Can Govt agree to pay a penalty fee for termination a K for convenience?

[govt2310]

Because it has been mandated by top management here, my agency's contracting shop is taking over administration of a delivery/leasing order from another agency's contracting shop. That other agency refuses to cooperate with the procedures in FAR 42.202 (we asked them to respond in writing about what their reasons/concerns are and are still awaiting their answer). They want us to just issue a new order to cover the remaining period of performance (about 18 months) from the original task order off of the GSA schedule. They contend we don't have to compete it, that the award can go to the incumbent for these commercial supplies, IAW FAR 8.405-1©. We pointed out that, as a contracting shop under DoD, we are subject to the competition requiremrents of DFARS 208.405-1 (if it is over $100K, which this is, then we are required to compete it or in the alternative do a J&A to justify why we cannot compete it). I have looked at all the spelled out justifications available (brand name requirement, logical follow-on, etc.), and I don't think our situation fits any of these justifications.

Why does it seem so important to sole source this to the incumbent? The story I was told was, at the old agency, documents were lost and there was confusion, and so a "reformed task order" was executed last fall to "formally rescind, reform, and replace all prior task orders . . .to grant relief to the contractor in the form of a reformed task order under which to invoice for supplies and services." In the reformed order, the contract signed a statement that included a release of claims, which states, in part, "BY counter signing below [incumbent] agrees to the establishment of a reformed order to include a minimum monthly fee for the equipment in the table below, on each serial number, PLUS OVERAGE CHARGES FOR THE BALANCE OF THE TERMS OF THE LEASE . . . the purpose of this reformed order is to settle by mutual agreement a contractual issue/controversy by defining the terms of the order to authorize and fund continued contractor lease fees [the contractor is providing/leasing to the Govt commercial equipment]. The agreed upon residual value of this order, in teh amount of NTE $1,405,618.54, includes lease fees for hte balance of the lease terms and potential overage fees. Acceptance of this reformed order will constitute agreement to hte terms of settlement and relases the government from future claims for periods prior ot October 1, 2008 for equipment in place at this time."

I really don't see clear language here conveying that, if the Govt terminates for convenience, the Government owes the incumbent the balance of the $1.4M total value of the order, but everyone (the folks at the old agency, folks here at my agency) all believe that that's what it says. Even if it does say that, I have never heard of the Government agreeing to pay a penalty fee in the event of doing a T4C, and it seems stupid. But apparently, that's happened here.

So my question is, is there any way to get out of it? If my agency takes over the administration of the order, or rather, just competes a new order off of the GSA Schedule, and say another company wins, not the incumbent, we are pretty sure the incumbent will litigate, probably filing both a protest and an appeal at the BCA, who knows. In such an event, can my agency and the old agency argue that the "pay-the-balance-of the-order-in-the-event-of-T4C" provision is null and void because it potentially violates the Anti Deficiency Act? Any other ideas? Or do you think it would be best for my agency to do a J&A justifying a sole source to the incumbent on the grounds that they had a previous order with the old agency that included a penalty fee for early termination, and then just issue a new order under the GSA schedule to them? If we got protested in that situation, would we prevail?

[Guest Vern Edwards]

You asked the following questions after three paragraphs of vague and confusing background:

1. "s there any way to get out of it?"

2. "[C]an my agency and the old agency argue that the "pay-the-balance-of the-order-in-the-event-of-T4C" provision is null and void because it potentially violates the Anti Deficiency Act?"

3. "Any other ideas?"

4. "[D]o you think it would be best for my agency to do a J&A justifying a sole source to the incumbent on the grounds that they had a previous order with the old agency that included a penalty fee for early termination, and then just issue a new order under the GSA schedule to them?"

5. "If we got protested in that situation, would we prevail?"

Do you really believe that anyone can answer those questions intelligently based on the information that you provided?

Do you really?