO has toughened up and held that you have to have had a "significant chance" of having the contract, but it still isn't a "more probable than not" standard.

Remedies: 31 USC 3554(b)(1)o Automatic stay provisiono Recommendations- technically non-binding, but 99% followed

Refrain from exercising any of its options under the contract Re-compete the contract immediately Issue a new solicitation Terminate the contract Award a contract consistent w/ the requirements of such statute & regulation

o 31 USC 3554(c) - can recommend payment of costs / attorney fees Standards of Review:

o "We’re deferential unless you're wrong and then we're not" - Schwartz Fact-finding ability: Weak

o See In re Dyneteria

b. Court of Federal Claims Jurisdiction:

o Pre 1996 - The Tucker Act 28 USC 1491 ("core provision") The United States Court of Federal Claims shall have jurisdiction to render judgment upon

- [1] any claim against the United States founded either upon the Constitution, or any Act of Congress or any regulation of an executive department, Means only Constitutional clauses and statutes which mandate compensation in the

event the law is broken. The only Constitutional provision which has been held to clearly mandate compensation is the 5th amendment and very few statutes say "pay the man if you break this law." Very few cases arise under the first clause of Tucker Act’s jurisdiction.

- [2] or upon any express or implied contract with the United States, or Most cases in the CoFC arise under a breach of express contract "Implied" only includes contracts implied in fact and not contracts implied in law.

This was an attempted codification of Heyer Products.- [3] for liquidated or unliquidated damages in cases not sounding in tort.

The third clause has been read not to waive sovereign immunity for every non-tort claim. Bad drafting, basically means nothing.

o Post 1996 - 28 USC 1491(b)(1) Both the Unites States Court of Federal Claims and the district courts of the United States

shall have jurisdiction to render judgment on an action by an interested party objecting to a solicitation by a Federal agency for bids or proposals for a proposed contract or to a proposed award or the award of a contract or any alleged violation of statute or regulation in connection with a procurement or a proposed procurement. Both the United States Court of Federal Claims and the district courts of the United States shall have jurisdiction to entertain such an action without regard to whether suit is instituted before or after the contract is awarded.

Standing: "Interested Party" - 28 USC 1491(b)(1), aboveo "[S]tanding in the Court of Federal Claims should follow the GAO approach [at least where they

are more restrictive]" - Amer. Federation of Gov't Emps v. U.S. (AFGE) Schwartz thinks this is wrong because…

- the Court of Federal Claims was functionally supposed to take over the jurisdiction of the district courts, which use the Article III standing test

- there is some argument that this is unconstitutional if your claims related to a gov't contract are constitutional and you have no Article III forum in which to assert them

- This might also make us be in breach of a few treaties Remedies: Tucker Act, 28 USC 1491(b)(2)

o To afford relief in such an action, the courts may award any relief that the court considers proper, including declaratory and injunctive relief except that any monetary relief shall be limited to bid preparation and proposal costs. No expectancy damages allowed in any U.S. forum.

o Equal Access to Justice Act ("EAJA") 28 USC 2412 - A successful litigant against the United States can recover attorney fees, but only if the court determines that the gov't position was not 'substantially justified'.

Standards of Review: 28 USC 1491(a)(4) – o In any action under this subsection, the courts shall review the agency’s decision pursuant to the

standards set forth in section 706 of title 5. (The Administrative Procedure Act). Fact-finding Ability: That of a typical court.

c. District Courts Jurisdiction:

o MAYBE the Administrative Procedure Act 5 USC 701, 702, 704 701: Note that gov't contract statutes are almost always of general applicability and thus

cannot be "committed to agency discretion." A statute can only be committed to agency discretion if congress intended a specific agency to have a monopoly on that statute.

