Does this Require a Ratification?

[rios0311]

Scenario: Time-and-Materials contract awarded under SBA 8(a) program. Contract consisted of a base period of performance and four option periods. Only two options were ever exercised. Contract ran its course and ended at the end of FY'12. COR retired shortly thereafter.

Contractor submitted final invoice subsequent to the end of FY'12. The amount on the invoice exceeded the contract ceiling - and the obligated amount - by approximately $5,500 because the COR, through inaction, constructively allowed the contractor to worked in excess of the estimate of hours stated on the contract. The contracting officer was not aware that the contractor was working in excess of what was required by the contract. Finance rejects the contractor's invoice because work occurred in FY'12, but there were no FY'12 funds remaining on the original obligation. The Government does not dispute the fact that it accepted and received a benefit from the services provided by the contractor in excess of what was contractually agreed upon.

Questions:

1. Does the COR's oversight in allowing the contractor to exceed the number of hours specified on the contract constitute an unauthorized commitment?

2. Is there any way to resolve the issue other than ratifying the action?

3. Is the agency at risk of incurring an Anti Deficiency Act violation?

Thank you!

[policyguy]

Does the contract contain the clause 52.232-7 Payments under Time-and-Materials and Labor-Hour Contracts? Instead of a ratification or claim a solution to your issue perhaps may be found based upon this clause e.g. withhold, release, etc.

[rios0311]

The clause is in the contract, but witholding was not required. No other charges or expenses were contemplated at time of award other than for the amount that was obligated and the number of hours that was estimated.

[Don Mansfield]

Did the contracting officer know that the contractor was working the extra hours?

[rios0311]

Did the contracting officer know that the contractor was working the extra hours?

No Don, the contracting officer was not aware of the fact that the contractor was working the extra hours. The specialist has been looking into it and finally had all the facts required to understand what had taken place. She's just made the CO aware of the situation. That is why I've posted the question.

I've edited my original post to reflect this information. Thank you.

[Don Mansfield]

Ok, then here are my answers:

1. I think you have an unauthorized commitment.

2. The issue could also be resolved by not ratifying the unauthorized commitment.

3. An unauthorized commitment does not create an obligation, so I don't think your agency is at risk of violating the Anti-Deficiency Act.

[rios0311]

Ok, then here are my answers:

1. I think you have an unauthorized commitment.

2. The issue could also be resolved by not ratifying the unauthorized commitment.

3. An unauthorized commitment does not create an obligation, so I don't think your agency is at risk of violating the Anti-Deficiency Act.

Don, (or anyone else who would like to contribute) if I understand you correctly, there are two possible courses of action; ratify the unauthorized commitment or not ratify the unauthorized commitment. If we don't ratify the commitment, is the contractor's only recourse to take it up with the COR or whomever allowed the work to proceed? Does the contractor have a valid basis on which to submit a claim? I ask because we did receive and accept a service of value.

Are there any other alternative solutions?

This brings me to another point; is the COR the responsible party, or could it be anyone else who allowed the contractor to work the additional hours?

Thank you Don.

[ji20874]

You can (and probably should) resolve the issue by telling the contractor that the Government's obligation was only the ceiling price, and that the contractor's performance of work going beyond that price was its own decision and at its own risk.

There is no unauthorized commitment here. There is nothing to ratify here. You don't have a problem; you have a contract -- you should enforce it.

However, if you want to make the contractor whole and stiff the taxpayer with the bill, you can do so under para. ( e ) of the contract clause at FAR 52.232-7, Payments Under Time-and-Materials and Labor-Hour Contracts. Oh, by the way, para ( e ) is also your authority for telling the contractor that its breaking of the ceiling price is its own problem.

p.s. I realize that sometimes, contracting officers are put in difficult situations, even by their own organizations, and I write what I do here (solid black and white) based on what information is given and for training and educational purposes and to support correct principles. ji

[rios0311]

You can (and probably should) resolve the issue by telling the contractor that the Government's obligation was only the ceiling price, and that the contractor's performance of work going beyond that price was its own decision and at its own risk.

There is no unauthorized commitment here. There is nothing to ratify here. You don't have a problem; you have a contract -- you should enforce it.

