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The term protest, as used in this thread, does not regard bid protests or protests received after award. This regards the term that means to retain the rights to make an objection later on. 

I have also seen the term defined as "Performing unwillingly where the person makes their dissatisfaction known in advance, sometimes to reserve a later right to take action for being made to perform under duress."

Question: Can a government agency accept a contractor's changed terms under protest?

I am familiar with cases in which the government has changed the terms of a contract unilaterally, and in resposnse, the contractor has stated that it will perform under protest in order to preserve its right to file a claim later or to pursue some other legal remedy later.

Does anyone know of any cases where the government has done this as well (successfully or unsuccessfully)? Such as in a case where a contractor put an agency in such a bad position that it had  no choice but to go along with the contractor's new terms (termination is not an option)?

I am wondering if an agency has the same right to accept a contractor's changed terms, but do so under protest. I'd like to see a case where this happened. My sense is that any party to a contract has the right to do this. But I would like to see it applied somewhere.

Thank you.

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  • rios0311 changed the title to If in Disagreement with Changed Terms, Can the Government Accept those Terms Under Protest?
3 hours ago, rios0311 said:

The term protest, as used in this thread, does not regard bid protests or protests received after award. This regards the term that means to retain the rights to make an objection later on. 

I have also seen the term defined as "Performing unwillingly where the person makes their dissatisfaction known in advance, sometimes to reserve a later right to take action for being made to perform under duress."

Question: Can a government agency accept a contractor's changed terms under protest?

I am familiar with cases in which the government has changed the terms of a contract unilaterally, and in resposnse, the contractor has stated that it will perform under protest in order to preserve its right to file a claim later or to pursue some other legal remedy later.

Does anyone know of any cases where the government has done this as well (successfully or unsuccessfully)? Such as in a case where a contractor put an agency in such a bad position that it had  no choice but to go along with the contractor's new terms (termination is not an option)?

I am wondering if an agency has the same right to accept a contractor's changed terms, but do so under protest. I'd like to see a case where this happened. My sense is that any party to a contract has the right to do this. But I would like to see it applied somewhere.

Thank you.

I believe you are actually talking about a "dispute" not a protest.  The dispute clause of a Federal contract is a remedy for either party.  As to case law demonstrating its use as you inquire I will leave that to others to respond.

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5 hours ago, rios0311 said:

I am familiar with cases in which the government has changed the terms of a contract unilaterally, and in resposnse, the contractor has stated that it will perform under protest in order to preserve its right to file a claim later or to pursue some other legal remedy later.

Does anyone know of any cases where the government has done this as well (successfully or unsuccessfully)? Such as in a case where a contractor put an agency in such a bad position that it had  no choice but to go along with the contractor's new terms (termination is not an option)?

@rios0311Give us a specific scenario. Give us a specific fact situation.

I will not waste my time engaging in a wild goose chase and pointless quarrels over yet another vague scenario from yet another OP who dribbles out information. It's time we all stop putting up with such inquiries. The phrase "the government reserved the right" appears in hundreds of board of contract appeals decisions, all different.

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Rios, a contractor can’t unilaterally change the contract terms and conditions. We need to know the context of what you are talking about.

I see there are two other replies while  I’m writing this post but I haven’t read them.

We had one of the top ten US construction contractors on a multiphase, DoD Major Acquisition Program systems contract file for bankruptcy at about 85% complete for the construction phase.*

The contractor asked that we change the construction phase of the contract from FFP to a cost reimbursement with no fee in order for it to be able to complete the construction phase.

The systems contract was under an International Treaty obligation with a Treaty Deadline.

If we terminated the systems contractor, we had a contractor working on another similar systems contract that could take over. However,  there would have been significant delays affecting the treaty deadline.

We agreed to convert the contract. One proviso was that we would actively work with the contractor during the remaining course of construction with our own head production evaluation and coordination specialist (PECER HEAD), scheduling and productivity specialists working in the contractor’s field office. The contractor would be open and cooperative.

The arrangement worked very well. We actually added incentives for schedule and cost control, which were effective.

