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I recently encountered a situation on which I would like to get the views of this forum. Consider the following hypo:

The government awards a contract to contractor X to install government provided kits into government vehicles. Toward the end of the first contract, the government issues a solicitation to install kits into more government vehicles. Based on X's knowledge of the number of vehicles in the government inventory, X recognizes that the number of vehicles covered by the second contract is substantially overstated.

The follow on contract is to be a FFP contract priced on a lump sum basis. In other words, the contractor is not paid based upon the number of kits installed. Instead, the contractor will be paid the FFP regardless of the number of kits installed.

Based on this set of facts, what, if any, obligation does X have to bring this error to the government's attention? If X does have an obligation to tell the government of the error, what is the source of the obligation, e.g., a FAR provision?

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Based on this set of facts, what, if any, obligation does X have to bring this error to the government's attention? If X does have an obligation to tell the government of the error, what is the source of the obligation, e.g., a FAR provision?

[uS flag waving slowly in the background...]

[soft patriotic music starts playing...]

The obligation to bring this error to the government's attention comes from the noble cause that the contractor is privileged to support. The government will thank the contractor for its integrity and desire to serve the public's best interest. Contractor management will sleep better at night knowing that because of their actions, more taxpayer dollars will be available to support the noble cause elsewhere.

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X is under no legal obligation that I know of. Whether there is a moral obligation is a matter of opinion.

The above statement itself appears to be an opinion. If moral obligations are simply matters of opinion, it is difficult to understand how legality is anything more than the opinion of the majority via the government. But, maybe opinions are all that people are really wanting anyway.

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Guest Vern Edwards

I don't think so. As long as X is not planning to cheat the government and intends to do what the contract requires of it, it has fulfilled its responsibilities. Besides -- why think that the government does not know what it needs? Maybe X thought it might have missed something and decided to go along with the program despite its suspicions..

As a business matter, I would tell the government that I think it has missed something. That course might prevent trouble later, like T for C. But that's me.

What if X KNOWS, absolutely KNOWS that the solicitation is wrong, tells the government, and the government tells X to get lost -- would X have an obligation to protest to save the government from itself? Would the government be morally obligated to stand by the deal, given that it was warned that the deal was a bad one for it and rejected the information?

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Guest Jason Lent

The above statement itself appears to be an opinion. If moral obligations are simply matters of opinion, it is difficult to understand how legality is anything more than the opinion of the majority via the government. But, maybe opinions are all that people are really wanting anyway.

Would it need to be anything more?

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That you're in need of wisdom.

You beat me to it. I agree.

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That you're in need of wisdom.

I agree. :) I am persuaded (convinced) that there is something more that people's opinions. I hope you were really saying that any moral obligation is a matter for another discussion (rather than a matter of opinion). Without absolute truth (wisdom) your argument (and mine) is circular.

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Guest Vern Edwards

This is what I said that prompted your comment in Post #4:

X is under no legal obligation that I know of. Whether there is a moral obligation is a matter of opinion.

Those two sentences do not constitute an argument, much less a circular argument. The first is a statement of fact about what I know about the law. The second is a statement of my opinion, which is that the existence of a moral obligation in this case is a matter of opinion -- something to be argued about. The two sentences are not related. The closest I have come to making an argument is what I said in Post #6.

Your statement that you think that there is more to the world than opinion is banal. Of course there is more. Your statement

Without absolute truth (wisdom) your argument (and mine) is circular.

is nonsense. I mean that literally: it makes no sense.

I know that you admit to being in need of wisdom, but that does not mean that you have to post meaningless junk. If you want to take issue with my statements in Posts #2 and 6, I'd be happy to read what you have to say, but only if you try to be intelligent. If all you want to do is punch in with silly statements that you think are pithy and amusing bon mots and moral theory, then you are wasting our time. They aren't pithy, they aren't bon mots, and as moral theory they're not even half-baked.

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This is what I said that prompted your comment in Post #4:

Those two sentences do not constitute an argument, much less a circular argument. The first is a statement about what I know about the law. The second is statement of my opinion, which is that the existence of a moral obligation is a matter of opinion -- something to be argued about. The two sentences are not related. The closest I have come to making an argument is what I said in Post #6.

Your statement that you think that there is more to the world than opinion is banal. Of course there is more. Your statement

is nonsense. I mean that literally: it makes no sense.

