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Lionel Hutz

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  1. I agree. FAR 5.202(a)(4) is meant to be an exception to providing notice when awarding a sole source under the authority of FAR 6.302-5. Similarly, FAR 5.202(a)(1) provides an exception to providing notice when relying on FAR 6.302-6 -- National Security. FAR 5.202(a)(2) provides an exception to providing notice when relying on FAR 6.302-2 -- Unusual and Compelling Urgency. FAR 5.202(a)(3) provides an exception to providing notice when relying on FAR 6.302-4 -- International Agreement. FAR 5.202(a)(5) provides an exception to providing notice when relying on FAR 6.302-1(b)(3) -- Only One Responsible Source and No Other Supplies or Services Will Satisfy Agency Requirements. (Utility Services).
  2. The OP said the contract is a FFP, C type contract. Yet the contract description states there is no fixed quantity and no dollars obligated at the time of award. Rather, there is a NTE ceiling and work is ordered and funding obligated as requirements arise. It sounds like despite awarding a FFP C type contract, they are administering it as a FFP or T&M, D type contract, it is hard to tell.
  3. Don, Good points. However, if additional consideration is not needed because it exists in the underlying contract, then the clause almost certainly authorizes, at least in part, a unilateral modification. Take for example the Excusable Delays clause, FAR 52.249-14. It provides, “the Contractor shall not be in default because of any failure to perform this contract under its terms if the failure arises from causes beyond the control and without the fault or negligence of the Contractor.” In addition, it states, “If the Contracting Officer determines that any failure to perform results from one or more of the causes above, the delivery schedule shall be revised…” This clause authorizes a unilateral modification to the contract. If the contracting officer and the contractor cannot agree to a new delivery, the contracting officer would be within her authority to unilaterally determine a new date and modify the contract. Now, as a practical matter, does it make sense to negotiate the delivery schedule with the contractor? Absolutely. Further, by agreeing to a new date, both sides have given up their right to argue that a different date should have been selected. Not only does this limit litigation risk, but relinquishing legal rights serves as adequate consideration to bind the parties. Consideration in a bilateral modification does not need to be in the form of money. Does this mean the contracting officer is no longer issuing a modification under 52.249-14? Not necessarily. FAR 52.249-14 directs that the delivery schedule be revised and does not restrict the revision to either a unilateral or bilateral modification. However, if 52.249-14 simply excused “excusable delays” but did not direct that “the delivery schedule shall be revised,” the contracting officer would still have the authority to modify the contract. That is exactly the situation with 52.212-4(f), which addresses Excusable Delays in commercial contracts. It simply notes that “The Contractor shall be liable for default unless nonperformance is caused by an occurrence beyond the reasonable control of the Contractor and without its fault or negligence…” It limits the contracting officer from determining the contractor is in default when the default is due to an excusable delay. However, it does not authorize the contracting officer to modify the contract, unilaterally or otherwise. And that makes sense in this context because 52.212-4(c) has already told us that the contract can only be modified “by written agreement of the parties.” In that case, a bilateral modification must be executed with consideration coming in the form of a reestablished delivery date enforceable by both parties. In a FAR Part 12 contract, following an excusable delay, 52.212-4(f) may be the *reason* you want to modify the contract (i.e., the contract delivery date is no longer enforceable), but it is not your *authority* to modify the contract. Sometimes the government’s reason and authority to modify the contract come from the same clause, but not always. This is part of the problem with block 13 on the SF 30. People want it to be a shorthand to tell them why the contract is being modified or modified in a certain way. But that is not what authority tells you. Cheers, Lionel
  4. I agree, and later in the paragraph I wrote, "Your authority to 'enter into" a contract is FAR 1.602-1(a) and your warrant." But to the extent someone feels obliged to cite a FAR section, 1.602-1 probably would be the most relevant. Although, I could see the argument that FAR 1.603-3 -- Appointment is relevant as well.