702: "A person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of a relevant statute, is entitled to judicial review thereof."- Scanwell - Awarding a contract counts as final agency action.

o Little Tucker Act – 28 USC 1346 Allows the district court concurrent jurisdiction over claims within the CoFC’s core

jurisdiction, provided the amount of the claim does not exceed $10,000. - But see remedies

o Why the Sunset Provision Ended Dist Court Bid Protest Jurisdiction in 2001 Legislative history Sunset provision terminates jurisdiction over “actions described in” 28 USC 1491 (namely bid

protests,) not jurisdiction conferred by 28 USC 1491 Standing - Merriam v. Kunzig (injury in fact is that a bidder would have been better off with the

contract, and is worse off for having expended bid preparation costs. The disappointed bidder is within the zone of interests Congress intended to protect. Although the proper granting of contracts is arguably to protect a public interest in good use of gov't resources, statutes can protect multiple interests).o Article III

Injury In fact- Particular & Actual or Imminent- Causation- Redressability

o APA 702 Plaintiff is within the zone of interests meant to be protected by the statute

- Previous interpretations of gov't contracting law said that it was meant to protect the public only. Subsequent superseding interpretations have held that the law can be meant to protect numerous interests at once, including those of contract bidders.

o Standing under the district court might be broader than under GAO or COFC Labor unions, states, municipalities might be able to pass this test, where they cannot pass

the "interested party" test under CICA/Tucker Act Remedies: Injunctive ONLY

o Since the enactment of the Contract Disputes Act, the core provision of the Tucker Act as mirrored in the Little Tucker Act does not provide any basis for the district court to award monetary relief in a contract performance dispute.

Injunction for the gov’t to obey a statutory duty to make monetary payments may occur.o If district courts do still exercise jurisdiction under the APA, relief under the APA does not

include monetary damages. Injunctive relief only. Standards of Review:

o APA 706 Chevron deference probably doesn't apply to most gov't contract statutes for the same

reason as the reason they can't be unreviewable due to committal to agency discretion -- they are typically of general applicability and thus do not belong to a single agency.

However, courts are still extremely deferential.- "Only when the court concludes that there has been a clear violation of a duty by the

procurement officials should it intervene in the procurement process and proceed to a determination of the controversy on the merits." - Steinthal

Fact-finding ability: Typical court.

d. Boards of Contract Appeals Coastal Corp v. U.S. (Fed Cir. 1983) Boards of Contracts Appeals do not have jurisdiction over bid

protests and Heyer reasoning cannot apply here because "[t]he implied contract, which defines the way the gov't must deal with bids in the process of selecting a contractor, is not a contract for … procurement."o The Contract Disputes Act is intended to give Boards of Contracts Appeals jurisdiction over

contract performance disputes as an alternative forum to the CoFC.

iii. Relationship Between Bid Protest & Performance Dispute For a It is not for the bid protest forum to decide what the financial arrangement should be for the

termination of the wrongfully awarded contractor. o Even in the Court of Federal Claims, despite that it has jurisdiction over both bid protests and

performance disputes, they are treated as separate proceedings. You need to give the gov't a chance to decide after a successful bid protest what it thinks the

wrongfully awarded contractor is owed for TFC and whether that contractor is happy. If the terminated contractor is unhappy with the compensation the gov't comes up with for

the termination, that party may then bring a claim under the Contract Disputes Act.

iv. International Law & Bid Protests Treaties might be used to interpretatively broaden the standing, remedies, and jurisdiction of the

Court of Federal Claims in order for the U.S. to be in compliance with international law. o International law is an avoidance cannon of interpretation: you should avoid interpreting

domestic law such that it causes a treaty breach.

WTO and the Government Procurement Agreement (GPA)o Although WTO has over 100 member nations, only ~30 have signed the GPAo GPA only applies to agencies listed in the Annexeso Applies only to procurements over a financial threshold of 130K Special Drawing Rights (SDRs) in

the international monetary system. o Requires national treatment – each member nation must treat suppliers from other member

nations no less favorably than their own domestic suppliers. o Bid Protest Procedures Required by GPA

“Non discriminatory, timely, transparent and effective procedures enabling suppliers to challenge alleged breaches of the Agreement in the context of procurements in which they have, or have had, an interest”- Same thing as “actual or prospective bidder”?