I know that you admit to being in need of wisdom, but that does not mean that you have to post meaningless junk. If you want to take issue with my statements in Posts #2 and 6, I'd be happy to read what you have to say, if you intend to be intelligent. But if all you want to do is punch in with silly statements that you think are pithy and amusing bon mots and moral theory, then you are wasting our time. They aren't pithy, they aren't bon mots, and as moral theory they're not even half-baked.

Without an explicit argument on your part, I don't think there is very much more to discuss about your original statement. I disagree with your implicit argument and your opinion about moral obligation. You made an absolute statement about moral obligation in the last part of Post #2 without qualification. However, your most recent post makes it clear that you meant all of your original statement to be qualified as simply your opinion. Thank you for the clarification. :) I agree with you that there is no legal obligation for the contractor to disclose the government's error back to the government.

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Would your answers be different if the solicitation had identified a specific quantity of vehicles, but the Contractor, in its role of maintaining those vehicles, knew or should have known that the quantity was grossly incorrect?

Would then the Contractor have "a duty to seek clarification from the Government" of the patent ambiguity (Blue & Gold Fleet, L.P. v. United States, 492 F.3d 1308, 1313 (Fed. Cir. 2007))?

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Guest Vern Edwards

I disagree with your implicit argument and your opinion about moral obligation. You made an absolute statement about moral obligation in the last part of Post #2 without qualification.

I expressed an opinion about whether a particular task is a moral obligation. I didn't express an opinion about moral obligation per se. You don't know what I think about the nature and sources of moral obligation, and thus you don't know anything about any implicit argument by me about moral obligation. What you're calling an implicit argument is nothing but an unjustified assumption on your part.

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I expressed an opinion about whether a particular task is a moral obligation. I didn't express an opinion about moral obligation per se. You don't know what I think about the nature and sources of moral obligation, and thus you don't know anything about any implicit argument by me about moral obligation. What you're calling an implicit argument is nothing but an unjustified assumption on your part.

I think metteec is getting the conversation back on track after my detour. :) Vern, I agree with you that my statement about your opinion on moral obligation was broad. I assumed that if you made an absolute statement about moral obligation for one scenario, that statement would apply absolutely to all moral obligations. Again, thank you for the clarification and additional opinion.

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Guest Vern Edwards

Would the answer be different if the solicitation had identified a specific quantity of vehicles, but the Contractor, in its role of maintaining those vehicles, knew or should have known that the quantity was grossly incorrect?

Would then the Contractor have "a duty to seek clarification from the Government" of the patent ambiguity (Blue & Gold Fleet, L.P. v. United States, 492 F.3d 1308, 1313 (Fed. Cir. 2007)?

If all that is happening is that X thinks it knows something and that the something it thinks it knows is not reflected in the solicitation, then there is no patent ambiguity in the solicitation. A patent ambiguity in the solicitation would arise out of statements in the solicitation, not a difference between what the solicitation says and what X thinks it knows to be the truth. A patent ambiguity arises from language that is subject to more than one reasonable interpretation. See ITT Federal Services Corp. v. U.S., 45 Fed. Cl. 174, 189:

Basic contract construction principles require that when parties to a contract dispute the meaning of their agreement, the court must examine the contract language to determine whether it is ambiguous. Id. Contract language is ambiguous if it is susceptible to two different and reasonable interpretations, each of which is consistent with the language of the contract. See Community Heating & Plumbing Co. v. Kelso, 987 F.2d 1575, 1579 (Fed.Cir.1993). When an ambiguity is found within a contract, the court must inquire whether that ambiguity is patent. See Fort Vancouver, 860 F.2d at 414.

The issue here is not whether there is a defect in the solicitation, but whether the solicitation reflects the government's actual requirement.

As described by Retread:

Based on X's knowledge of the number of vehicles in the government inventory, X recognizes that the number of vehicles covered by the second contract is substantially overstated.

If the government states its requirement to be a certain number of vehicles, and if its requirement is in fact for less, that might be a mistake on the government's part, but it is not a defect in the solicitation per se, since the government can contract for any quantity as long as it is clear and unambiguous about that quantity. Once the government contracts, both parties are bound by their agreement. The Government may have to T for C and compensate the contractor accordingly.

