Contracting Officer's Authorization to Proceed

[MCCAEL]

Happy New Year's, everyone.

I recently learned that my CO colleagues execute authorization to proceed differently. First, I understand the term "authorization to proceed" is not in the FAR; but rather it is a legal definition to authorize someone to perform some work per the authorization (https://www.lawinsider.com/dictionary/authorization-to-proceed#:~:text=Authorization to Proceed or “ATP,Sample 1Sample 2). The FAR does use the term "notice to proceed," but it is strictly for construction contracts (FAR 11.404(b), FAR 28.103-1(b), FAR 36.213-4(e), etc.).

At my agency, we usually use the ATPs for non-construction unilateral change orders or bilateral supplemental agreements. For one reason or another, we have the changes negotiated, including the price, but we haven't had the chance to draft the modification SF-30 for signature yet. In order to authorize the contractor to work immediately we issue the ATP. (Although we normally use it for modifications, theoretically we could use it for new awards as well: For when the terms and conditions have been negotiated, but the SF-1449 is not timely ready.)

In issuing their ATPs, some COs have used FAR 1.602-1 as their authority: Contracting officers have authority to enter into, administer, or terminate contracts and make related determinations and findings. Contracting officers may bind the Government only to the extent of the authority delegated to them. Contracting officers shall receive from the appointing authority (see 1.603-1) clear instructions in writing regarding the limits of their authority. Information on the limits of the contracting officers’ authority shall be readily available to the public and agency personnel.

Others have used FAR 16.603 (Letter Contracts) as their authority: A letter contract is a written preliminary contractual instrument that authorizes the contractor to begin immediately manufacturing supplies or performing services.

We found that some agencies specifically define "authorization to proceed" or "notice to proceed" as a type of letter contract (e.g., https://www.acquisition.gov/epaar/part-1516-types-contracts#Section_1516_603_1_T48_601315412). But I personally have an issue with this for our situation. FAR 16.603-2 says, "A letter contract may be used when (1) the Government’s interests demand that the contractor be given a binding commitment so that work can start immediately and (2) negotiating a definitive contract is not possible in sufficient time to meet the requirement. However, a letter contract should be as complete and definite as feasible under the circumstances." In our case, it is not that we haven't negotiated a definitive contract; it's just that the written contract is not yet ready.

What are you thoughts on ATPs for non-construction contract actions? Should they be deemed as a letter contract? If not, what other authority do COs have to authorize a contractor to perform work prior to the written contract?

[C Culham]

16 hours ago, MCCAEL said:

What are you thoughts on ATPs for non-construction contract actions? Should they be deemed as a letter contract? If not, what other authority do COs have to authorize a contractor to perform work prior to the written contract?

Random thoughts -

This Forum thread with regard to all the questions- 

Another thought with regard to a Change action and not a contract award action.   Why not this?  Issuance of a "Change Order" following the guiding principles of FAR 43.2 most especially FAR 43.204!

Your thoughts on a letter contract.   Yes but aren't you saying in the rest of your opening post that you need (have) a binding commitment and want the work to begin immediately yet you do not have a contract available to put in the contractors hands right now yet you have a enough done that is complete and definite  as feasible under the circumstances to have the work begin?

I think you are making it too hard as the tools are there. 

I would also offer that your office, your people, your systems have made it too hard if you cannot finalize a modification or contract in a timely manner to put it in the contractors hands when it needs to be.  

[Vern Edwards]

22 hours ago, MCCAEL said:

What are you thoughts on ATPs for non-construction contract actions? Should they be deemed as a letter contract?

@MCCAELNo. A letter contract is a contract, signed by both parties, that the parties have not fully definitized.  If you can get a letter contract signed quickly you should be able to get a fully negotiated contract modification signed more quickly.