However, if you want to make the contractor whole and stiff the taxpayer with the bill, you can do so under para. ( e ) of the contract clause at FAR 52.232-7, Payments Under Time-and-Materials and Labor-Hour Contracts. Oh, by the way, para ( e ) is also your authority for telling the contractor that its breaking of the ceiling price is its own problem.

p.s. I realize that sometimes, contracting officers are put in difficult situations, even by their own organizations, and I write what I do here (solid black and white) based on what information is given and for training and educational purposes and to support correct principles. ji

Thank you for your response. To make the contractor whole, as you stated, wouldn't we have had to modify the contract while its period of performance was in effect? The period of performance ended on September 30, 2012. Is there an authority that would allow us to modify a contract under these circumstances after the POP has ended?

I think the specialist will need to dig a little deeper to find out if our program people requested that the contractor continue working, or if the contractor decided to work in excess of the allowable hours on its own accord. I think it would be appropriate to pay up if our program people requested the work, but I would not be inclined to do so if the contractor took it upon itself to continue working when no one requested it.

Thank you.

[Guest Vern Edwards]

I'm with ji20874. Why are you talking about ratification? Did the contractor provide the notice required by paragraph (d) of the payment clause?

[ji20874]

"I think the specialist will need to dig a little deeper..."

I recommend simply rejecting the invoice (or the amount over the ceiling price) and hitting the ball into the contractor's court, so to speak -- the contractor can speak for itself and make its own case regarding receiving and accepting instructions from Government officials other than the contracting officer. Even if Government program people requested the work, that doesn't create an entitlement to payment on the contractor's part.

Make the contractor make its case -- don't give the contractor a gift or do its work for it. Does it assert a right to an equitable adjustment under the contract's Changes clause? If so, ask the contractor to give you a copy of the written order contemplated by paragraph ( a ) of the clause.

Again, this is black and white advice, but we seem to live in a gray world -- T&M contractors sometimes have VERY cozy relationships with Government program offices, and you may not be able to prevail if the contractor and program office combine against you. But these are still correct principles.

[rios0311]

Solid advice. Thank you very much. Spot on regarding contractor relationships with program offices.

[Don Mansfield]

There is no unauthorized commitment here. There is nothing to ratify here. You don't have a problem; you have a contract -- you should enforce it.

Time out. Are you saying that the Government cannot ratify? I'm with you on what the Government should do, but you seem to be saying that ratification is not an option at all, even if the Govt. wanted to.

[policyguy]

I might suggest having the CO request an audit of the final invoice with the supporting documentation IAW paragraph (f) of the payments clause before considering ratification or rejecting the invoice. Once the audit is completed then you could consider your next steps accordingly. I would also suggest that the contract file be reviewed for any correspondence from the contractor per paragraph (d) of the payment clause and as Vern suggested above. (No indication above if this was done). More research and other steps are needed before considering ratification or rejection of the invoice.

[Guest Vern Edwards]

Don:

You ratify an unauthorized act -- the making of an agreement. See FAR 1.602-3. What was the act? In what way did the COR agree to anything?

The original poster said:

[T]he COR, through inaction, constructively allowed the contractor to worked in excess of the estimate of hours stated on the contract.

He doesn't say that the COR knew that the contractor had exceeded the ceiling and agreed that the contractor would be paid. That's why I asked if the contractor provided the required notice of overrun. Even if the COR knew, would that knowledge, alone, constitute an unauthorized act, an agreement? Would neglect constitute an unauthorized commitment to pay the contractor?

Without an overt act, what is there to ratify?

[Navy_Contracting_4]

Don:

You ratify an unauthorized act -- the making of an agreement. See FAR 1.602-3. What was the act? In what way did the COR agree to anything?

The original poster said:

He doesn't say that the COR knew that the contractor had exceeded the ceiling and agreed that the contractor would be paid. That's why I asked if the contractor provided the required notice of overrun. Even if the COR knew, would that knowledge, alone, constitute an unauthorized act, an agreement? Would neglect constitute an unauthorized commitment to pay the contractor?

Without an overt act, what is there to ratify?

There may or may not be an overt act. We don't know yet. In Post #9, the poster said "I think the specialist will need to dig a little deeper to find out if our program people requested that the contractor continue working, or if the contractor decided to work in excess of the allowable hours on its own accord."

I think that's an essential fact to know before deciding on the appropriate or acceptable course of action.

[Guest Vern Edwards]

It is likely that the only evidence of an act will be the contractor saying that it was told this or that. Of course, the now retired COR might take the Fifth, deny that he encouraged or agreed to anything, be unable to recall, or simply doesn't answer the phone.

But who cares? Suppose that the continued performance was of acceptable quality, that the government needed the performance, and that the government has the funds to pay. Should it refuse to pay because the work was not properly authorized under the contract? Is theh CO prohibited from modifying the contract after the fact to increase the ceiling price?

