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Don Mansfield

GAO says FAR Part 8 BPAs are not contracts

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The GAO just issued a decision stating that BPAs under FSS contracts are not contracts. See AINS, Inc. Here's the relevant excerpt:

Although Privasoft, Inc. submitted the original quotation, under the facts here we see no basis to object to the establishment of a BPA with Privasoft Corp., the vendor holding the FSS contract. A BPA is not a contract,[13] and orders placed against an FSS BPA are placed against the underlying FSS contract. Canon USA, Inc., B-311254.2, June 10, 2008, 2008 CPD para. 113 at 3. That is the situation here: the quotation submitted by Privasoft, Inc. was for the establishment of a BPA under Privasoft Corp.'s FSS contract. As noted above, Privasoft Corp.'s FSS contract identified Privasoft, Inc. as the entity through which ordering and payment transactions would be effected. Under these circumstances, we do not think that the roles of the two different corporate entitities are a basis for us to sustain the protest.

I remembered having this debate on Wifcon last year. Here's the thread:

http://www.wifcon.com/discus/messages/8523/9699.html

Did the GAO get it right?

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No. GAO did not get it right. First of all, they provide no factual and legal analysis to support their assertion that BPAs in general and the BPA at issue in particular are not contracts. All they have done is assert that BPAs are not contracts. Here is the entire mention of BPAs and contracts:

A BPA is not a contract,[FN13] and orders placed against an FSS BPA are placed against the underlying FSS contract. Canon USA, Inc., B-311254.2, June 10, 2008, 2008 CPD ? 113 at 3.

Here is Footnote 13:

[13] The protester cites various cases for the proposition that substitution of bidders (or offerors) is generally not permissible. E.g., The Calvin Corp./CRIT Constructors, JV, B-258756, B-258947, Feb. 13, 1995, 95-1 CPD para. 71. Given that a BPA is not a contract, and quotations submitted in response to an RFQ for the establishment of a BPA are not offers that may be accepted by the government to form a binding contract, Computer Assocs. Int'l., Inc.--Recon., B-292077.6, May 5, 2004, 2004 CPD para. 110 at 3, the cases cited by protester are inapplicable here.

Computer Assocs. makes no mention of BPAs.

Note that there is no legal analysis of the text of the so-called BPA at issue.

Here is what the Canon decision says:

It is well-settled, however, that a BPA itself is not a contract; rather, a contract is formed by the subsequent placement of a valid order against the BPA, or by the incorporation of the basic agreement into a new contract. [FN1] See Envirosolve LLC, B?294974.4, June 8, 2005, 2005 CPD para. 106 at 3 n.3, citing Modern Sys. Tech. Corp. v. United States, 24 Cl. Ct. 360, 363 (1991).

Here is FN 1:

FN1. This view is consistent with the description of BPAs set out in the FAR. Specifically, FAR sect. 13.303?1 defines BPAs generally as ?a simplified method of filling anticipated repetitive needs for supplies or services by establishing ?charge accounts' with qualified sources of supply,? and refers to FAR part 16.7, Agreements, for further guidance. Both FAR sect. 16.702, Basic agreements, and FAR sect. 16.703, Basic ordering agreements, specifically state that such agreements are not contracts.

That amounts to nothing more than that BPAs, as envisioned by FAR 13.303-1, are not contracts. (FAR 16.7 does not address BPAs, only other kinds of agreements: Basic Agreements and Basic Ordering Agreements.) FAR FAR 13.303-1 says nothing about the BPA in question, which is not a BPA as envisioned by FAR Part 13, but as established against a contract that obligates the contractor to deliver upon receipt of an order. FAR 8.405-3, which addresses BPAs under FSS contracts, does not refer to FAR Part 13.

Here is what Envirosolve, cited in Canon, says:

A BPA is not itself a contract and does not obligate the agency to enter into future contracts with the contractor(s). FAR 13.303?1(a), 16.703(a)(2); Boehringer Mannheim Corp., supra; see also Humco, Inc., B?244633, Nov. 6, 1991, 91?2 CPD 431 at 3. Rather, an actual contract is formed when the agency issues a purchase order under the BPA, or the basic agreement is incorporated into a new contract by reference. FAR 13.303?5; Modern Sys. Tech. Corp. v. United States, 24 Cl. Ct. 360, 363 (1991).

Again, that amounts to nothing more than to say that a BPA is not a contract because FAR 13.303-1 does not envision it as such. (FAR 16.703(a)(2) is about Basic Ordering Agreements, not BPAs, and does not mention BPAs.) Well, FAR says a lot of things that are not so. The Humco decsion, cited in Envirosolve, is not about BPAs; its about Basic Ordering Agreements (BOAs).

The Modern Systems decision of the old Court of Claims, cited in both Canon and Envirosolve, was not based on FAR, but on the Postal Service Procurement Regulations. In that case, however, the court examined the text of the BPA to determine whether the parties manifested an intention to be bound. It did not rely on what the parties called their document.

But the kicker is that in the GAO decision you bring to our attention, GAO said:

[O]rders placed against an FSS BPA are placed against the underlying FSS contract.