Court or non-judicial tribunal subject to judicial review or a set of due process requirements- GAO or CoFC appears to meet these standards

Foreign entities appear to be allowed to bring a claim of violation of U.S. domestic procurement law in either the GAO or CoFC- Nothing in Tucker Act or CICA suggests a limitation disqualifying foreign bid protestors

Required Remedies: - “rapid interim measures . . . “

GAO’s automatic stay provision?- “correction of breach or compensation for loss . . which may be limited to costs for

tender preparation or protest” Arguably GAO’s authority, which is limited simply to recommendations, does not

meet this test. But b/c protestors can go to CoFC instead, US is incompliance w/ GPA

NAFTA – Similar procurement requirements, but unlike GPA, does not seek to regulate the quality of bid protest tribunals made available by member nations.

European Union - Directive 2004/18/EC, consolidated the Public Supplies Directive, Public Works Directive, and Services Directive. Did not address remedies for violation of procurement rules.o Review Directive 1989 – Addresses remedies and procedures for enforcement

Requires procedures for prompt and effective review for alleged violations of European Community law

No requirement that review extend to alleged violations of nat’l procurement law, but if review rights are extended to domestic suppliers, foreign suppliers must also have access.

Standing: “any person having or having had an interest . . . how has been or risks being harmed . . .”

Tribunals must have authority to - Take interim measures to prevent further damage to interests- Either Set aside or ensure setting aside of unlawful decisions, including removal of

discriminatory specifications . . . or- Award damages

Not explicit, but most EU tribunals limit monetary damages to bid preparation costs and deny expectancy damages.

Does not mandate that initial review tribunal be independent of procuring agency (unlike GPA)

VIII. Performance & Administration of Government Contractsi. Delays / Suspensions

Excusable Delay - Contractor should be excused from sanctions for late performance--including termination for default-- that would otherwise be applicable.o Excusable delays in fixed price supply and service contracts: FAR 52.249-8 -

(c) Except for defaults of subcontractors at any tier, the Contractor shall not be liable for any excess costs if the failure to perform the contract arises from causes beyond the control and without the fault or negligence of the Contractor. Examples of such causes include (1) acts

of God or of the public enemy, (2) acts of Government in either its sovereign or contractual capacity, (3) fires, (4) floods, (5) epidemics, (6) quarantine restrictions, (7) strikes, (8) freight embargoes, and (9) unusually severe weather. In each instance, the failure to perform must be beyond the control and without the fault or negligence of the Contractor.

(d) If the failure to perform is caused by the default of a subcontractor at any tier, and if the cause of the default is beyond the control of both the Contractor and subcontractor, and without the fault or negligence of either, the Contractor shall not be liable for any excess costs for failure to perform, unless the subcontracted supplies or services were obtainable from other sources in sufficient time for the Contractor to meet the required delivery schedule.

o Where there is an excusable delay or express suspension order, the time during which the contractor was on excusable standby gets added to the available performance time when the work resumes. Thus, if the CO TFDs when the original deadline goes by following an excusable delay, the TFD is improper and should be converted into a TFC.

Compensable Delay - contractor is entitled to an equitable adjustment to cover cost of the delay where a Suspension of Work clause is applicable. All compensable delays are excusable, but not all excusable delays are compensable.o Two situations:

Express Suspensions by order of Contracting Officer Constructive Suspensions

- Constructive suspension has the same effect and consequences as an actual suspension, and relief should be grated as if an actual suspension order had been issued.

o Substantive requirements for compensable delay – Fruehauf v. U.S. The plaintiff-contractor must be without fault in contributing to the ensuing delay The work was interrupted for the convenience of the gov't

- Work interrupted by an incompetent other contractor whom the gov’t refuses to terminate for default or convenience constitutes work interrupted for the convenience of the gov’t – Fruehauf v. U.S.

