Gabriel Ho

H - clause vs FAR/DFAR

44 posts in this topic

Retreadfed- not defraud but more like TINA. yes am concern of double charging. Our team also when down the disclosure statement route, what DS at time of award and was there changes. 

When a contractor provide you a list of physical completed contracts but will not give closing documents like property clearance, and FV.  Now that POP is over, contractor is seeking for line item or "source of funds" to close these contracts. (DOs, BOAs)

Joel- (ACAT I) program; multi D types, BOAs. and C types. negotiated, line items but no line items for closeout. 

 

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12 hours ago, Gabriel Ho said:

Retreadfed- not defraud but more like TINA. yes am concern of double charging. Our team also when down the disclosure statement route, what DS at time of award and was there changes. 

When a contractor provide you a list of physical completed contracts but will not give closing documents like property clearance, and FV.  Now that POP is over, contractor is seeking for line item or "source of funds" to close these contracts. (DOs, BOAs)

Joel- (ACAT I) program; multi D types, BOAs. and C types. negotiated, line items but no line items for closeout. 

 

Then the Program Office ought to know what this contractor did or didn't propose to include in their contract prices for closeout and the parties ought to know each other's interpretation of the H-Clause.  All that should have been resolved before now. 

Purely rhetorical questions - No need to bother to answer here.  Just to make my point that such complex issues need to be thoroughly researched and resolved other than in a Discussion Forum without the benefit of the entire contract and background information.  How on earth could a Program Office for an ACAT I program overlook millions?? or billions?? of dollars necessary for closeout when evaluating and negotiating the various contract vehicles?  Who the Heck estimated, evaluated, audited, prepared the negotiation objectives, negotiated these contracts, etc.???????????? 

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16 hours ago, Retreadfed said:

Don, I do not read the H clause as saying the contractor does not have to do what is required by the Government Property clause or any other clause in the contract.  Instead, I read it as saying that the price of the contract does not include the activities listed in the H clause.  However, the clause goes on to state that in certain circumstances the government will add funding to the contract to cover the cost of these activities.  This interpretation harmonizes the H clause and GP clause so that no conflict is present.  Such harmonization is the preferred way of interpreting the contract.

I agree that you should first try to harmonize the clauses, but I don't think you can in the case. Here's the wording of the clause:

23 hours ago, Gabriel Ho said:

H003 - The parties understand and agree that there are no costs included in the price of this SBC contract, and no requirement for the performance of, packing, crating, handling, removal or restoration, storage, shipment, destruction, scrap, sale, demilitarization, close-out or other disposition of any Government-owned or furnished tooling, equipment, material or other government property, or any residual material, inventory, data or documentation used in the performance of this contract. In the event of a termination for convenience, the Contractor is to be directed in the performance of these tasks and reimbursed in accordance with FAR 52.249-6, Termination for the Convenience of the Government. In the event that there is, for any reason, no follow-on contract (e.g. SBC extension or PBL), then the Contractor is to be directed by the Contracting Officer in the performance of these tasks and reimbursed in accordance with FAR 52.243-2, Changes – Cost reimbursement.

Your interpretation renders meaningless the words in bold. From U.S. Attorneys Manual:

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An interpretation will be rejected if it leaves portions of the contract language useless, inexplicable, inoperative, meaningless, or superfluous. Ball State Univ. v. United States, 488 F.2d 1014 (Ct. Cl. 1973); Blake Constr. Co. Inc. v. United States, 987 F.2d 743, 746-47 (Fed. Cir. 1993).

 

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Don, I guess we have a difference of opinion on this.  I do not think that my interpretation renders any language in either clause meaningless.  The GP clause says the contractor will do certain things when a contract is terminated or expires.  The H clause says there is no money in the contract for those activities, but when a termination occurs or the contract expires with no follow-on, the government will require the contractor to do the things listed in the clause, which generally means the contractor will comply with the GP clause, and add money to the contract to cover these activities.  In regard to a termination for convenience, this is consistent with the model termination letter found in FAR 49.601-2.  Thus, the direction contemplated by the H clause in regard to terminations would likely occur prior to or simultaneously with the termination.  If the government elects to allow the contract to expire, direction to comply could be issued prior to the or concurrently with the expiration.  We have to assume that government officials will do their jobs correctly.  Thus, I do not see a conflict. 

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Retreadfed,

What if the contract expires and there is a follow-on? Would the contractor be required to perform property closeout tasks?

The H clause doesn't say the Government will require performance of the listed tasks or cover reimbursement of costs in that circumstance. 

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2 hours ago, Don Mansfield said:

... no requirement for the performance of close-out or other disposition of any ... government property ... used in the performance of this contract.

Not that my opinion should carry much weight, but it says what it says. The parties' intention is murky and certainly has been in dispute for 4 years. The contractor is correct (as Don noted) that Section H has precedence over Section I. Thus, any ambiguity would seem to be latent not patent. Contra proferentem. Pay the contractor for any direct costs plus burden it incurs for the change in performance obligations and think about how to better word the clause in future contracts.

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Don, this gets down to the intention of the parties.  I can see if there is a follow-on contract and all the property under the old contract is transferred to the new contract, property close-out activities may not be required.  In that case, there is no problem.  On the other hand, if the follow-on contract does not require use of some or all of the property, then close-out activities may be required in which case I think the H clause would kick in. 

We have been discussing a conflict between the H clause and the current version of the GP clause which came into being in 2007.  However, we do not know what GP clause(s) are in the contract.  It very well may be that we are dealing with an old dog here and that the property was provided under a facilities contract.  I should have caveated my statements to reflect this reality.