 

 

[*A very complex situation. This contractor had acquired another top ten construction contractor and inherited several huge FFP contracts, all of which were losing millions of dollars, allegedly undisclosed to the acquiring contractor. The overall losses were in the hundreds of millions of dollars, forcing the new firm into Chapter 11 Bankruptcy for many months. Fraud charges and lawsuits galore by the acquiring firm. Some big names in the construction and acquisition world were involved here. One person many would know of later, as a high level, DoD acquisition official.

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Culham, I meant “under protest” as the term is defined in Black Laws. The uniform commercial code refers to it as “performance or acceptance under reservation of rights”. See https://www.law.cornell.edu/ucc/1/1-308

ji20874, neither the Contacts Disputes Act nor the FAR apply to us, so the Disputes clause is not in our contract. At least not the FAR version of it.

Vern, I thought my question was sufficiently direct. I cannot provide the exact scenario, but I will attempt to describe a very similar one.

We have a contract with a company that provides us a building to house and maintain some of our property. The company does not own the building. The landlord informed the company that it sold the building and needs us out earlier than the contract end date. The company knows it is responsible for providing us with a building, so it offered to move our property to another location and cover the cost of the move.

This isn’t just any property, there are many moving parts to the move, and a great amount of planning and coordination must take place to pull it off successfully. We don’t know if there will be other costs involved down the road and there will be significant repercussions for us if the contractor does not complete the move on time.

We cannot terminate the contract because we can’t vacate the building without significant lead time. In addition, we have no idea how the company will react to an adversarial response from us, and any attempt to negotiate additional concessions from the company will likely lead to untenable delays or an undesirable reaction from the company. They basically have us over a barrel. We have no choice but to accept their terms.

Can we accept their terms under protest to preserve our rights to pursue legal remedies later if we experience more costs than what their “make-us-whole” proposal offers?

I am concerned about unintentionally waiving or relinquishing our rights by accepting their terms. I would like to know if including a statement to the effect of “we accept your terms, but do so under protest” or “we accept your terms without prejudice” will serve to preserve our rights. 
 

Joel - thank you for the information. No question that the contractor can’t do what it did. Even the contractor is aware, so it has acted in good faith to make us whole. But we have no way of knowing for sure that there won’t be additional costs, so we can’t yet know whether the contractor’s proposal fully protects us. 

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@rios0311  So I am confused just a little.   You say "Can the Government..."  Then you reference UCC and say FAR and Disputes Act does not apply.  Then you reference "We have a contract...."

So do you have a contract or a lease.   Who are "We".   What "Government" is involved?  As to the Contract Disputes Act, are you sure?   Reference http://cafc.uscourts.gov/sites/default/files/opinions-orders/16-2308.Opinion.7-31-2017.1.PDF

I am with Vern as noted you have not provided enough detail. 

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What objectives are important to you? Make them conditions for approval.

E.G., Can you accept under the conditions that the move will be made by ?date, that there will be no additional cost or other impacts to the government…etc.?

Why “protest” if the contractor will fulfill the purpose of the contract? 

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Gosh, rios. Doesn’t your organization or agency have a lawyer who can advise you? This is but a discussion Forum. Legal advice, remedies and protections are dependent upon the specific facts and circumstances , contract terms, etc.

I don’t think that you need to use the term “accept under protest” here. The contractor can’t complete the contract under the same circumstances. It wants to perform and is willing to move the contents at no cost. You don’t want to terminate.   Just my opinion. 

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19 hours ago, rios0311 said:

Question: Can a government agency accept a contractor's changed terms under protest?

@rios0311I would not use that terminology—"under protest," but the answer is yes. Read what follows.

7 hours ago, rios0311 said:

I cannot provide the exact scenario, but I will attempt to describe a very similar one.

We have a contract with a company that provides us a building to house and maintain some of our property. The company does not own the building. The landlord informed the company that it sold the building and needs us out earlier than the contract end date. The company knows it is responsible for providing us with a building, so it offered to move our property to another location and cover the cost of the move.

This isn’t just any property, there are many moving parts to the move, and a great amount of planning and coordination must take place to pull it off successfully. We don’t know if there will be other costs involved down the road and there will be significant repercussions for us if the contractor does not complete the move on time.

