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Is FAR 8.406-6 As Easy As "May" and "Shall"?



I was reading a decision of the Armed Services Board of Contract Appeals (ASBCA) about a week ago and I found the following.

Sharp Electronics Corp. v. McHugh, 707 F.3d 1367 (Fed. Cir. 2013) is the first Federal Circuit interpretation of FAR 8.406-6 regarding the respective authorities of GSA schedule COs and ordering agency COs.

Why read the ASBCA decision when I could go straight to the horse's mouth! So I searched the Court of Appeals for the Federal Circuit (CAFC) web site and I found the Sharp decision--and it was recent. Here is a brief description of the issue in the Sharp case.

On September 18, 2001, the General Services Administration (GSA) awarded a multiple award schedule (MAS) contract to Sharp Electronics Corporation for office equipment. On December 1, 2005, the Army issued a delivery order "in accordance with and subject to terms and conditions" of Sharp's MAS contract. The order provided for a four-year lease of copier equipment, including one base year and three option years, with the last option year ending on December 1, 2009. Option years one and two were exercised in full. The Army partially exercised option year three for six months and subsequently extended the lease for three more months. The lease finally ended on August 31, 2009.

Sharp filed a claim with the Army contracting officer (CO) citing the termination fee provisions of its schedule contract. The Army CO did not respond and did not refer Sharp's claim to GSA's CO who was responsible for Sharp's MAS contract. After 60 days, Sharp appealed to the ASBCA which determined that it did not have jurisdiction and dismissed the case. Sharp then filed an appeal with the CAFC.

What should an agency CO do with a dispute on an order? What should an agency CO do if there is a question of contract interpretation with the MAS contract and that interpretation affects the interpretation of the agency order? Well, in a majority decision, the CAFC tells us this.

We hold that FAR 8.406-6 does not authorize an ordering CO to decide a dispute requiring interpretation of schedule contract provisions, in whole or in part, regardless of whether the parties frame the dispute as pertaining to performance. However, the ordering CO is certainly authorized to construe the language of the order (or its modifications). Because an order's details--not merely price, quantity, and specifications, but also permissible variation in quality or quantity, hours and location of delivery, discounts from schedule pricing, etc.--are arranged between the schedule contractor and the ordering CO, the ordering CO is able to construe these commonly disputed terms as long as the dispute does not involve interpretation of the schedule contract. We also see no reason why an ordering CO resolving a dispute cannot apply the relevant provisions of the schedule contract, as long as their meaning is undisputed. For example, an ordering CO who resolves a dispute over whether goods are conforming may apply schedule contract provisions governing replacement of nonconforming goods. See FAR 8.406-3(a) (2012) ("If a [schedule] contractor delivers a supply or service, but it does not conform to the order requirements, the ordering [CO] shall take appropriate action in accordance with the inspection and acceptance clause of the contract, as supplemented by the order."). The dispute only need go to the GSA CO if it requires interpretation of the schedule contract's terms and provisions.

It is easy for the CAFC but is it that easy for you? There was a minority opinion in this CAFC case too which looked at it differently.

Anyway, the CAFC case is Sharp Electronics Corporation v. John McHugh, Secretary of the Army, No. 2012-1299, February 22, 2013. The ASBCA decision is Impact Associates Inc.


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