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cdhames

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If I could use an example to articulate a request for help:  Let's say a DoD agency has a construction requirement for the installation of HVAC.  The contractor proposes a "custom" HVAC unit.  During negotiations, several elements are negotiated down to "standard" units in order to save on cost.  After some reluctance, the contractor agrees to the revised specs at a reduced price.  Assume the contractor negotiated in good-faith.

Fast forward 6 months.  The contractor has substantially completed the effort but states they cannot obtain the efficiency levels with the "standard" units, and cannot locate any other "standard" sources in the market to meet the required efficiency levels. 

The subject matter experts, after review, also cannot find any "standard" units in the market to meet the required efficiency levels. 

The CO in charge of the contract asks both parties what is needed to meet the "efficiency levels".  Contractor replies only a "custom" HVAC unit. 

The customer, at this time wants the contractor to comply with the stated efficiency levels.  If the Contractor has to eat the cost, then they feel the Contractor has to eat the cost -they agreed afterall to the reduced scope. 

After lengthy negotiations, the Customer finally agreed to revise the SOW and re-add to it, the original requirements that were removed, due to the fact that neither party can find a "standard" source to meet the efficiency levels.

The CO would like to come to a fair and equitable solution.  The contractor is operating at a loss now, and has agreed to a further discount on a revised proposal due to their part in not identifying this issue up-front; and has essentially re-proposed the "custom" solution to include additional labor to remove the "standard" units.  

After another review, the customer has returned to their original position and wants the Contractor to eat the cost. 

CO has been advised by various parties that this could be a differing site condition, but believe this is really a sourcing issue, on top of poor planning by all parties and is pushing for an equitable solution.  Assume things are at an impasse now.

Based on the facts as stated, how would you have dealt with/resolved this situation?

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Too complicated with too many variables to know how I would deal with it.  Would need to review the complete contract, the proposal and all the negotiation information available in order to take a position. Then my position would have to be discussed with my legal advisor. 

So I guess that is how I would have dealt with the situation.   

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1 hour ago, cdhames said:

The contractor proposes a "custom" HVAC unit.  During negotiations, several elements are negotiated down to "standard" units in order to save on cost.

What was the awarded requirement as negotiated? Maybe it's for installation of some custom units and some standard units.

I can't be sure if the negotiated contract is for modified standard units, custom units, standard units, or a mix of the one or more of the three?

 

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16 hours ago, cdhames said:

Based on the facts as stated, how would you have dealt with/resolved this situation?

cdhames:

How would I have handled it during negotiation? I would have been a lot more cautious about pushing the contractor to reluctantly agree to provide what "the customer" wanted. It sounds like there should have been more and/or better market research before the contract was signed. How would I handle it now? I have no idea. Settle without litigation if I could.

What it boils down to is this: What will the government do if the parties cannot resolve the impasse through negotiation and compromise? How will the contractor respond to what the government does? Who is likely to prevail if the matter goes to a board of contract appeals or to the Court of Federal Claims?

You haven't given us enough of the right kind of facts to support a rational prognostication, and what you have told us doesn't make sense entirely. For example, you said that the contractor has "substantially completed" the work. Well, unless the "efficiency level" is only a minor matter, which it does not seem to be, then I wonder whether the work is substantially complete in the legal sense of that term. Is the specified efficiency level crucial to intended use? See Cibinic et al., Administration of Government Contracts 4th, pp. 1039-41.

Your story about the negotiation history will probably count for little. Once a contract has been signed that's all just parole evidence, which is generally inadmissible unless the contract is ambiguous. Much will depend on the wording of the specifications and their nature, whether design, performance, or both. What the court will want to know is what the contract says and what it means. In the event of litigation, the outcome will depend on the nature of the disagreement between the parties, their contending assertions, the pertinent facts as determined by the court, and the court's interpretation of the contract.

It's unlikely that you can provide enough of the right kind of facts and the wording of the contract in this kind of forum to enable anyone to predict what the outcome would be. We go could go back and forth from now until doomsday, and when the trumpet blows you still wouldn't have a reliable answer. Having said that, I think that if the contractor signed a clear agreement to achieve the specified efficiency level under definite specifications, then they are probably in a tight spot. Still, if I were the CO I'd ask the customer how essential it is that the contractor achieve the specified efficiency level. Where did the requirement come from? What effect will the efficiency level have on the mission?

It sounds like both sides have lost something. Maybe it's best to leave it at that and get out without going to court, which will result only in both sides losing more than they already have.