  5. To paraphrase Lt. James Gordon, the warrant is the authority the contracting officer deserves, but not the one the SF-30 is looking for right now. So we'll hunt the warrant. Because the warrant can take it. Because the warrant is not our hero. The warrant is a silent guardian. A watchful protector. A Dark Knight. Wait, what? I mean… Nevermind…
  6. FAR 52.217-9 provides the government with authority to extend the term of the contract through the *unilateral* exercise of an option. It is well settled that the government must exercise an option “in exact accord with the terms of the contract.” Freightliner Corp. v. Caldera, 225 F.3d 1361, 1366 (Fed.Cir.2000). Modifying the terms of the contract at the same time that you are exercising that option, means you are not exercising an option in accord with the terms as they exist in the contract. An attempt to unilaterally exercise an option according to terms different from those set forth in the contract is invalid. See Alliant Techsystems, Inc., v. United States, 178 F.3d 1260, 1275 (Fed. Cir. 1999). However, the Court of Federal Claims has held that while an attempted option exercise that differs from the terms of the contract prevents the option from being exercised unilaterally, the parties may agree to the modification bilaterally. See 4737 Conner Co. v. United States, 65 F. App'x 274, 276–77 (Fed. Cir. 2003) (“[T]he government here attempted to exercise the option and thought it was properly doing so. However, the letter purporting to exercise the option referred to terms outside of those in the option.… This explicit reference to a termination provision that was no longer contained in the option … converted [the government’s] purported acceptance of the option into a counter-offer that [the contractor] was free to either accept or reject.”) Further, before exercising an option pursuant to 52.217-9, "the contracting officer shall make a written determination for the contract file that exercise is in accordance with the terms of the option, the requirements of this section, and Part 6. To satisfy requirements of Part 6 regarding full and open competition, the option must have been evaluated as part of the initial competition and be exercisable at an amount specified in or reasonably determinable from the terms of the basic contract..." You cannot do that if you are exercising an option that has terms different than the basic contract. Therefore, when executing a modification that both changes the terms of the contract and extends the period of performance, you should not cite FAR 52.217-9, because you are not relying on its authority to unilaterally modify the contract. Instead, your authority is the same as any other bilateral modification, as discussed below. With regard to that authority, Don is correct. FAR 1.602-1(a) states “Contracting officers have authority to … administer … contracts….” Unless you are relying on some other specific and applicable modification authority, then FAR 1.602-1(a) and your warrant are your authority to modify a contract. The only reason this is an issue is because there is a box on a form that someone has decided must be filled in. When you award a contract, do you cite your authority to enter into a contract? If asked would you cite “mutual agreement of the parties”? Your authority to “enter into” a contract is FAR 1.602-1(a) and your warrant. This is the same authority to “administer” contracts, which includes modifications. FAR clause 52.212-4(c) is not an authority. It is a limitation on authority. It requires that all modifications be (1) bilateral, and (2) in writing. Requiring that a modification be bilateral and in writing does not grant authority where it did not previously exist, it limits the types of modifications that are enforceable. It prohibits oral modifications or modifications imposed without the consent of one of the parties. As explained by the Court of Federal Claims, to be enforceable, a bilateral modification must have the same elements as a contract. "The question thus devolves to whether plaintiff can enforce a contract modification to which defendant asserts the Air Force never assented. An express contract requires intent to be bound, and such intent must be expressed in a manner capable of understanding. Unconditional acceptance must be established. “It is essential ... that the acceptance of the offer be manifested by conduct that indicates assent to the proposed bargain.” In addition to mutuality of intent to contract and lack of ambiguity in offer and acceptance, consideration is also necessary to bind the Government. Manifestation of mutual assent will not be present “if the parties attach materially different meanings to their manifestations and ... neither party knows or has reason to know the meaning attached by the other ....” ECC Int'l Corp. v. United States, 43 Fed. Cl. 359, 369 (1999) (citations omitted). In effect, a modification is a contract to change an existing contract. Restated, the elements of a contract and/or modification are: (1) mutuality of intent to contract; (2) consideration; (3) an unambiguous offer and acceptance; and (4) actual authority on the part of the government's representative to bind the government. Marchena v. United States, 128 Fed. Cl. 326, 331 (2016), aff'd, 702 F. App'x 988 (Fed. Cir. 2017). So, “agreement of the parties” is a prerequisite of a bilateral modification and necessary to satisfy elements (1) and (2). Further, mandating the agreement be in writing, as 52.212-4(c) does, helps ensure that there is an unambiguous offer and acceptance. But neither of those oft-cited "authorities" confers “actual authority” on anyone signing a contract. If a government employee, who is not a contracting officer, "mutually agrees” to enter into a “written,” “bilateral” agreement with a contractor, there is still no contract (or modification) because the employee does not have authority. It’s the whole reason the FAR contains a process to ratify *unauthorized* commitments. So, why does the SF-30 require the contracting officer to cite an authority? I do not know. But, my guess is that it is intended to account for unilateral modifications authorized by specific clauses, for example, 52.243-1 -- Changes-Fixed-Price, and 52.217-9 -- Option to Extend the Term of the Contract. These modifications are effected without a new “offer and acceptance” or additional “consideration.” Those contractual elements of a modification are satisfied at the time of contract award and reflected in the contract clauses authorizing the unilateral modification. For example, under FAR 52.217-9, the parties have mutually and unambiguously agreed that the government has authority to unilaterally extend the term of the contract. Consideration exists as part of the price the government is paying under the contract. Because such a unilateral option exercise would not be possible without the inclusion of FAR 52.217-9, it should be cited as the authority to make such a modification when it applies. In the end, cite whatever you want. Writing something in block 13 of the SF-30 does not grant you authority. Leaving it blank does not or citing something wrong does not divest you of the authority you already have. Yes, its better to have the correct authority written, but if someone in the government tracks some metric using block 13 and they want you to write something else, it will have little impact on the contract.
  7. The GAO concluded the market research was not adequate because it relied on other government contracts to make a commerciality determination. In the case of Red River, the commerciality determination was whether a term/condition was commercial. However, the principle is the same when applied to the supply or service itself. You cannot solely rely on other government contracts when trying to assess whether something is commercial because whether or not the federal government purchases something tells you nothing about whether that supply or service is "of a type customarily used by the general public or by non‑government entities for purposes other than government purposes." This directly contradicts Joe2713's statement that "The Supplier can show commerciality through CID/CSP based on individual contracts with the Federal Government. Don't the offers/individual contracts with the Fed Gov fit the definition of a commercial item?" That's what I was responding to.
  8. No. See, Red River Waste Solutions, LP, B-411760.2 (Jan 20, 2016):
  9. I agree. And just to add a little bit more, GAO has held that a contracting officer need only make an “informed judgment” that two qualified small business concerns will compete. A contracting agency need not make a full responsibility determination before deciding whether to set aside a procurement (Olympus Corp., Comp. Gen. Dec. B-225875), but it may make such a determination. (Commercial Energies, Inc., Comp. Gen. Dec. B-243402.) See for example: Belleville Shoe Manufacturing Company; Altama Delta Corporation; Wellco Enterprises, Inc., B- 287237, B- 287237.2 (May 17, 2001): In determining the availability of responsible small business concerns for set-aside purposes, the contracting agency's investigation goes not only to the existence of the businesses, but also to their capability to perform the contract. Information Ventures, Inc., supra. The record supports the agency's finding that Altama had never produced boots of the type required here in the large quantities required, and it was this consideration that led to the agency's conclusion. We see nothing unreasonable in the agency's being concerned that a contractor lacking this experience, even though generally responsible and capable in the field, would encounter a learning curve that would potentially result in substantial delays and administrative burdens for the agency. The only caveat is that a contracting officer’s decision not to set aside a procurement for small business is reviewable by the SBA. FAR 19.501(d). And, in my experience, the SBA is often more generous to contractors in its responsibility determinations than many agencies. Depending on the likelihood of SBA involvement, you may want to coordinate with the SBA representative on any set-aside nonresponsibility determinations.