We cannot terminate the contract because we can’t vacate the building without significant lead time. In addition, we have no idea how the company will react to an adversarial response from us, and any attempt to negotiate additional concessions from the company will likely lead to untenable delays or an undesirable reaction from the company. They basically have us over a barrel. We have no choice but to accept their terms.

Can we accept their terms under protest to preserve our rights to pursue legal remedies later if we experience more costs than what their “make-us-whole” proposal offers?

What you have described in that scenario is your contractor telling you that it cannot or will not continue to perform and is offering a settlement.

You have not asked what you should do or what I would do in such a case, but I'm going to tell you anyway.

The notice to you may constitute anticipatory repudiation (anticipatory breach) of the contract. See Cibinic, et al., Administration of Government Contracts, 5th ed., pp. 835-842. Ask your legal office for confirmation. If you have not read Cibinic, Chapter 10, Default Termination, Damages, and Liquidated Damages, which I suspect you have not or you would not have asked your question, read it as soon as possible. You want to make sure that your actions and communications from this point on, including internal actions and communications, do not constitute a waiver of the government's right to terminate for default. See Cibinic, pp. 843-849.

You must document all actions and communications from this point on, including internal actions and communications, as if your life depended on it. Every-single-action-and-communication. Open a special file.

From this point on, be extremely cautious about email and oral communication.

As CO, I would respond to the contractor in writing, USPS certified mail, return receipt requested, and instruct them to confirm in writing that they are unable or unwilling to perform. I would tell them that if they cannot or will not perform they must propose a course of action in writing and a settlement. I would demand a written response from them by a specific date.

I would tell them that pending receipt of their response the government will exercise "reasonable forbearance"—see Cibinic, pp. 848-849— while I investigate the facts, consider their response, consult my superiors and lawyers, and determine what course of action to take. I would tell them that the government reserves its right to terminate the contract for default and take any other legal action required to protect its interests in accordance with the contract terms.

If I chose to accept their proposed course of action and settlement, I would do so on the condition that the government reserves its right to pursue any additional damages caused by the default that later occur or are discovered.

I would, of course, coordinate with my boss and legal before doing or saying anything. But I would move out promptly.

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Culham - it is a contract for services. In order to provide the services, the contractor needs a building to hold our property and provide the service, so they leased the building from a third party. We do not hold the lease. We are an agency of the government.

Joel - I am not seeking legal advice. See my original post. I only requested to be pointed to a case. I wanted to read it for myself. Yes, we have attorneys and a general counsel. I still want to read it for myself. 
 

Vern - thank you. We are clear that they repudiated their obligation, but only because the third party sold the building from under them, so they did offer a solution - a sort of settlement as you have suggested. No one has wanted to use that language or threaten termination. Doing that might put us in a very bad position.

What you describe is exactly what I suggested we do, but wanted to see it applied in a case:

“If I chose to accept their proposed course of action and settlement, I would do so on the condition that the government reserves its right to pursue any additional damages caused by the default that later occur or are discovered.”

This is what I meant by accepting their terms under protest - to reserve our right to pursue any additional damages caused by their actions that we discover later.

I was hoping to see a case or legal reference to confirm for myself that those words need to be put in writing in the agreement in order to preserve a party’s rights. I believe they do, but wanted to confirm.

It has been a while since I posted here. I have since moved from my last agency and recently started at a different one. Very different here.

Pardon the change in font size. Typing from my phone this morning.

Thanks, everyone. 

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1 hour ago, rios0311 said:

I was hoping to see a case or legal reference to confirm for myself that those words need to be put in writing in the agreement in order to preserve a party’s rights. I believe they do, but wanted to confirm.

I'm not sure words need to be put in writing, but I think it's wise to do so.

Are you saying you want someone to provide you with a court or board citation to a specific case in which the government used those word0?

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Yes. I was hoping to understand whether their inclusion in a settlement agreement is essential - whether it is essential to put the contractor on notice that their offer may not be enough. I believe they are, otherwise it may appear that we are fully satisfied with what they offered us.