COs have issued what you call an "ATP," "authorization to proceed," orally and in writing, for many years. They have been mentioned in 189 board of contract appeals decisions going back to 1955 and in 53 Court of Federal Claims decisions going back to 1944. But ATP is not a governmentwide official term, and it means different things to different persons. Frankly, in your case I have no idea what kind of document you are talking about. It might be an advance agreement on precontract costs, see FAR 31.205-32.

Without a description of what the ATP would actually cover and permit, it's not easy to answer your question about CO authority.

[MCCAEL]

@C Culham You're right, these are usually unilateral change orders. But as you mentioned in your last sentence, for various reasons we just don't have the award document ready. So instead we issue the ATP to effectuate the changes while the mod is being worked.

 

@Vern Edwards Thank you, Vern. I've never done a letter contract, but that was my understanding: That's it's an undefinitized contract.

To give you more insight into our ATPs, they're usually written in an email and issued by the CO. It contains the contract information, the new terms and conditions (including work, price, funding, etc.), a statement for the contractor to start performance, and that we will issue the award document, e.g., SF-30, by a certain date. By the time we issue the ATP, we have already engaged and negotiated with the contractor regarding the changes, so they're already aware that it's coming their way.

I had considered advance agreements, but I was hung up on this part: "[C]contracting officers and contractors should seek advance agreement on the treatment of special or unusual costs" (FAR 31.109(a)). I initially read this as if advance agreements are for special or unusual costs; but now that I'm re-reading it, I think it's simply suggesting that we should come to an agreement on special or unusual costs before finalizing an advance agreement.

I hadn't considered 31.205-32 Precontract costs, but I think this fits our scenario to a tee:

Precontract costs means costs incurred before the effective date of the contract directly pursuant to the negotiation and in anticipation of the contract award when such incurrence is necessary to comply with the proposed contract delivery schedule. These costs are allowable to the extent that they would have been allowable if incurred after the date of the contract.

I will make the case that our ATPs are precontract costs, not letter contract. I really appreciate you pointing me in the right direction. Thanks again, Vern.

[ji20874]

19 minutes ago, MCCAEL said:

...these are usually unilateral change orders...

You do not need an ATP for a unilateral change order.  A change order is an order, and talk of an ATP following a change order simply makes no sense.  A change order can be issued by SF-30, or by electronic means (FAR43.201(c)).  You do not need a change order and then an ATP.

After the government issues the change order, the contractor immediately implements and then has a period of time to submit a proposal for an equitable adjustment in the contract price, the delivery schedule, and so forth (particulars are dependent on the contract's Changes clause).

A change where the government and contractor agree on the change and the equitable adjustment beforehand is a supplemental agreement, not a change order.

So, for this thread, I need to ask the OP:  Are we talking about--

• change orders, where the government orders the change and the contractor immediately implements and comes back later with a proposal; or
• supplemental agreements, where the parties agree on the change and the appropriate contract changes before the change is implemented?

[MCCAEL]

@ji20874 Thanks for your insight. Sometimes they're change orders but other times they can be supplemental agreements. We have issued ATPs for both. Despite the FAR permission, do COs issue change orders without an SF-30? To formalize the changes, we have always followed through with an SF-30.

[C Culham]

50 minutes ago, MCCAEL said:

these are usually unilateral change orders.

I am astounded that, as ji notes, that you have added one more element of bureaucracy to the matter.

 

50 minutes ago, MCCAEL said:

That's it's an undefinitized contract.

Personally find the argument some what off.  My quick research of CBCA cases suggests that while ATP, as Vern notes, have been mentioned, so are there many cases where an unsigned contract or modification have been in dispute.   Of note there are ones in regard to the signed whatever is different than that implied that started the work in the first place.   Here "email" comes to mind.   So is it just an email that represent possibly tens of pages of a contract or does it include attachments?

As you continue to justify the ATP approach, especially using 31.205-32 as a premise, I would consider FAR 31.001 first.   Or stated another way what type of contracts are we talking here as every consideration on what is appropriate will depend on the contract, actual or implied.