  10. I don't, although I have not searched for one. Why would you expect there to be a case? I would expect there would not be a case. A published protest would require the third party to know that an option was exercised late, which they are unlikely to know. And, even if they do know it was exercised late, it would require that party to know it was a protestable issue. So, the litigation risk is relatively small. But maybe it is more likely in a situation where other contractors know the option cannot be exercised due to a shutdown? I don't know. In any event, the likelihood of a protest may make someone feel "safer" about a course of action, but it has no impact on the propriety of that action
  11. I agree. But, here, the issue is not whether the contract will be enforceable if the contractor does not object. The issue is whether a late exercise of the option is permitted under applicable statutes, regulations, and contract provisions. The OP specifically asked if a third party could protest an invalid option exercise. The answer is yes. You can have an enforceable contract even when you have violated a procurement law to create those contractual obligations. For example, let’s say a contracting officer solicits services on an LPTA basis with 2 technical evaluation criteria. Under those criteria Offeror A is the lowest priced technically acceptable offeror. However, in conducting the evaluation, the contracting officer relies on an unstated 3rd evaluation factor, which results in the selection of Offeror B. Award is then made to Offeror B. -Is there a contract? Yes. -Did the contracting officer comply with applicable laws and regulations concerning how to solicit and award a contract? No. -If Offeror A protests, will they succeed in overturning the award to Offeror B? Yes, absolutely. -If Offeror A does not protest and Offeror B performs, can Offeror B later succeed on a claim alleging there is no contract because it was improperly awarded? No, it has waived its right to object to the contract award. It's the same situation here. If the contractor does not object, and performs, you can create a contractual obligation by proceeding with a late option exercise. However, you will not be in compliance with statute and regulation when doing so. While that’s an interesting theory, the Federal Circuit disagrees with you, stating, “When a contract or a provision thereof is in violation of law but has been fully performed, the courts have variously sustained the contract, reformed it to correct the illegal term, or allowed recovery under an implied contract theory; the courts have not, however, simply declared the contract void ab initio." American Tel. & Tel. Co. v. United States, 177 F.3d 1368, 1376 (Fed. Cir. 1999). In contrast to your assertion, courts will not rule the exercise void ab initio. They will give effect to the terms DESPITE the fact that the contracting officer violated the law. For another example, see the case of E. Walters & Co. v. United States, which stated, "Granted that this use of the 'option' provision was clearly prohibited by the procurement regulations, and for good and sufficient policy reasons, the fact that a procurement practice is prohibited does not necessarily mean that it is therefore actionable. The discipline to be administered in such cases is a responsibility of the cognizant procurement officials within the agency in which the violation took place. It is not a type of discipline to be administered by this court, in the form of judgment for the party allegedly aggrieved by the violation of the procurement regulation." E. Walters & Co. v. United States, 217 Ct. Cl. 254, 263-64, 576 F.2d 362, 366-67 (1978) (emphasis added.) So, it is clearly settled that you can violate the law by improperly exercising an option, and yet still have enforceable contractual rights if the contractor waives its objections through performance. I disagree. When the period of performance is over and the period to exercise the option lapses, the contracting officer lacks authority to extend the period of performance using that option. Under what authority is the contracting officer authorizing the contractor to do the work? One contract has ended, and now he has awarded the work to the contractor without competition and in violation of FAR Parts 6 and/or 13. I disagree. In most years, there is no funding lapse because there is a continuing resolution. Further, in this case, there is no funding lapse. The OP stated that prior year funds are available for this contract. The issue hangs on whether the option will be exercised in time. Except, of course, the law requires the contracting officer to exercise the option in accordance with the terms of the option clause, which the contracting officer cannot do if the period to exercise the option has lapsed. Anyway, this has been an interesting discussion. But, at the end of the day, this is a beginners forum, and MAY-D-FAR-B-WIT-U asked for "legal precedent or GAO decisions that will allow us to revive the contract," and whether "a third party challenge the belated option exercise?" My answers are: (1) There is plenty of authority stating that a late option exercise can be enforced against the contractor if the contractor performs and does not object. We've already cited some of those. (2) You will not find any legal precedent that says a "late" option exercise that does not comply with the terms of the option clause is authorized. (3) A third party can challenge a belated option exercise on the grounds that the original contract expired, and the invalid option exercise was an improper sole source award. If folks want to "get the job done" regardless of legal authority, that is their prerogative. But to suggest such a course of action in a beginners forum without adequately explaining the potential downsides is, in my opinion, doing MAY-D-FAR-B-WIT-U a disservice.