Our challenge is to not come off as threatening out of concern that the contractor may rescind its offer/settlement and leave us in a vulnerable and precarious situation.  This position may be difficult to understand by others who are used to seeing the government have all the leverage. In this case, we do not.  

Thank you.

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1 hour ago, rios0311 said:

Yes. I was hoping to understand whether their inclusion in a settlement agreement is essential - whether it is essential to put the contractor on notice that their offer may not be enough.

@rios0311I do not believe it is essential for the government to expressly reserve its rights. It rights are its rights. The key is for no representative of the government to say or do anything that justifies the contractor in believing that the government has waived its rights and to rely on that belief to its detriment.

I have recommended some readings, including Cibinic pages 843-857, in which the authors discuss waiver in detail. The materials include case citations. I suggest that you read it.

 

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12 hours ago, joel hoffman said:

What objectives are important to you? Make them conditions for approval.

E.G., Can you accept under the conditions that the move will be made by ?date, that there will be no additional cost or other impacts to the government…etc.?

Why “protest” if the contractor will fulfill the purpose of the contract? 

 

11 hours ago, joel hoffman said:

Gosh, rios. Doesn’t your organization or agency have a lawyer who can advise you? This is but a discussion Forum. Legal advice, remedies and protections are dependent upon the specific facts and circumstances , contract terms, etc.

I don’t think that you need to use the term “accept under protest” here. The contractor can’t complete the contract under the same circumstances. It wants to perform and is willing to move the contents at no cost. You don’t want to terminate.   Just my opinion. 

 

10 hours ago, Vern Edwards said:

I would, of course, coordinate with my boss and legal before doing or saying anything. But I would move out promptly.

Rios, the three posts I cited above make a lot of sense to me.  You’re dealing with a vendor who furnishes a building and support that lost a lease.  It’s a situation out of their control.  They are willing to fix things as best as they can.  My advice is listen to them, get legal involved as well as your boss, and senior program management (assuming the property is part of some agency program outside of your own organization).  Considering or even doing research on termination at this point may be premature.  Terminations have major impact on both the contractor and the agency.  I know you said you haven’t discussed this with legal but you should right now as well as with your boss.

Edit:  do you know what your boss or management wants to do?  

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16 hours ago, rios0311 said:

We have a contract with a company that provides us a building to house and maintain some of our property

So call me dumb and thats fine but I am wondering if there is a reach to this situation via a GFP clause that might be in the contract that would remedy the future unknown costs the OP is wondering about?

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Formfed - tough to explain without being too specific, but legal has been involved.  I’ve raised some issues, so others in that office are weighing in. The matter has the appropriate level of internal attention.

We are not considering termination. I attempted a big one once and ended up having to withdraw it after losing agency support and a long battle with the contractor. I learned some important lessons from that one and posted about it some years ago on some other threads here and in the What Happened section of wifcon. 
 

Number 4 of those lessons was:

Sometimes in contracting, it doesn't matter how right you believe you are, or how strong a case you think you have against a contractor. The interests of the agency may dictate pursuing a different course of action. As a leader, you'll need to get behind that course of action.

C Culham - I didn’t understand your angle on GFP. 

I will follow up here or in What Happened once this is all settled. 

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@rios0311

On 9/23/2022 at 11:39 AM, rios0311 said:

The term protest, as used in this thread, does not regard bid protests or protests received after award. This regards the term that means to retain the rights to make an objection later on. 

I have also seen the term defined as "Performing unwillingly where the person makes their dissatisfaction known in advance, sometimes to reserve a later right to take action for being made to perform under duress."

Question: Can a government agency accept a contractor's changed terms under protest?

You launched this thread with that inquiry. Now you say:

1 hour ago, rios0311 said:

We are not considering termination.

When I read your opening post I immediately thought that you had not done enough research and thought things through sufficiently to make a clear inquiry. Your last post confirms my initial opinion.

What I find strange about your posts is that you started out wanting to preserve the government's rights in the face of the contractor's announced intention to default, but now say the government is not considering termination, which seems tantamount to saying that the government does not intend to exercise its rights. I understand your expressed reason for saying that, but I hope that you, or someone in your office, has a clear mind and set of objectives when sitting down to negotiate with the contractor.