Delay is either the government's fault or delay is so protracted that it would be unreasonable to expect the contractor to shoulder the added expense.

o Procedural requirements for compensable delay If the suspension order is express, there is no contemporaneous notice requirement

- The gov’t already knows the contract is suspended… it’s the one that suspended it If the contractor believes there has been a constructive suspension, it must give a

contemporaneous notice (30 days) to the contracting officer that it is seeking an equitable adjustment- Failure to give contemporaneous notice isn't a jurisdictional bar, but you lose the number

of days' worth of compensation that you didn't give notice. For both express and constructive delays, the contractor must submit a claim to the CO

within the statute of limitations of 6 years, if the equitable adjustment is denied.o Compensation available for compensable delay:

Losses caused by delay Losses which flow from compacted lead / mobilization time Losses which flow from subsequent acceleration of work Expectancy damages are not available for compensable delay.

- Under constructive changes, however, the contractor is entitled to reasonable profits on the additional work which has to occur under the change. This causes some contractors to argue that it wasn't just a compensable delay, but that the delay amounted to a constructive change.

ii. Changes / Modifications Changes must be within the "general scope" of the contract

o General scope - "anything that's even vaguely related to the contract performance" This limitation is not designed to protect the contractor. This limitation is to protect full and open competition; to prevent endless modification of

contracts so that the CO doesn't have to begin a new bidding process.- Test for whether a change order is lawful: Given the change, would the contract have

elicited a different field of competitors for bidding? An argument that a change is illegal because it is outside the general scope should go to a

bid protest forum. Changes should be in writing

o A change order doesn't have to be written to constitute a constructive change if the change was the result of an authorized C.O.'s oral change order. - W.H. Armstrong & Co. v. U.S.

o A mutual misunderstanding of an ambiguous contract where the contractor’s interpretation is reasonable and the gov’ts interpretation requires a more expensive performance than the contractor anticipated may result in a constructive change because contracts shall be construed against the drafter (gov’t) - W.H. Edwards Engineering Corp. v. U.S.

Types of constructive changes:o Additional work

Gov't misleads contractor as to the nature or extent of the performance that will be required – see also Transamerica

o Acceleration o Lack of appropriate gov't cooperation in facilitating performance

Includes overzealous inspection Contractor must give timely notice to the gov't that it is seeking an equitable adjustment

o 30 days from receipt of a written order Failure to give contemporaneous notice isn't a jurisdictional bar, but you lose the number of

days' worth of compensation that you didn't give notice. Flexible when it comes to a constructive change

o If contractor is unsatisfied, must submit a claim to CO within 6 year statute of limitations. Equitable Adjustment:

o Cost of the extra labor, etc. plus a reasonable profit thereon. In effect, the compensation for the extra work is a cost-reimbursement contract: cost, plus a

reasonable profit thereon. Thus, sometimes changes can turn a fixed-price contract into a cost-reimbursement contract.

iii. Inspection & Acceptance Performance problems fall into two categories:

o Timelinesso Quality of performance

Contractors must come up with their own quality assurance program

o Gov't can TFD just for failing to come up with a program, even if there are no problems Gov't has its own right to inspection

o Gov'ts right to inspect does not relieve contractor of duty to inspect.o Gov't has latitude w/ time, frequency, and place of inspection.

However, excessive inspection ratified by an authorized contracting officer can lead to a constructive change either under W.H. Edwards, or as an acceleration change.

Gov't and contractor rights depend on whether an error is caught before or after final acceptance.o Before Final Acceptance: (Gov't has more rights than a private party before it accepts)

Gov't can reject the goods- Even for non-material breach - Arrow Lacquer (the government may require strict

performance and terminate for even non-material breaches) (exceptionalism!) Gov't can require correction Gov't can order delivery of the good, which does not constitute acceptance, and then

institute an equitable price adjustment downward.- This is a change order- The amount of the adjustment can be disputed through the CDA.

o After Final Acceptance: (Gov't has less rights than a private party would after it accepts.) Gov't has given itself extremely weak warranties

- Exception: when off-the shelf commercial items are purchased under less-competitive procedures, UCC-type warranties apply.