  12. Yes. It is well settled that an option must be exercised exactly in accordance with the terms of the option clause. Failure to do so renders the exercise invalid. When you invalidly exercise a “late option,” you have in effect awarded a sole source contract for that option work. Unless you have a J&A or Memo Limiting Competition supporting that action, that invalid option exercise is a violation of statutory requirements for competition as implemented through FAR Parts 6 and 13. It is true that if you exercise the option late and the contractor agrees to perform, either expressly in the modification or by performing without objection, then the contractor has waived it’s right to later object to the option exercise. But, that does not mean that the exercise of the option complied with law, regulation, or the terms of the contract. Board of contract appeals cases addressing the issue of an invalid option exercise rely on the doctrine of waiver. (E. Walters & Co. v. United States, 217 Ct. Cl. 254, 256, 576 F.2d 362, 363 (1978)) (“plaintiff's silence constituted a waiver of its rights to an equitable adjustment because of the exercise of the option for increased quantities of the procured item.”) The doctrine of waiver “precludes a contractor from challenging the validity of a contract … where it fails to raise the problem prior to execution, or even prior to litigation, on which it later bases its challenge.” Whittaker Elec. Sys. v. Dalton, 124 F.3d 1443, 1446 (Fed. Cir. 1997) (citing United Int'l Investigative Servs. v. United States, 109 F.3d 734, 738 (Fed. Cir. 1997); E. Walters & Co., 576 F.2d at 367-68). In other words, if a company accepts an option extension and performs, the company cannot later argue that it is not subject to the terms of the contract simply because it was not exercised in accordance with option clause or applicable law. It is an equitable principle used to prevent an unjust result after the fact. However, it does not give the parties the authority to waive the application of law merely because both parties mutually agree. Would you say that it’s okay for a contracting officer to award a sole source contract without adequate justification, as long as both parties agree to “waive” any violations? Would it matter to you that after performance the contractor would not be able to object to the terms of the contract on the grounds that the award violated CICA? No, of course not. A different contractor, auditor, IG inspector, or any other third party would be well within their right to object to such an award, and the GAO would not hesitate to uphold such a protest. It is the same situation here. If you cannot get a contracting officer to exercise the option, then perhaps you can support a “late” option exercise with a valid J&A or Memo Limiting Competition. This would be very fact specific, however, it might be a possibility. The bottom line is that when there is a lapse in funding and the government shuts down, bad things are going to happen and it is not within your power to fix everything. If someone takes the position that he is going to “get things done” regardless of the law because he "knows what’s right” and “no one will know about it or complain,” then there is nothing really to discuss. My recommendation would be to do what you can to minimize the impact, but stay within the bounds of applicable law and regulation.
  13. MAY-D-FAR-B-WIT-U, can you clarify one point for me? In your first post you stated, It was unclear to me whether you mean there are no contracting officers available to exercise the option (which obligates the funds), or there are no financial management folks available to record the obligation. However, later you stated, This makes me think that, in fact, there are no warranted contracting officers that can exercise the option. Can you confirm whether that is correct or not?
  14. Neither 204.7104-1(a), nor 204.7103-1(a)(4)(iii) authorize using multiple accounting classification citations in a single CLIN. They merely say that when you are authorized to do so, you should use an information subline item in accordance with 204.7104-1(a). 204.7103-1(a)(4)(ii) identifies three situations in which multiple accounting classification citations for a contract line item is authorized: Does your situation fall in one of the above three scenarios? If so, bring DFARS 204.7103-1(a)(4)(ii) to the legal office's attention. If not, you're out of luck unless you can find some other authority to include multiple accounting classification citations on one contract line item.
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