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Retreadfed

Potential Application of the Christian Doctrine

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The decision talks about FP-LOE, but from what I read, it looks more like a T&M contract.  If the agency was sloppy in its contract formation and contract administration, maybe it deserves the penalty.  For example, the decision talks about a contract "ceiling" -- but there is no ceiling in a FP-LOE contract.  Maybe the judge invoked the Christian doctrine because this was a sloppy contract.

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I do not understand that under the Christian Doctrine, FAR 31.205-47 is a mandatory contract clause. It isn't even a contract clause to me. Or is it that cost principles in FAR apply by operation of law under the Christian Doctrine? I haven't done the research but if FAR cost principles apply by operation of law, I would have thought that the law that made them operational was something other than the Christian Doctrine.    

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Neil, I had similar thoughts.  In addition, FAR 31.102 states the application of the cost principles when pricing a contract.  It only applies to the government when evaluating proposals and does not prevent a contractor from proposing any cost it pleases.  Further, it does not say anything about determining what costs a contractor can recover after a contract is awarded.  Finally, there are several clauses that incorporate the cost principles from FAR 31.2.  However, I am unaware of any clause that incorporates what is in 31.1.

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Neil and Retreadfed - I agree and seems that the Doctrine is rewritten in this decision to state a mandatory part of the FAR that expresses a significant or deeply ingrained strand of public procurement policy will be incorporated into a Government contract by operation of law as opposed to the previous holding that a mandatory clause that expresses a significant or deeply ingrained strand of public procurement policy will be incorporated into a Government contract by operation of law (emphasis added).

It will be interesting how the impact of the decision unfolds.

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This appears to be a Decision that the government should appeal. The key legal question isn’t whether the cost is allowable, it’s whether or not there is entitlement to a price adjustment due to the cost incurrence.  

What entitles the contractor to reimbursement for a cost incurred in performance of a fixed price level of effort contract? 

I can understand that the parties negotiated a conversion from level of effort to FFP. I am assuming (maybe incorrectly) that they also considered the impact of the government not providing the required tech data and drawings to the contractor to complete the project. Had the contractor incurred the legal defense costs prior to the bilateral Mod 8 conversion, those costs may have been allocable and allowable in the Mod. But they weren’t incurred at that point and the mod was finalized prior to the Qui Tam lawsuit. 

So, I don’t see any entitlement to a price adjustment for any allowable costs incurred after the conversion and agreement that recognized and (I assume) considered impacts due to the government not providing the drwgs and tech data. 

I could see where the cost of legal defense could have been claimed as an impact to the contractor for the government’s failure to provide the information, prior to the conversion. 

But that would be part of the questions not specifically discussed in the written decision. 

 In general, when  my organization settled issues similar to the problem of the issuing data here, we included language in the settlement agreement that the settlement included all impacts known or unknown to either party. 

It may be simply a matter of a poorly written decision that did include entitlement issues, but I think that would’ve been necessarily covered in or better explained in the written decision

H2H, did the government use the correct language  in its argument that the costs were not allocable to the fixed price fixed price level of effort or to the FFP effort?  It would seem that the cost would be allocable to the contractor’s cost for the contract in it’s accounting system.

The applicable question to me concerns entitlement, not the nature of the cost, if there is entitlement to a price adjustment. 

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Neil, here is the pertinent language from 10 U.S.C. 2324 which, with the companion statute in title 41, is the source of the relevant part of 31.205-47 "Except as provided in subparagraph (C), costs incurred by a contractor or subcontractor, or personal services contractor in connection with a criminal, civil, or administrative proceeding commenced by the United States or a State in connection with a covered contract, subcontract, or personal services contract may be allowed as reimbursable costs under the contract, subcontract, or personal services contract."  It goes on to state that "The term “covered contract” means a contract for an amount in excess of $500,000 that is entered into by the head of an agency, except that such term does not include a fixed-price contract without cost incentives or any firm fixed-price contract for the purchase of commercial items."

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Thanks, Retreadfed. Seems like this does not support the decision either.

FAR Part 31 is as follows:

31.000 Scope of part.

This part contains cost principles and procedures for—

(a) The pricing of contracts, subcontracts, and modifications to contracts and subcontracts whenever cost analysis is performed (see 15.404-1(c)); and

(b) The determination, negotiation, or allowance of costs when required by a contract clause. (emphasis added)

I did not see any of the above applicable from the facts in the case.

I agree with C Culham...let's see how or if this case is relied upon in the future. I agree with Joel Hoffman that the court seemed to be off base by focusing on allowability. Even so, there was no express finding regarding what paragraph in FAR 31.205-47 makes the cost allowable. As a result, I am not sure it is allowable even if -47 is applicable.  

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My impression is that the Judge went to great lengths to deny the government's motion to dismiss, including invoking the Christian doctrine. To me, this was the Judge saying the case will be heard on its merits and creating a rationale for doing so. I wouldn't get too worked up about the rationale. We will have to see what the decision is when the facts are established and the case decided.

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I agree with H2H.

However, maybe I missed it but regardless of a determination that a cost is allowable, there first must be entitlement to a price adjustment on a FFP contract. The government was not involved in the Qui Tam lawsuit. 

FFP contracts are not subject to price adjustment solely on the basis that an unanticipated cost was incurred. 