Let's see: an FSS BPA is established against an underlying contract, and orders placed against it are placed against the contract and must be completed as long as they are within the terms of the contract. So, an FSS BPA is part of a contract (an appendix or a kind of codicil) and orders placed against it are binding, but the BPA is not itself a contract. Go figure.

That part of GAO's decision about BPAs and contracts is as sloppy a piece of legal writing as you'll ever see. Maybe they are overworked at GAO and don't have time to do a good job of supporting their decisions. No competent lawyer doing a good job would say that a document is not a contract because it's called a "BPA." The only way to decide such a matter is on a case by case basis, based upon an analysis of the facts at hand. (GAO is found of saying that what matters is not what agencies call a thing, but what the thing is in fact.)

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This decision reminds me of another GAO decision earlier this year where they said that, as a general proposition, a delivery order was not binding--it was just an offer by the Government that the contractor was free to reject. To support this assertion, they cited an earlier decision that dealt with the legal effect of purchase orders--there was no mention of delivery orders. I wrote about this in my blog.

I don't know what's going on at GAO, but citing decisions that do not stand for the proposition being asserted is unacceptable.

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FSS BPAs and open market BPAs are such different animals they should rename the FSS BPA to avoid confusion over this issue (not that and contracting or legal professionals should be confused by it since the differences are clear). I too don't see how an FSS BPA is not a contract.

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FSS BPAs and open market BPAs are such different animals they should rename the FSS BPA to avoid confusion over this issue (not that and contracting or legal professionals should be confused by it since the differences are clear). I too don't see how an FSS BPA is not a contract.

BPA?s are not contracts because they lack some of the necessary elements of a contract. The elements of a contract being, offer, acceptance, consideration, legality of purpose, and competency of parties. The offer, acceptance, and consideration occur on the ?calls? when actual purchases are made.

TAP

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BPA?s are not contracts because they lack some of the necessary elements of a contract. The elements of a contract being, offer, acceptance, consideration, legality of purpose, and competency of parties. The offer, acceptance, and consideration occur on the ?calls? when actual purchases are made.

TAP

TAP,

You are doing the same thing the GAO did--asserting that, in general, BPAs are not contracts and supporting your assertion by referencing things that are true about FAR Part 13 BPAs, but not necessarily true about FAR Part 8 BPAs. Have you been paying attention to this thread? If you think that FAR Part 8 BPAs are not contracts, per se, then please explain the contractual elements that they lack. I recommend that you read the thread that I referenced in my initial post.

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Where is the consideration, on the FSS, the BPA, or the Order? My understanding is that it is upon placement of the order. But I could be wrong.

TAP

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TAP,

Under the FSS program, GSA awards indefinite quantity contracts (FAR 38.101(a)). The consideration in such contracts is the Government's promise to order a minimum quantity in exchange for the contractor's promise to deliver the supplies or perform the services when ordered to by the Government up to the contract maximum (assuming orders are placed in accordance with the Ordering, Indefinite Quantity, and Order Limtations clauses). The contractor also promises to abide by the terms and conditions of the contract. According to Carl Culham, a frequent contributor to this forum, the following clause is contained in a number of FSS contracts:

BLANKET PURCHASE AGREEMENTS (I-FSS-646) (MAY 2000)

Blanket Purchase Agreements (BPA's) can reduce costs and save time because individual orders and invoices are not required for each procurement but can instead be documented on a consolidated basis. The Contractor agrees to enter into BPA's with ordering activities provided that:

( a ) The period of time covered by such agreements shall not exceed the period of the contract including option year period(s);

( b ) Orders placed under such agreements shall be issued in accordance with all applicable regulations and the terms and conditions of the contract; and

( c ) BPAs may be established to obtain the maximum discount (lowest net price) available in those schedule contracts containing volume or quantity discount arrangements.

I'll quote Vern to explain the consideration in this arrangement:

The contractor agrees to enter into BPAs when it signs the FSS contract (agrees to agree). Thus, the consideration that bound the parties to the contract covers BPAs. If the BPA incorporates the terms of the contract, which it should, according to GSA, then the contractor is bound by the indefinite-quantity clause to accept any orders placed against the BPA.

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FAR 16.702 -- Basic Agreements.

(2) "A basic agreement is not a contract."

How is this statement in the FAR not applicable?

TAP

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FAR 16.702 -- Basic Agreements.

(2) "A basic agreement is not a contract."

How is this statement in the FAR not applicable?

TAP

This thread is about Blanket Purchase Agreements. Basic Agreements and Blanket Purchase Agreements are not the same thing.

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Part of what's missing is often the main reason to do a BPA and that is to negotiate more favorable pricing as well as additional terms and conditions. BPA's usually provide considerable price reductions from the FSS contract. Often that's expressed in percent discounts or different unit prices. Other benefits get established such as warranties, no-cost training, additional licensning seats, etc. That clearly is a contract to me.

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Can somebody please explain to me how a contract can exist before key elements (e.g., price and terms and conditions) have been negotiated? I have always thought an "agreement to agree" is unenforceable. Am I wrong?

