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Government “Poaches” Contractor’s Employee, Then Rejects Fixed-Price Invoices

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Koprince Law LLC

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Picture this scenario: the government hires your company to do a job; you assign one of your best employees to lead the effort. He or she does such a good job that the government hires your employee away. The government then drags its feet on approving your proposed replacement and refuses to pay you for the time when the position was not staffed–even though the contract was fixed-price.

The scenario is exactly what happened to a company called Financial & Realty Services (FRS), and according to the Civilian Board of Contract Appeals, FRS wasn’t entitled to its entire fixed-price contract amount.

In Financial & Realty Services, LLC, CBCA No. 5354, 16-1 BCP ¶ 36472 (Aug. 18, 2016), FRS held a GSA Schedule contract for facilities maintenance and management services. The underlying Schedule contract included FAR 52.212-4 (Instructions to Offerors–Commercial Items).

In 2013, as part of that contract, GSA awarded FRS a task order to manage some federal buildings in the Dallas/Fort Worth [Texas] Service Center, Fort Worth Field Office. The task order, at its most basic, called for FRS to provide a property manager.

The task order was priced in firm fixed annual amounts, and GSA agreed that FRS could invoice in fixed monthly amounts.

Important to later events, the task order required that the property manager to be able to obtain a National Agency Check with Inquiries (NACI) clearance within three months of award and maintain it through the life of the contract. For the first year or so of performance, a FRS employee served in the property manager position. Then, in October 2014, the government solicited and hired the employee away, to do basically the same job he was doing for FRS.

A month later, FRS submitted a potential replacement to GSA, but that candidate took another job in the intervening time before the government gave FRS word that it had approved his/her NACI clearance. FRS then offered a second and a third option in January and February 2015. Finally, in March, the third potential replacement became the property manager.

FRS later submitted invoices for $49,280, seeking payment for the time between October 2014 and March 2015. GSA refused to pay, so FRS filed a claim with the contracting officer seeking payment of the disputed amount. The contracting officer denied the claim, so FRS appealed the denial to the CBCA, alleging that GSA “breached its contract with FRS by thwarting or precluding FRS' performance of the contract and by failing to pay the full contract price.”

GSA moved for the case to be dismissed. In its motion to dismiss, GSA argued there was no factual basis to determine that GSA had acted improperly.

FRS conceded that it did not actually provide a property manager during the relevant time frame. As one might expect, however, FRS argued that the task order was fixed-price (meaning, FRS said, that the government agreed to pay regardless of whether the position was staffed), and that the government actively prevented FRS from performing.

The CBCA disagreed. It pointed out that FAR 52.212-4(i) states that “[p]ayment shall be made for items accepted by the ordering activity that have been delivered to the delivery destinations set forth in this contract.” The CBCA continued:

Notwithstanding the task order’s “fixed price,” GSA was obligated to pay only for services that were delivered and accepted.  Whether GSA could “supervise” the FRS employees who performed the services is immaterial.  In light of the complaint’s allegations that FRS did not staff the task order during the months in dispute, the allegation that GSA “fail[ed] to pay the full Contract price” for that same period . . . does not state a claim on which the Board could grant relief.

As for the fact that the GSA hired FRS’s property manager, the CBCA wrote that FRS “identifies no factual basis to suspect that GSA did anything inconsistent with the normal federal hiring process.” The CBCA determined, “we do not see how an otherwise lawful recruiting or hiring action that an agency was not contractually barred from taking–which is all that has been plausibly alleged–could constitute undue interference entitling a contractor to be paid for work it did not perform.”

Finally, the Board held that GSA had not breached the contract by failing to timely approve a replacement property manager. The CBCA noted that the contract did not include “a contractual duty on GSA’s part to clear job candidates within a specified time . . . .” Under the circumstances, the CBCA found the delays in clearance to be reasonable.

The CBCA dismissed the appeal.

As an impartial observer, it is easy to have sympathy for FRS. It did nothing wrong. In fact, it seemingly did everything right. It staffed the position with someone so good that the government poached the worker away within a year. It suggested multiple replacements, at least one of which took a different job while the government was still in the process of authorizing clearance. It certainly would seem like FRS had reason to be upset, especially since the task order was fixed-price.

But let’s be real here. Fixed-price or not, the government isn’t too keen to pay for something it doesn’t receive from a contractor. As Financial & Realty Services demonstrates, that policy may apply even when the government itself causes the contractor to be unable to deliver.

 

View the full article

 

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Good read.

As stewards of public funds:  Never pay for something you did not receive, and never accept something for which you won't pay.  Regardless of contract type.

Always be at peace.

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