EDIT: The Court determined that the costs were related to the Contractors performance under its pre-Mod 8 performance under a “fixed-price level of effort” arrangement. Normally, actual costs incurred don’t entitle the contractor to a price adjustment, absent government liability for the incurred cost. 

However, tHere were issues on non-compliance by the government, which resulted in a negotiated, bilateral restructuring of the contract type. The Court may be saying that the legal costs may be allowable and allocable under the level of effort arrangement, because the parties negotiated a settlement and conversion to FFP. 

There was also earlier discussion of the possibility that this was not a fixed price level of effort but something else like a fixed-ceiling price contract with retro-active price redetermination. The Court mentioned a ceiling price. Incurred costs may be allowable in that price arrangement, too., where the government breaches or doesn’t meet its responsibility under the original terms of the pre-mod 8 contract. 

It will be interesting to read the follow up litigation and Case Decision. 

 

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Deleted. 

Edited by joel hoffman
I thought I was texting somebody

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I do not have experience with the Court of Federal Claims. However, I am contemplating that this apparent expanded Christian Doctrine holding could now be cited as precedence in another case. There may never be a  "trial" and/or appeal because the parties could settle. I would hope that the current decision be decertified for publication if that is possible in this Court, because in my mind the Christian Doctrine is deserving of a precedence case with more rationale for expansion of this nature.   

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48 minutes ago, Neil Roberts said:

I do not have experience with the Court of Federal Claims. However, I am contemplating that this apparent expanded Christian Doctrine holding could now be cited as precedence in another case. There may never be a  "trial" and/or appeal because the parties could settle. I would hope that the current decision be decertified for publication if that is possible in this Court, because in my mind the Christian Doctrine is deserving of a precedence case with more rationale for expansion of this nature.   

I’m not a lawyer either. But Vern explained a couple of years ago that not everything in a published decision is precedent setting. I forget the legal term, whether a “holding”, “determination”, etc. 

Perhaps a lawyer can better explain.  At any rate, as Here to Help mentioned,  this was simply a denial of the government’s Motion to Dismiss, leading to a hearing based upon the merits of the claim. 

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ob·i·ter dic·tum

/ˌōbidər ˈdiktəm/

noun

LAW

noun: obiter dictum; plural noun: obiter dicta

a judge's incidental expression of opinion, not essential to the decision and not establishing precedent.

an incidental remark.

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I don't see it as dictum. I see the Court believing that without making the Christian Doctrine applicable, the facts were not supported with any legal basis. Whether it is dictum or not, it may still be cited by litigants to bolster their case, and the court in their case may decide it is or is not dictum. 

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By my read the decision's use of Christian is more than a passing remark or opinion as the decision goes to a fair amount of length to support that the Christian Doctrine applies and is a basis to the overall decision. 

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This whole case is very obtuse - the contractor is not saying that the government actually did anything to harm them under the terms of the contract, but that the government owed them money under the terms of an accounting standards clause that had nothing to do with actual performance ("a failure to intervene in a qui tam action").  It also introduces the concept of an FFP being immutable regardless of circumstance.

I had an REA filed against one of my contracts back in the early 90's, but it was related to a defective data package provided as GFI.  The contractor had very detailed cost records related to their diagnosis and corrective action, related to building compliant rocket solid motors ("compliant" in this case meaning "motors that don't blow up" 😁). 

This one seems to have started in relation to a data package, but that issue kind of faded into the background quickly.

Was anyone else startled to read this part?:

Quote

“An equitable adjustment makes a contractor whole after the [g]overnment modifies a contract.” E.g., VHC, Inc. v. Peters, 179 F.3d 1363, 1366 (Fed. Cir. 1999) (citing Bruce Constr. Corp. v. United States, 324 F.2d 516, 518 (Ct. Cl. 1963))

Part 50 doesn't predicate rights to an adjustment on a modification being issued.  Does anyone know what the referenced decision says in full? (e.g., does it talk about "implied" or "constructive" modifications?)

In the meantime, I'm going to pop some corn and watch this drama unfold in the COFC.

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12 minutes ago, REA'n Maker said:

This whole case is very obtuse - the contractor is not saying that the government actually did anything to harm them under the terms of the contract, but that the government owed them money under the terms of an accounting standards clause that had nothing to do with actual performance ("a failure to intervene in a qui tam action").  It also introduces the concept of an FFP being immutable regardless of circumstance.

I had an REA filed against one of my contracts back in the early 90's, but it was related to a defective data package provided as GFI.  The contractor had very detailed cost records related to their diagnosis and corrective action, related to building compliant rocket solid motors ("compliant" in this case meaning "motors that don't blow up" 😁). 

This one seems to have started in relation to a data package, but that issue kind of faded into the background quickly.

Was anyone else startled to read this part?:

Part 50 doesn't predicate rights to an adjustment on a modification being issued.  Does anyone know what the referenced decision says in full? (e.g., does it talk about "implied" or "constructive" modifications?)

In the meantime, I'm going to pop some corn and watch this drama unfold in the COFC.

Which referenced decision are you referring to?  Bruce Construction? 

https://law.justia.com/cases/federal/appellate-courts/F2/324/516/201724/

it was a constructive change under the changes clause at the time. 

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