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Can somebody please explain to me how a contract can exist before key elements (e.g., price and terms and conditions) have been negotiated? I have always thought an "agreement to agree" is unenforceable. Am I wrong?

I'm not sure I understand your question in light of this thread. Perhaps you can restate it?

In a general context, you can have a contract as your discussed. Isn't a letter contract one where prices and T&C's aren't yet negotiated?

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What an interesting discussion! Thanks all. Regardless of the answer to the underlying question, there are a number of observations made here that hit the mark. To restate them slightly:

1. The GSA MAS are such a unique animal that recycling terminology (BPA) historically used by the FAR for a different application was not the best idea. -Mike_wolf

2. When it comes to the law of contracts, what the FAR calls something isn't necessarily what it is.- Vern

'When I use a word,' Humpty Dumpty said, in rather a scornful tone, 'it means just what I choose it to mean — neither more nor less.'

'The question is,' said Alice, 'whether you can make words mean so many different things.'

'The question is,' said Humpty Dumpty, 'which is to be master — that's all.'

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Happy New Year!

I agree that citing decisions that do not stand for the proposition being asserted is sloppy, and this seems to be the case in the AINS decision. The subject matter for AINS is FAR Subpart 8.4 (FSS) BPAs, while the subject matter for Canon appears to be FAR Part 13 (SAP) BPAs. I read the AINS decision, but I haven't read the Canon decision. I note that in the AINS case, the idea of a BPA not being a contract is not the central focus of the case, and is only mentioned sort of as an aside. The decision in the case didn't ride on this principle.

However, the general principle is still true, isn't it? "A BPA [whether under FAR Part 13 or FAR Subpart 8.4] is not a contract, and orders placed against an FSS BPA are placed against the underlying FSS contract." I have always had this understanding, and I have never been confused between FAR Part 13 and FAR Subpart 8.4.

Under a FAR Subpart 8.4 BPA (a FSS BPA), the Government promises nothing. The contractor provides nothing, other than maybe a promise for some price discounts and so forth.

It is asserted above that "[t]he contractor agrees to enter into BPAs when it signs the schedule contract." I've never tried to unilaterally establish a BPA with a schedule contractor, or force a contractor to enter into a BPA when it didn't want to. I'll have to re-visit FAR 8.405-3 to convince myself of this -- or maybe there is a standard blurb in schedule contracts that says this?

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Under a FAR Subpart 8.4 BPA (a FSS BPA), the Government promises nothing. The contractor provides nothing, other than maybe a promise for some price discounts and so forth.

How do you know that is true as a general proposition?

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Found in GSA FSS contracts...can't say if all but it is there in many....

Clause I-FSS-646 that states that a Contractor agrees to enter into BPA provided that the BPA won't exceed the period of the contract including options, the BPA is issued in accord with regulation and the contract, and the may be issued to get maximum discount.

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This thread reminds me of the long standing debate about whether REAs are claims.

It's not what you call a thing that matters. It's what the thing really is. You can call a sperm whale a fish, like Melville did in Moby Dick, but calling it that does not make it so. Whales are mammals, and mammals are not fish.

You cannot make any general assertions about BPAs under FSS contracts unless and until you have analyzed and integrated the legal effects of the language of the particular contract and the particular BPA. Period. Moreover, while a BPA may not be a contract as defined in FAR 2.101, it might be a contract under the common law of contracts. It all depends on what the contract and the BPA say.

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You also have to consider the context in which the question as to whether a BPA is a contract is asked. For example, see 13 CFR 121.404 partricularly (a)(2) and (g)(3), concedrning compliance with SBA size standards in regard to certain BPAs and GSA FSS contracts.

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Found in GSA FSS contracts...can't say if all but it is there in many....

Clause I-FSS-646 that states that a Contractor agrees to enter into BPA provided that the BPA won't exceed the period of the contract including options, the BPA is issued in accord with regulation and the contract, and the may be issued to get maximum discount.

Carl,

Here's I-FSS-646, which I'm copying from one of your earlier posts:

I-FSS-646 BLANKET PURCHASE AGREEMENTS (MAY 2000)

Blanket Purchase Agreements (BPA's) can reduce costs and save time because individual orders and invoices

are not required for each procurement but can instead be documented on a consolidated basis. The Contractor

agrees to enter into BPA's with ordering activities provided that:

(a) The period of time covered by such agreements shall not exceed the period of the contract including

option year period(s);

(B ) Orders placed under such agreements shall be issued in accordance with all applicable regulations

and the terms and conditions of the contract; and

( c) BPAs may be established to obtain the maximum discount (lowest net price) available in those

schedule contracts containing volume or quantity discount arrangements.

I read that as a binding promise to enter into a BPA provided the stipulated conditions are met. However, I don't see anything about what the legal effect of the BPA will or must be.

In my experience with FSS BPAs, the BPA was little more than a discount off the FSS price. In my opinion, those lacked consideration and probably weren't enforceable. However, that wouldn't support a general proposition that FSS BPAs are not contracts. There may be some out there that are contractually enforceable.

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