Latent defects, fraud on the part of the contractor, or gross mistake amounting to fraud, are all reasons for which final acceptance may be revoked.

iv. Termination for Conveniencea. When the Gov’t May TFC

C.O. must determine that termination is in the interest of the gov't before TFCing.o The court does not have to agree as to whether termination was in the interest of the gov’t. It

must only find that the CO determined it was in the interest of the gov’t.o TFDs held improper are turned into constructive TFCs – College Point Boat

Krygoski - o No changed circumstance is necessary for TFCo The test for when a TFC can be made is one of objective good faitho There are two possibilities:

If the gov't entered into a contract in objective bad faith, not intending to perform, unless something changes the gov’t is still in bad faith

However, a changed circumstance can give the gov't the reason it needs to TFC If the gov't entered into a contract in objective good faith, no changed circumstance is

needed to terminate for the convenience of the gov't.

Analysis - Validity of Termination For Convenienceo Was the original contracting in good faith (w/ intent to perform)?

If no… Is there a changed circumstance which justifies termination?

If yes … TFC is valid If no … TFC is not valid (Torncello)

If yes… Is the termination itself in bad faith (i.e. simply b/c they don't like the contract

they made)? If no … TFC is valid (Krygoski)

Needing to re-solicit to preserve full and open competition because the award has been made improperly is a really good faith reason to terminate – See e.g., Amdahl

If yes … TFC is not valid

b. Determining Contractor Compensation Following TFC CO issues a TFC Contractor responds with a TSP - Termination Settlement Proposal

o The TSP initiates the CO’s obligation to determine the amount of compensation due.o If the CO and the contractor agree on either the TSP or a price which results from further

negotiation, then "we're done" and no one has standing to challenge the amount agreed upon.o Negotiation Factors -

Contract price for work completed & accepted but that hasn't been paid for Cost attributable to work partially performed or unavoidable at the time the TFC notice was

received- Ex: contractor has a subcontract and needs time to terminate that. The cost of the sub's

work during the interim should be recoverable. A reasonable profit on work performed unless there would have been a loss on the entire

contract if it were completed.- The gov't doesn't have to pay profit to the contract just for "stopping the bleeding"

There is no right to recover anticipated profits for work not performed - That’s expectancy damages, which are never allowed in the U.S.

o If they can't agree, it goes through the Contract Disputes Act process. See Performance disputes.

v. Termination for Defaulta. When the Gov’t May TFD

Borrowing the UCC to create federal common law, the default rule is that unless the parties agree otherwise, the contractor assumes the risk that it cannot accomplish that which it promised. Having promised the impossible is not a defense to default. – U.S. v. Wegematic

Timeliness Problemso Ability to TFD applies to both failed interim or final deadlines

No requirement for cure notice for failure to meet interim or final deadline The right to terminate for this reason can be waived if the gov't continually seems to not

care about the deadline - DeVito- If the gov't is sitting idle and suddenly decides to get serious about timelines, it needs to

either send a cure notice or set a new deadline. Some signal must be sent to the contractor before termination. The new deadline doesn't necessarily need to be "realistic".

o Applies where performance has slowed so much that timely performance is endangered. Cure notice is required

The burden is on the gov't to show that the contractor is not likely to be able to complete

Quality Problemso Strict Compliance Doctrine - the gov't can TFD for failure to achieve specs even if not material o Substantial Compliance Doctrine - where

(1) Nonconforming goods are delivered on time and (2) contractor reasonably believed the goods were in conformance, the contractor is entitled to a cure notice.

- If they don’t cure, then the strict compliance doctrine kicks in, no matter how nonmaterial the nonconformance appears to be.

- In many cases cure notice is a formality b/c unlikely defect can be fixed within 10 days

b. Determining Contractor Compensation Following TFD Contractor is entitled only to the value of work already completed and accepted. If gov't chooses to have the contractor deliver half-completed work or materials, it will pay for that. No reasonable profit. The government is entitled to cover costs—the difference between the cost of reprocurement and

the defaulting contractor’s bid.

IX. Performance Disputesi. Path for a Claim / Performance Dispute Fora

ii. Role of Contracting Officers Contracting officers have a dual role as the gov't representative and the primary adjudicator

o "The contracting officer has to take off his government hat and put on his judge's hat”o These roles are arguably incompatible – Exceptionalism.o This explains why the review of CO findings at both the BCA and CoFC is de novo; we are not

confident the CO can fully set aside his gov't interest.

