Jump to content

Verbal Purchase Orders/Contracts


MileHighAcq

Recommended Posts

Is there such a thing as a verbal purchase order? Can a CO issue a verbal order, and later follow up with a written purchase order? 

Based on the FAR definition, a contract has to be in writing.

Quote

Contract means a mutually binding legal relationship obligating the seller to furnish the supplies or services (including construction) and the buyer to pay for them. It includes all types of commitments that obligate the Government to an expenditure of appropriated funds and that, except as otherwise authorized, are in writing. In addition to bilateral instruments, contracts include (but are not limited to) awards and notices of awards; job orders or task letters issued under basic ordering agreements; letter contracts; orders, such as purchase orders, under which the contract becomes effective by written acceptance or performance; and bilateral contract modifications. Contracts do not include grants and cooperative agreements covered by  31 U.S.C.6301, et seq. 

But suppose there's an emergency and a CO issues a verbal solicitation to a vendor, gets a verbal quote, and issues a verbal purchase order, and the vendor accepts it constructively by starting performance, do you have a valid contract in place? While the CO may have skipped several procedural steps, as long as they follow up with a written purchase order, it seems to me that they would have a valid contract in place. Or do you not have a valid contract until it's in writing?

What if the CO never follows up with a written purchase order?

Would it then be considered an unauthorized commitment?

Yes, CO has the authority to enter into a binding agreement/contract within the limits of their authority, but does the CO have the authority to enter into a verbal agreement? Seems to me that no officer of the Government does.

So is it to be treated as an unauthorized commitment that has to be ratified? I think the answer is yes, but curious as to what other think.

It seems like there's some grace period between when a verbal purchase order is issued and when the CO follows up with a written purchase order (maybe same day?), but I can't find anything in writing that allows that grace period and based on a strict interpretation of the FAR, a verbal order/contract is not a real thing and it's therefore an unauthorized commitment that needs to be ratified.

I'm not sure how useful this GAO decision is, since it dates to 1976, but it seems that at least at one point GAO considered verbal contracts to be valid:

Quote

 

https://www.gao.gov/assets/b-185177-098547.pdf

In Escote Manufacturing Company v. United States, 169 F. Supp. 483 (Ct. Cl. 1959), it was held that, if all the elements of a contract were present, both the Government and private contractors could enforce an oral sales agreement made between them, even though the agreements were not subsequently reduced to writing. "Inasmuch as a contract was entered into between plaintiff and defendant, it would make no difference whether the signature of the contracting officer was on the acceptance form. Plaintiff points to no statute or regulation requiring contracts of this nature to be in writing, and we know of none.

 

I guess that may have been the case in 1976, but clearly today there is regulation that requires a contract to be in writing.

But even so, it other cases (e.g., https://www.gao.gov/assets/b-191029.pdf) GAO has recognized the concept of quantum meruit, which in essence recognizes the validity of a verbal contract, even if it arose from an unauthorized commitment.

Perhaps the answer is both? A verbal purchase order constitutes a valid commitment for the purpose of paying a government obligation, but it has to be ratified because it is not a valid contract because no officer of the government, including the CO, has the authority to enter into a verbal contract.

Link to comment
Share on other sites

  • Replies 54
  • Created
  • Last Reply

Top Posters In This Topic

Why are you asking this question?  Is it mere academic curiosity, or do you need help with a real situation?

Are you making the argument that verbal purchase orders are illegal?

Are you making the argument that a verbal purchase order requires ratification before formalization?

If not verbal purchase orders, what are your solutions to the following very real situations that I have faced in my career--

  • On a Sunday afternoon, a tree falls on powerlines on a military base (the military owns the power lines).
  • On a Friday evening, a landslide covers an important roadway for which a federal civilian agency has jurisdiction.

Please answer practically with real solutions, not theoretically with concepts.

Link to comment
Share on other sites

yeah, I hear ya ji20874. I think it very well could be a real situation, and one that I suspect probably happens all the time because, as you suggest, it is necessary from a practical standpoint. But the FAR doesn't seem to provide for these very real and probably more frequent than we know or would like to admit situations - at least not a realistic solution. 