My reasoned counsel would be if you really want to be a catalyst for change work hard at changing your internal office procedures that sound (via your comments) to be a common practice, a lazy one I might add, and change to where the consideration of use of an ATP is rare and issuance of a "signed" contract and a signed unilateral "Change Order" is the norm.

Definitization versus not with regard to a letter contract or a change order?  I might generally agree with Vern but definitized or not I really wonder.  Its word play.  After all what is the word at 43.204(b) but Definitization!

[MCCAEL]

@C Culham You've misinterpreted. The ATPs are not issued commonly. They're done rarely and the signed contracts are indeed the norm.

I understand the concern of disputes of unsigned contract/modification, but again we've already engaged the contractor. They're fully aware that the changes are happening and they're on board. If it's a supplemental agreement, we would not proceed if the contractor weren't in agreement.

I really appreciate everyone's input.

[C Culham]

2 minutes ago, MCCAEL said:

You've misinterpreted.

Sorry!   You are on the right track then.

PS - My experience.  CO's used the SF-30 for the "Change Order" and another modification for the follow on bilateral d agreement.  Example if no mods to the contract yet - Mod No. 1 Change Order, unilateral, Mod No. 2 bilateral  with reference that it was definitizing Mod No. 1.

[Vern Edwards]

Sometimes parties agree to make a significant change, but it takes a while to settle issues and agree to terms and a price adjustment. They might decide to negotiate a supplemental agreement instead of issuing a change order. (C/Os aren’t always appropriate.) They also might stop work or work around the problem pending a deal. Once they agree it may take a while to process the paperwork. The parties might want to resume the work as changed while waiting for the mod to be processed, but the contractor wants to be assured that it will not run into QA issues and will be paid in accordance with the handshake and pending mod. Many contractors want something in writing to that effect. Without it they would have to proceed at risk. Thus, the written “authorization to proceed.” Procedure and CO authority depend on agency rules.

[C Culham]

1 hour ago, Vern Edwards said:

Procedure and CO authority depends on agency rules.

Vern Please take this as a thought not a challenge. 

It would depend on the contract, in fact or implied, as well, I would think. 

CO's are given wide latitude to make stuff work, it just seems if a contract is in place it must be considered as well.  By example in this discussion all seem to agree that there is a contract, I just wonder where a ATP is mentioned for starting the original and/or changed work.  Parallel in some contracts "NTP" and its use.  "Changes" as already mentioned too.   It would seem in one case, as already mentioned,  the OP has recognized the ATP in another agency regulation.  Maybe the OP's agency should consider doing so as well.

[Vern Edwards]

In 48 years I have never seen a contract that addressed ATPs. If one does, directly or indirectly, then the parties  would have to consider its effect.

[REA'n Maker]

On 1/5/2023 at 10:33 AM, ji20874 said:

You do not need an ATP for a unilateral change order.  A change order is an order, and talk of an ATP following a change order simply makes no sense.  A change order can be issued by SF-30, or by electronic means (FAR43.201(c)).  You do not need a change order and then an ATP.

Whenever this issue has come up, I address it by saying my signature on the mod is the ATP.  I've never understood why some agencies insist on treating an ATP as a standard practice rather than an exception process.

My consulting experience has shown that Urban Legend and Institutional Inertia drive many "agency policies". 

One rather important agency (they are called out in Artice 1 of the Constitution) had an "unwritten policy" for years that said Delivery Orders must be FFP and Task Orders must be Cost-type.  They also believed options on task orders were prohibited. Turns out that this bit of genius was attributable to a Branch Chief many years prior who was dating on the down-low (and later married) the Division SES and therefore everyone was afraid to challenge her.  After she left, these practices continued even though not a single 1102 in the office could explain why. It took a new Director and 2 years to fix those notions. You have to experience this kind of stuff first-hand to believe it.