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Don Mansfield

Waiver of Amounts Due the Government

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Does the contracting officer have the authority to waive amounts due to the Government? For example, some COs will waive an amount due to the Government at contract closeout if that amount is below a certain dollar figure. Here's an example of such a clause accomplishing that purpose:

Quote

 

EXPEDITING CONTRACT CLOSEOUT (NAVSEA) (DEC 1995)

(a) As part of the negotiated fixed price or total estimated amount of this contract, both the Government and the Contractor have agreed to waive any entitlement that otherwise might accrue to either party in any residual dollar amount of $500 or less at the time of final contract closeout. The term "residual dollar amount" shall include all money that would otherwise be owed to either party at the end of the contract, except that, amounts connected in any way with taxation, allegations of fraud and/or antitrust violations shall be excluded. For purposes of determining residual dollar amounts, offsets of money owed by one party against money that would otherwise be paid by that party may be considered to the extent permitted by law.

(b) This agreement to waive entitlement to residual dollar amounts has been considered by both parties. It is agreed that the administrative costs for either party associated with collecting such small dollar amounts could exceed the amount to be recovered.

 

I see the wisdom of such a clause, but my question is whether the CO has this authority.

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Maybe there is another way to look at it, in order to make it okay?  At least it is mutual and works both ways.  I suppose both parties could agree, for administrative efficiency and to avoid nickels and dimes, that any amounts due by or to either party will be rounded downward to the nearest $500 increment -- so $415 gets rounded down to zero and $1,215,412 gets rounded down to $1,215,000.  If so, then they could agree to limit the effect to closeout.

Since the clause has been in effect for 22 years, and since there was probably a legally sufficient determination at the first, and since it has stood the test of time, I'm willing to leave it alone.  I say this as a contracting practicioner, not as an attorney and not as a party that would be aggrieved.  I suppose anyone wanting to object to the clause should do so before proposals are submitted, rather than after contract formation.

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Beyond the wisdom stated by Don and the logic of ji I say No (maybe).

Reasoning – The NAVSEA clause appears to be a policy rather than a regulation as I could not find a FAR supplement that authorizes it’s use.  I will be honest my research was limited.  As such if NAVSEA did not seek a deviation from FAR subpart 32.6 for the waiver clause  as such it seems in conflict with regulation.  Here I note that in another part of the FAR a waiver of an amount due the government (liquidated damages) from a contractor is left to a higher authority and not the CO (FAR 11.501).

Interesting to me in my research is that on one hand NAVSEA is waiving the amount but on the other hand complies in the few solicitations I reviewed with FAR 32.6 and includes FAR Clause 52.232-17 in solicitations.

Beyond the FAR I could find no other discussion (GAO Redbook) about a CO’s authority of waive contract amounts due the government, but again it was limited research on my part.

Confusing wisdom and logic yet innovative application of the FAR in Dec 1995.

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I have waived amounts due under the authority of FAR 1.602-2 - Responsibilities. 

Contracting officers are responsible for ensuring performance of all necessary actions for effective contracting, ensuring compliance with the terms of the contract, and safeguarding the interests of the United States in its contractual relationships. In order to perform these responsibilities, contracting officers should be allowed wide latitude to exercise business judgment (self-added emphasis).

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23 minutes ago, Weno2 said:

I have waived amounts due under the authority of FAR 1.602-2 - Responsibilities. 

Contracting officers are responsible for ensuring performance of all necessary actions for effective contracting, ensuring compliance with the terms of the contract, and safeguarding the interests of the United States in its contractual relationships. In order to perform these responsibilities, contracting officers should be allowed wide latitude to exercise business judgment (self-added emphasis).

How does FAR 1.602-2 override FAR 32.610?

Quote

32.610 – Compromising Debts.

For debts under $100,000, excluding interest, the designated agency official may compromise the debt pursuant to the Federal Claims Collection Standards (31 CFR part 902) and agency regulations. Unless specifically authorized by agency procedures, contracting officers cannot compromise debts.

 

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Maybe I'm missing something, but doesn't the CO have to enforce the clauses in the contract? Are you saying that the CO has a duty to object to the inclusion of an official agency clause when the agency directs that clause to be incorporated into a contract, or that the CO must refuse to enforce the contract as agreed-to by the parties? If that's what your position is, I'm thinking it's a tad bid unrealistic.

My position is that the contract must be enforced as written and agreed-to. Whether the clause is sound policy or not is above the CO's pay grade. Whether the agency obtained a FAR Deviation or not is above the CO's pay grade.

So the beef, if any, is with the agency not the CO.

What am I missing, please?

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here_2_help,

36 minutes ago, here_2_help said:

Maybe I'm missing something, but doesn't the CO have to enforce the clauses in the contract? Are you saying that the CO has a duty to object to the inclusion of an official agency clause when the agency directs that clause to be incorporated into a contract, or that the CO must refuse to enforce the contract as agreed-to by the parties?

What you're looking at should not be described as an "official agency clause." It's a local clause developed by a suborganization of an agency that has not been vetted through the rulemaking process like a FAR or DFARS clause. It's not contained in Title 48 of the CFR. Don't be fooled by the fact that the contracting activity is identified and it's dated. Such clauses have been held to have no contractual effect, even though they are agreed-to by the parties. See, for example, La Gloria Oil&Gas Co.v.U.S., 56 Fed.Cl. 211 (2003).

In my opinion, a CO should always treat local clauses with some suspicion. Usually, they are someone's great idea within a contracting office to solve an immediate problem. However,  they aren't always thought through.

If a CO doesn't have the authority to waive amounts due by law, a local clause is not going to give it to them.

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