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Depending on how it is worded in the solicitation, I think that this could end up to be a False Claims issue. For example, the contract line item stated:

0001 - FFP: Install Kits into 450 vehicles - QTY: 1 LOT $400,000

Yet, the Contractor could only install kits into 350 vehicles because of the gross mistake. The Contractor knew or should have known at time of the order that the quantity was incorrect, but failed to notify the agency of the gross mistake. If the Contractor submitted an invoice for the entire $400,000, don't you think it would be a false claim because he did not meet the terms and conditions of the contract and knew that the quantity was incorrect?

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Guest Vern Edwards

metteec:

I don't think what you have described would be a false claim. How much do you know about the False Claims Act? What have you read?

In any case. what do you mean when you say that the quantity is "incorrect"? In what way is it "incorrect"? The government says it wants a contractor to install x number of kits. How would that statement be "incorrect"? The government is not making a statement of fact that it has only x. It is simply stating its desire for x. How can a wish be "incorrect"?

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If the Contractor submitted an invoice for the entire $400,000, don't you think it would be a false claim because he did not meet the terms and conditions of the contract and knew that the quantity was incorrect?

I think it would be a false claim if the contractor somehow claimed on its invoice that it had actually repaired 450 vehicles (when really it was only 350 vehicles). But if the contractor disclosed that it had only needed to repair 350 vehicles and still submitted an invoice for $400,000, I do not see how (at least yet) that would legally be a false claim. If the contractor submitted an invoice for $400,000 without disclosing the number of vehicles repaired, the government might try to prove some kind of wrong-doing under those circumstances. All these scenarios would arise after contract award.

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metteec:

I don't think what you have described would be a false claim. How much do you know about the False Claims Act? What have you read?

I keep a copy of the False Claims Act in my nightstand, next to the Bible and the FAR.

Seriously though, the last time I read the whole thing was probably two years ago (it is only a couple of sections). I have also read Nash, Cibinic, and Nagle's Administration of Government Contracts which includes several pages that speak to it. I enjoy reading the FCA cases identified on Wifcon. The last big one I can think of was the CA qui tam case. Further, I have assisted agency IGs on two FCA cases brought on by the agency, both which were settled. I have not been involved in a qui tam lawsuit.

Back to the topic, I said "incorrect quantities" because the Contractor was aware of the number of vehicles in the Government's inventory, and the number of kits requested exceeded the number of vehicles in that inventory. A reasonable person would have questioned why there was a difference. Not questioning shows either ignorance or moral ineptness. In order to receive payment, the Contractor's invoice would need to reference the contract line item number and description per FAR Clause 52.212-4. If the Contractor included that information, but actually installed less than the stated number of kits, then it would violate 31 U.S.C 3729(a)(1)(A).

Based upon the contractor not notifying the Government of the apparent incorrect quantities, and then submitting an invoice when it installed less quantities, I think a judge would rule the contractor had the intent to make a fraudulent claim. I wish that I could give you a case law reference to prove my point but so many FCA cases are settled in the government's favor.

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Guest Vern Edwards

The quantities in the solicitation are not incorrect just because they don't match the quantity of vehicles in the government's inventory. Who knows why the government specified the quantity that it did. Maybe it's expecting to get more vehicles.

There would be no false claim case based on what we've been told. The contractor has every right to rely on the government's statement of its own requirement.

If the contract specifies 300 kits and the contractor finds it only has to install 200, it will have to ask the government about the other kits. The contractor would be stupid to invoice for 300 when it's only done 200. That would be a false claim.

If the government says "There are no other kits," then the contractor will presumably say, "Okay, well, the contract says I have to do 300. So what do you want me to do now?" And the government will have to decide.

Go have a beer. You're overheated. If you don't drink, start now.

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Two observations.

1. The firm may know how many vehicles that the government currently has but that doesn't necessarily mean that there won't be the quantity that has been described in the solicitation. PerhAps there are more vehicles due in.

2. Why would the government use the language for the CLIN described in Metteec's post 19 for a fleet of vehicles, mixing numbers of units then lump sum pricing it? Apparently the requirements writer doesn't know the exact number of vehicles. Why not use a unit priced CLIN to account for likely variations in actual quantities. Someone will have to verify that each vehicle gets the installed kit anyway.

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