I'm also curious from a theoretical standpoint though. If this happens as frequently as I think it probably does, why hasn't OMB/OFPP provided practical procedures for dealing with it.

Link to comment
Share on other sites

3 hours ago, MileHighAcq said:

If this happens as frequently as I think it probably does, why hasn't OMB/OFPP provided practical procedures for dealing with it.

Maybe it is best to leave well enough alone?  Do you trust OFPP to issue procedures for this?

Link to comment
Share on other sites

Good questions. Here's how I see it.

Contracting officers have the authority to enter into contracts (FAR 1.602-1(a)).

By definition, contracts are in writing "unless otherwise authorized." (FAR 2.101)

There are two instances that seem to authorize oral contracts:

Purchases under BPAs should be made orally when it is not considered economical or practical to use electronic methods. (FAR 13.303-5(e)(1))

Purchases using imprest funds or third-party drafts should normally be placed orally. (FAR 13.305-4(b))

I don't see a writing requirement as a big deal with the technology we have today. If you can reach someone by phone, you can probably also send an e-mail or text to the same device.

Link to comment
Share on other sites

15 hours ago, Vern Edwards said:

I presume that by "verbal" you meant oral.

FAR does not mention oral contracts, including purchase orders. Not even FAR Part 18, Emergency Acquisitions.

FAR does mention oral orders (task orders, delivery orders) against existing contracts.

yeah, I guess I meant oral, but really, even if something is in writing (e-mail or text), while it may have more force in case of a dispute, for the purposes of regulatory compliance, it seems like anything short of a written order/contract would not meet the requirements of the regulations, even if it was technically in writing.

Link to comment
Share on other sites

12 hours ago, ji20874 said:

Maybe it is best to leave well enough alone?  Do you trust OFPP to issue procedures for this?

probably not, but I'm not sure I like the alternative of the status quo (which seems to be that we pretend not to do it and they (the auditors) pretend that they don't know differently) any better.

Link to comment
Share on other sites

MileHighAcq,

Think about it -- if you don't trust OFPP to do it right, then isn't it really best to leave well enough alone?  If there is no gross abuse or no scandal, why try to create more rules?  Please do consider the real scenarios I shared earlier -- I faced those real circumstances, and I dealt with them promptly and responsibly -- would you want to take away whatever flexibility I had (or that I imagined that I had)?

Link to comment
Share on other sites

1 hour ago, ji20874 said:

MileHighAcq,

Think about it -- if you don't trust OFPP to do it right, then isn't it really best to leave well enough alone?  If there is no gross abuse or no scandal, why try to create more rules?  Please do consider the real scenarios I shared earlier -- I faced those real circumstances, and I dealt with them promptly and responsibly -- would you want to take away whatever flexibility I had (or that I imagined that I had)?

I agree, those are definitely real scenarios that COs face every day, and for the most part (I'm guessing, hoping, but have no way of knowing) they handle it responsibly and quickly follow up verbal direction with a formal contract, order, or modification. But I do think that it puts COs at risk and in a vulnerable position, should shit ever hit the fan. Something else to consider is that some COs may be less willing than others to take on such risks and therefore refuse to do verbal contracts/orders, which hurts the customer/mission.

I also see the issue from OFPP's standpoint and why they don't want to put a less cumbersome process in place for emergency situations - because they know it will likely be abused. 

End result is that we're left with some murky gray areas that isn't ideal for anyone.

Link to comment
Share on other sites

2 hours ago, formerfed said:

This discussion hasn’t mentioned use of P-cards either

How is it relevant? If you use it under the micro, no contract is necessary - i.e. the purchase card is both the contract and the method of payment.

On the other hand, if you use it only as a method of payment, you still need a written contract in place.

The only issue it gets you around is the ADA/funding issue.

Link to comment
Share on other sites

57 minutes ago, MileHighAcq said:

End result is that we're left with some murky gray areas that isn't ideal for anyone.

I think I might have a higher comfort level with gray than some.  I do not think we could make everything black and white even if we wanted to -- if we did, we wouldn't need professionals and we could all be clerks.