When there is no dispute, the clock does not start running.o There is no dispute unless a contracting officer asks for the contractor's position so that a

dispute might arise.o "Nowhere did he indicate that he would listen, or that it was open to dispute." - Keystone Coat

& Apron Mfg. v. U.S. (statute of limitations has not run out where CO outright denied the contractor any input into the process by which the CO calculated the cost of missing scrap he claimed was due the gov’t)

iii. “Claim” Requirement CDA gives board jurisdiction over a contracting officer's final decision on a "claim"

o The CDA doesn't define "claim" So, FAR 33.201 filled the gap by defining "claim":

o "[1] a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract … [2] A voucher invoice, or other routine request for payment that is not in dispute when submitted is not a claim. [3] The submission may be converted to a claim, by written notice to the contracting officer … if it is disputed to either as to liability or amount or is not acted upon in a reasonable time." Requests for Equitable Adjustments are by definition claims – Reflectone v. Dalton

- "Nothing in the definition suggests that other written demands seeking payment of a sum certain as a matter of right, i.e. those demands that are not routine, also must already be in dispute to constitute a claim.”

Was it a Claim:o If it's a non-routine submission, it must be a demand as a matter of right to a sum certain.o If it's a routine submission, the contractor must dispute it and then the contractor must request

a final decision. You don't need formal language to request a final decision from a contracting officer.

o Test = Given all the facts and circumstances, should the contracting officer have known there was a request for a final decision? – Transamerica Ins. v. U.S. Qualifying language in the request for a final decision stating that the contractor is willing to

negotiate doesn't necessarily make it not a claim- Although it can be evidence that it wasn't a request for a final decision

Professor Schwartz says the test seems to be that if the contractor is willing and prepared for final decision, even if they are also willing to bargain more, they have submitted a claim.- Contractor must say something that would reasonably communicate to the

contracting officer that they are willing and prepared for a final decision.

Conversion of a routine request for payment into a claimo Contractor "Okie dokie, all done! Here's our bill!"o Contracting Officer "uhh that's not right."o Contractor "well, we think it is, can you please make a final determination?" Claimo Contracting Officer "Nope. Still not right." starts the statute of limitation clock for an appeal.

(Keystone)

iv. Certification Requirement Contract Disputes Act - 41 USC 7103(b)

(1) Requirement generally.—For claims of more than $100,000 made by a contractor, the contractor shall certify that—

(A) the claim is made in good faith;(B) the supporting data are accurate and complete to the best of the contractor's knowledge and belief;(C) the amount requested accurately reflects the contract adjustment for which the contractor believes the Federal Government is liable; and(D) the certifier is authorized to certify the claim on behalf of the contractor.

(2) Who may execute certification.—The certification required by paragraph (1) may be executed by an individual authorized to bind the contractor with respect to the claim.

- This is a codification of Judge Plager’s dissent in U.S. v. Grumman Aerospace(3) Failure to certify or defective certification.—A contracting officer is not obligated to render a final decision on a claim of more than $100,000 that is not certified in accordance with paragraph (1) if, within 60 days after receipt of the claim, the contracting officer notifies the contractor in writing of the reasons why any attempted certification was found to be defective. A defect in the certification of a claim does not deprive a court or an agency board of jurisdiction over the claim. Prior to the entry of a final judgment by a court or a decision by an agency board, the court or agency board shall require a defective certification to be corrected.

- Despite the title of this subsection, "failure to certify or defective certification" -- because the text of the subsection only mentions defective certification, a complete absence of any certification might still be jurisdictional. However, it's not really clear.

v. International Law & Performance Disputes “The GPA and NAFTA [and EU provisions] generally do not undertake to regulate contract

administration or remedies and procedures which govern claims for breach of an awarded contract in member nations, leaving such matters to national law.”o B/c the focus of these agreements is to overcome protectionism.