What about "the customer"? It sounds to me like they are looking at the situation as a zero-sum game. If so, it's unlikely that the CO can make them happy unless he or she can get the contractor to "eat" the costs. Anyway, they're not "customers," they're clients, and unlike customers, clients are not always right.

All:

These kinds of What should I do? and What's going to happen? questions (I call them "story problems": This happened, and then this happened, and this is what's going on. What should I do?) are pointless to ask. They are essentially asking for a legal analysis and almost always indicate that the person asking does not understand contract law and how it works. A reasonable answer almost always depends on facts and contract language that we at Wifcon Forum do not have and cannot get. Yet they are very common at Wifcon. Such questions are distressing, because while Wifconers would like to help the person asking, they simply can't. Not if they're responsible persons. Yet Wifconers probe and probe, trying to get more information out of the asker, which is almost always a waste of everyone's time and a source of frustration.

Lawyers get these kinds of questions all the time, and they dread them, because all they can say is, Well, maybe this or maybe that--it depends. What does the contract say? What are the facts that you can prove? That kind of answer irritates people and makes them complain about lawyers, but they, not the lawyers are the ones at fault. In my opinion, such questions are the product of doubt and anxiety, seeking assurance. I asked them during my first year or so as a contract negotiator, until a stern supervisor (Thanks, Mr. Kirk) and a kindly lawyer (Thanks, Joe) sorted me out.

All you help and advice seekers, Please, Please, PLEASE, stop asking these kinds of questions at Wifcon. Instead, go see your attorney with the contract in hand and a file full of documented facts. And get yourself a copy of Administration of Government Contracts.

cdhames, this is not intended to be an attack on you. Please don't take it that way.

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On ‎4‎/‎30‎/‎2016 at 0:39 AM, Vern Edwards said:

All:

These kinds of What should I do? and What's going to happen? questions (I call them "story problems": This happened, and then this happened, and this is what's going on. What should I do?) are pointless to ask. They are essentially asking for a legal analysis and almost always indicate that the person asking does not understand contract law and how it works. A reasonable answer almost always depends on facts and contract language that we at Wifcon Forum do not have and cannot get. Yet they are very common at Wifcon. Such questions are distressing, because while Wifconers would like to help the person asking, they simply can't. Not if they're responsible persons. Yet Wifconers probe and probe, trying to get more information out of the asker, which is almost always a waste of everyone's time and a source of frustration.

Lawyers get these kinds of questions all the time, and they dread them, because all they can say is, Well, maybe this or maybe that--it depends. What does the contract say? What are the facts that you can prove? That kind of answer irritates people and makes them complain about lawyers, but they, not the lawyers are the ones at fault. In my opinion, such questions are the product of doubt and anxiety, seeking assurance. I asked them during my first year or so as a contract negotiator, until a stern supervisor (Thanks, Mr. Kirk) and a kindly lawyer (Thanks, Joe) sorted me out.

All you help and advice seekers, Please, Please, PLEASE, stop asking these kinds of questions at Wifcon. Instead, go see your attorney with the contract in hand and a file full of documented facts. And get yourself a copy of Administration of Government Contracts.

Well said.

Asking questions too early (as seems to be the case with many of the "story problems") also deprives the individual of the valuable learning that comes along with searching, seeking, and thinking.  It may be a bit presumptuous of me, but my guess is that the experts here at Wifcon don't have all the information they provide in a post in their hip pocket.  In most cases, I imagine the Wifcon experts go out and retrieve relevant information, digest it, then post it.  Sure, it may be easier for them to do perform those tasks than the person asking the question, but I bet that's largely because those individuals made a habit out of following that process early in their careers.  Not only have they learned how to do those things effectively, but they've also learned things from doing it.

Individual's eagerness to ask questions such as these reminds me of a couple of articles that I read last year regarding how the internet may make us feel smarter than we actually are (an HBR Q&A with one of the researchers can be found here:  https://hbr.org/2015/07/the-internet-makes-you-think-youre-smarter-than-you-are  and the full article on their research can be found here: https://www.apa.org/pubs/journals/releases/xge-0000070.pdf).  The concluding paragraph from the research paper drives home the potential impact of such behavior:

Quote

There are clearly benefits to the freely accessible information on the Internet; however, there may be costs inherent to the strategy of accessing that information.  The boundary between personal and interpersonal knowledge is becoming increasingly blurred (Clark & Chalmers, 1998).  As technology makes information ever more easily available and accessible through searching, the ability to assess one's internal "unplugged" knowledge will only become more difficult.  Erroneously situating external knowledge within their own heads, people may unwittingly exaggerate how much intellectual work they can do in situations where they are truly on their own.

 

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