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2 hours ago, Retreadfed said:

However, we do not know what GP clause(s) are in the contract.

Gabriel said it was 52.245-1 Government Property (Deviation) (June 2007) in his first post. That's what I quoted from.

Gabriel,

Is the Government property going to be transferred to the follow-on contract?

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Don- yes transferred to the follow-on.  if the group see the H- clause as for property only, that not what the contractor impetrate.  To the contractor its "closeout"

The contractor will not provide any closeout documents, plus final vouchers (rates been settle), property clearance, etc...

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21 hours ago, Gabriel Ho said:

Don- yes transferred to the follow-on.  if the group see the H- clause as for property only, that not what the contractor impetrate.  To the contractor its "closeout"

The contractor will not provide any closeout documents, plus final vouchers (rates been settle), property clearance, etc...

Gabriel,

If the property was transferred to the follow-on contract, why would it cost the contractor so much to perform property closeout on the predecessor contract?

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The H- clause makes perfect sense where the parties or the government expected the same contractor to be awarded follow on contracts and orders.

Why tie up funding or have the contractor include the price of efforts that  arent necessary if it is anticipated that the contractor will continue the services under follow on contracts and orders?  

My point earlier is that the government ought to know whether or not the contractor included the cost for closeout in those contract vehicles, considering that this is a major acquisition program and how the contracts and orders should have been negotiated. The OP says that it involves huge costs.

Having worked on an ACAT I Defense Acquisition Program, we knew what our Systems Contractor was including or not including in its proposal and what was negotiated. 

If the parties have been aware of the difference in interpretation of the H-Clause, it should have been resolved or reworded by this point. 

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thats our point, why is it costing the Govt so much! We got a quote from the contractor; ($750K) to provide FV for 20 delivery order ONLY!

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On 5/17/2017 at 9:00 AM, Gabriel Ho said:

 Need your understanding of what take precedence, FAR/DFAR VS local clause.

If that is still the question, then the answer is simple: If there is a conflict between the Section H clause and FAR/DFARS, then FAR/DFARS take precedence unless the CO obtained approval to deviate from FAR or DFARS in accordance with FAR Subpart 1.4.

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Does the contract include the clause at FAR 52.215-8, Order of Precedence-Uniform Contract Format?

If YES, that clause suggests that a Sec. H special contract requirement will take precedence over a Sec. I contract clause.

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2 hours ago, Gabriel Ho said:

Vern, are there court cases or samples to backup?

Yes.

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On 5/22/2017 at 10:57 AM, ji20874 said:

Does the contract include the clause at FAR 52.215-8, Order of Precedence-Uniform Contract Format?

If YES, that clause suggests that a Sec. H special contract requirement will take precedence over a Sec. I contract clause.

Only if there is no conflict with law or regulation in the form of an unauthorized deviation. An unauthorized deviation is beyond the authority of a contracting officer and is not enforceable against the government.

See McDonald Douglas Corp. v. U.S., 670 F.2d 156 (U.S. Court of Claims, 1982):

Quote

McDonnell's first position (which was accepted by the trial judge) is that the parties agreed wholly to exclude the Tucker invention from the Subject Invention clause. For us, the overriding factor resolving this contractual question is that, under the regulations in effect when the contract was made on August 31, 1964 (unlike the regulations they replaced), the contracting officer had no authority to give, by himself, contractual exemptions from the patent rights clause. Compare 32 C.F.R. § 9.107-2(a) (1961) with 32 C.F.R. § 9.107 (1965). (The July 21, 1964 amendments eliminated the possibility of such an exclusion for a particular invention from the patent rights clause.) Any attempt to do so would constitute a deviation from the regulations. 32 C.F.R. § 1.109-1 (1964) (definition of deviation). Deviations were allowed only if authorized in accordance with departmental procedures and if written notice of the deviation was furnished to the Assistant Secretary of Defense and the Assistant Secretary of the Army. 32 C.F.R. § 1.109-2 (1964). Plaintiff has produced nothing to indicate that such authorization was granted or that proper notice was furnished, and we can take it that they were not given. In this case, therefore, any deviation from the prescribed wording was a violation of the regulation and beyond the authority of the contracting officer. Actions taken by that officer beyond his authority are, of course, not binding on the Government. E.g., Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 68 S.Ct. 1, 92 L.Ed. 10 (1947).

That is Contracting 101. See Rockies Exp. Pipeline LLC v Salazar,  730 F.3d 1330 (Fed. Cir. 2013):

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We agree with the government that it may cancel as illegal a contract that violates procurement statutes or regulations, see Schoenbrod v. United States, 410 F.2d 400, 403–04 (Ct.Cl.1969)....

See also AHTNA Environmental, Inc. V. Dept. of Transportation, CBCA 5456, 17-1 BCA ¶ 36600:

Quote

We note, though, that a contract provision which conflicts with, rather than permissibly supplements, a mandatory FAR clause is typically unenforceable unless the contracting officer obtained authorization from the agency head for a deviation under FAR 1.403 or 1.404. See Johnson Management Group CFC, Inc. v. Martinez, 308 F.3d 1245, 1256 n.2 (Fed. Cir. 2002) (“A contracting officer is not authorized to deviate from the requirements of procurement regulations when the necessary authorization to do so has not been given.”); Southwest Marine, Inc., ASBCA 34058, et al., 91-1 BCA ¶ 23,323, at 116,985 (1990) (clause inconsistent with Changes clause in FAR was held unenforceable).

 

 

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