Link to comment
Share on other sites

21 hours ago, MileHighAcq said:

How is it relevant? If you use it under the micro, no contract is necessary - i.e. the purchase card is both the contract and the method of payment.

It’s similar to giving oral authorization to proceed followed up with a P.O. or contract number.  The P-card is giving authorization to perform.  Isn’t that the same as your original question 

Quote

Is there such a thing as a verbal purchase order? Can a CO issue a verbal order, and later follow up with a written purchase order? 

Edit:  I also brought it up as another method of oral agreements besides impress fund actions and BPA calls

Link to comment
Share on other sites

We can't answer every question in our profession in black and white. 

I have issued oral orders in the past, normally for emergency situations. Doesn't matter to me if it is a standalone action or a MOD to an existing contracting vehicle.

Example: A construction contract is in place to remove and replace the main sewer line to a large government medical facility. As often, the design did not accurately show where the main water line that supplied the facility was. The water line is hit, damaged and shuts off water to the facility. It is Saturday afternoon, before a government holiday on Monday. The contract writing software this agency uses is down for updates over the long weekend. The facility gets ahold of the CO of the existing contract. They advise the construction contractor has proposed a price to repair the line, it appears fair and reasonable, and the funding is available for the work. 

What is a CO to do?

1. Tell the facility the contract writing system is down and it will have to wait until Tuesday.

2. Confirm the price is fair and reasonable, issue a verbal "go ahead" for the work and handle the paperwork next week. 

 

Seems like an easy answer to me. I was once that CO getting a PO signed at 1:00 in the morning for an emergency requirement. Not anymore. 

Link to comment
Share on other sites

2 hours ago, Constricting Officer said:

We can't answer every question in our profession in black and white. 

Yes.  Yet I do wonder if we have become slaves to "systems".  I too have been in similar situationsbut who says you cannot grab a blank form and fill it out by hand, pass to a contractor and then later complete via the "system".  I have done this before.   Issues of available monies etc. comes with the relationships that are forged in your role as a CO.   Risk evaluation, etc. the "fun" stuff you get to do as a CO.

I am not advocating for it to be routine but there are times.   

So at this point let me insert FAR 52.103.  So why can't an intentional procurement be done in writing all the time?

Link to comment
Share on other sites

2 hours ago, Vern Edwards said:

without a purchase card number or something in writing it cannot get paid

I left that out. I always follow up with an email. It'll provide PO number if a one-off or a summary of work and cost agreed to, if under a current contract (MOD). 

22 minutes ago, C Culham said:

I am not advocating for it to be routine but there are times.

Exactly. I was explaining this to a CS the other day. In some situations it is the best option, but >95% it is not. The line "we'll do the paperwork next week" being used too often would almost certainty lead to a lack of documentation. Whether timely or not at all.  

Link to comment
Share on other sites

What about the issue of whether a CO is exceeding their authority when they issue a verbal order? I'm thinking most COAs are silent on whether the CO has to issue their orders/contracts in writing or verbally. It is understood that contracts are in writing.

I guess as long as the CO follows up a verbal order with a written order/contract/modification within a reasonable time, it's a non-issue. 

But what is a reasonable time? Maybe it's before someone else (e.g. an auditor, an independent reviewer, supervisor, etc.) discovers it? Or before an REA/claim comes in from the contractor?

If a CO fails to issue a written order/contract/modification before the problem is discovered by someone else, do you then process it as a ratification of an unauthorized commitment pursuant to FAR 1.602-3 because the CO does not have express authority to enter into verbal contracts/agreements? Or, since the COA is silent on orders/contracts having to be in writing, do you consider the CO as having had the authority to enter a contract, and the problem is more of an administrative issue in their failure to follow up with a written order/contract/modification?

Personally, I'm leaning towards the latter. 

Link to comment
Share on other sites

3 hours ago, ji20874 said:

MileHighAcq,

Why are you pushing so hard on this issue?

 

I find gray areas of law, regulations, ethics, etc. fascinating and am curious how other COs handle such issues. Also can be practical advice when/if I encounter such issues.

Link to comment
Share on other sites

Guest
This topic is now closed to further replies.

×
×
  • Create New...