And I wish that people who come to Wifcon for information would think things through and do some preliminary research before hopping on the internet and making obscure inquiries. I wish they would think of making an inquiry as a matter of professional craft.

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Vern - by wanting to preserve our rights, I was not referring to preserving our right to terminate later. I am interested in preserving our right to file a claim for additional costs that we may experience down the road that are attributable to losing the building - costs that aren’t currently known or captured in their offer to make us whole.

I was concerned that accepting the contractor’s offer could be construed as us accepting it as final and in full satisfaction of any and all outstanding issues. Too many unknowns at this point to do that  

 

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Rios, I don’t understand what is so difficult to reserve your rights by including a statement to the effect:  “The Contractor will be fully responsible for any time impacts or direct or indirect cost impacts to either party due to* this action. The government reserves all of its rights under the terms and conditions of the contract.”

First, consult and coordinate the language with your legal office. 

(“due to” ? or “as a result of”?)
Don’t delay…

Edited by joel hoffman
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If the material in storage is going to be government furnished equipment or government furnished materials on other contracts, you should also include a reference to possible damages on any other affected contracts.

First, consult and coordinate the language with your legal office.

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2 hours ago, rios0311 said:

Vern - by wanting to preserve our rights, I was not referring to preserving our right to terminate later. I am interested in preserving our right to file a claim for additional costs that we may experience down the road that are attributable to losing the building - costs that aren’t currently known or captured in their offer to make us whole.

 

@rios0311I know what you are interested in preserving. The problem as I see it is that you may not understand default and default procedure.

At this point you are wasting time here repeating yourself without learning anything.

Read FAR Subpart 49.4, Termination for Default; Cibinic, Administration of Government Contracts, 5th ed., Chapter 10, Default Termination, Damages, and Liquidated Damages; the 1989 Briefing Paper by Williamson and Medell-Jones, Government Damages for Default, 89-7 Briefing Papers 1; and Steve Feldman's 2018 article in Procurement Lawyer, "The Rhetoric and Reality of Termination for Default."

Goodbye and good luck.

Vern

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Vern - I’m sure you are right. I probably don’t fully understand the procedure. I will read the references you provided. Thanks. 
 

Joel - I’m at a new organization. I suggested that and it was met (internally) with a lot of concern about adding anything to the agreement that might make the contractor withdraw its offer to cure the issue. So, part of what I wanted to learn from a case was whether the statement needs to be in the agreement in order to preserve our rights. 
 

Vern is right. We’ll just continue to go in circles here. Enjoy the rest of your Sunday.  I appreciate everyone’s input!

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Yes, circles. You don’t want to upset the contractor but you don’t want to pay any impact costs.

You don’t seem to understand that the contractor is not in control here.

Unless it does something, it will be in breach of contract, responsible for damages. 

If it does something and it costs the contractor more, it is the party who increased its costs, not the government. It’s not the governments responsibility. I’m assuming that this isn’t a cost reimbursement contract.

Seriously—- Read Cibinic’s coverage in Nash and Cibinic, et als’ Administration of Government Contracts. Your legal office should have electronic access to the other,  periodical articles that Vern described.

You or your office should purchase the Administration… book. To me, the book is a must read. I recommend soft or hard cover book, in lieu of purchasing a downloadable version. Easier, for me at least, to scan and quickly find what is covered on topics. And I can read it anywhere, not just in front of a computer. Plus you will have it for as long as you want it.

I first read it in 1982 or so. I still have three editions of it on my bookshelf in my office at home. I have used it to save the government millions of dollars in negotiating contracts, mods, and resolving/negotiating REA’s and claims over the years.

Dont know if there are still college bookstores with actual books anymore. I bought two versions at local college bookstores before there were on-line book sales. My offices bought the first one (later stolen by a Korean contractor, in Saudi Arabia) and the last one. 

Good luck. 

Edited by joel hoffman
Added paragraphs on the references that Vern mentioned.
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