[ji20874]

Don,

Based on the facts presented, you already know my recommended course of action. However, if something was different and if I wanted to make a payment to the contractor, I probably would not recommend use the ratification procedures of FAR Subpart 1.6 for two reasons--

. (1) The tools/authorities the contracting officer needs are already in the contract, FAR 52.232-7 and 52.243-3 -- he or she doesn't need to reach outside the contract for an authority; and

. (2) FAR 1.602-3( b )( 5 ) tells me that an unauthorized commitment that would involve a claim (like this one - a constructive change is a claim) is processed as a dispute (where the contracting officer is encouraged to settle issues in controversy before they become claims), rather than as a ratification. [The word "rather" is my interpretation, used instead of "in addition to" -- I know that some tend towards "in addition to", but I generally don't.]

Even so, I don't know all the facts.

I believe in the constitutional principle that "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law" -- the Contractor cannot make the decision to do additional work beyond the contract and then demand payment.

[Guest Vern Edwards]

I have not been able to find a single decision in which a board of contract appeals or the Court of Federal Claims or any of its predecessors sustained an appeal for costs in excess of a T&M ceiling when the contractor did not give the required notice and the CO did not explicitly increase the ceiling. The ceiling is strictly enforced. Not even a constructive change to the contract will justify exceeding the ceiling.

[rios0311]

Thanks Vern. That helps.

[dcarver]

This may be an overly simplistic view of it, but reject the invoice and make the contractor to submit a claim for it if they want the money. Put the onus on them to prove that they were directed to continue work. From the evidence you provided, it seems that since they weren't told to stop working that they continued without regard to the contract ceiling or period of performance. That sounds like contractor stupidity rather than the Government directing them to continue to work.

[Don Mansfield]

Don:

You ratify an unauthorized act -- the making of an agreement. See FAR 1.602-3. What was the act? In what way did the COR agree to anything?

He doesn't say that the COR knew that the contractor had exceeded the ceiling and agreed that the contractor would be paid. That's why I asked if the contractor provided the required notice of overrun. Even if the COR knew, would that knowledge, alone, constitute an unauthorized act, an agreement? Would neglect constitute an unauthorized commitment to pay the contractor?

Without an overt act, what is there to ratify?

The unauthorized act would be the acceptance of the services in excess of the amount stated in the contract. The OP wrote "The Government does not dispute the fact that it accepted and received a benefit from the services provided by the contractor in excess of what was contractually agreed upon."

[Don Mansfield]

Don,

Based on the facts presented, you already know my recommended course of action. However, if something was different and if I wanted to make a payment to the contractor, I probably would not recommend use the ratification procedures of FAR Subpart 1.6 for two reasons--

. (1) The tools/authorities the contracting officer needs are already in the contract, FAR 52.232-7 and 52.243-3 -- he or she doesn't need to reach outside the contract for an authority; and

. (2) FAR 1.602-3( b )( 5 ) tells me that an unauthorized commitment that would involve a claim (like this one - a constructive change is a claim) is processed as a dispute (where the contracting officer is encouraged to settle issues in controversy before they become claims), rather than as a ratification. [The word "rather" is my interpretation, used instead of "in addition to" -- I know that some tend towards "in addition to", but I generally don't.]

Even so, I don't know all the facts.

I believe in the constitutional principle that "No Money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law" -- the Contractor cannot make the decision to do additional work beyond the contract and then demand payment.

Thanks for pointing out FAR 1.602-3( b )(5). I learned something new.

[Guest Vern Edwards]

The unauthorized act would be the acceptance of the services in excess of the amount stated in the contract. The OP wrote "The Government does not dispute the fact that it accepted and received a benefit from the services provided by the contractor in excess of what was contractually agreed upon."

I doubt that the poster used "accepted" in its official sense. He probably meant only that the government didn't do anything to stop the contractor from working past the ceiling. But if he did use it in the official sense, read the definition of "acceptance" in FAR 46.101 and then read the definition of "unauthorized commitment" in FAR 1.602-3(a). I still don't see an unauthorized commitment. And if the CO or an authorized COR did in fact accept the services, the government would be off the hook if the contractor did not provide the required notice and the CO did not expressly raise the ceiling price.

[Don Mansfield]

And if the CO or an authorized COR did in fact accept the services, the government would be off the hook if the contractor did not provide the required notice and the CO did not expressly raise the ceiling price.

What if the CO knew that he/she was accepting services in excess of the ceiling price? Wouldn't the acceptance of benefits with knowledge that the contractor expected compensation create an implied-in-fact contract?