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What parts of the FAR apply to me?

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Vern, For contractors subject to CPSRs, I think the concern is that if an extra-contractual requirement exist, and it is not followed, then a contractors? purchasing system could be disapproved.

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Vern, For contractors subject to CPSRs, I think the concern is that if an extra-contractual requirement exist, and it is not followed, then a contractors? purchasing system could be disapproved.

garth:

I have done everything I can to explain to you in plain English. What you're getting now from Jacques reads like a rather dense legal treatise, and I can feel myself being sucked under by his prose. I'm going to have to let this conversation go, since it doesn't really matter to me and I'm not making any money out of it. I feel that I have done all I can to fulfill by brotherly obligation to you. Why don't you and Jacque play together for a while? So long, partner.

Jacques, you don't have to respond to me. Please don't bother.

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Vern,

I appreciated you spending so much of your time on this topic and your patience with my struggles. I place a great value on your input on this and all the WIFCON discussions.

Thanks,

Garth

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Notwithstanding Vern?s argument outlining the authority (OFPP Act) under which the FAR system was created and operates, and the statements of applicability in the Part 1, what I continue to struggle with is the concept that if a statement in the FAR requires a contractor or subcontractor to ?do something? it is not enforceable absent a contractual clause.

Garth,

Please look at the tables of contents of the FAR Parts. Most of them contain sections and subsections entitled Contract Clause(s), Solicitation Provision(s), or Contract Clauses and Solicitation Provisions. FAR Part 52 -

Quote

(a) Gives instructions for using provisions and clauses in solicitations and/or contracts;

(B) Sets forth the solicitation provisions and contract clauses prescribed by this regulation; and

? Presents a matrix listing the FAR provisions and clauses applicable to each principal contract type and/or purpose (e.g., fixed-price supply, cost-reimbursement research and development).

Unquote

If, as you suggest, the relationship between the Government and contractor is defined in the nearly 2 thousand pages of FAR text, why are provisions and clauses prescribed? Why do not contracts merely contain signature blocks, prices, specs, schedules and the statement "Both parties to this contract are obligated to comply with the FAR"?

The solicitation, with its provisions, and the contract, with its clauses, define the pre and post award relationship between the government and the contractor.

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If you think about it, the Christian Doctrine confirms the point. Why bother to read a clause into a contract if the FAR applies to the contractor without the clause?

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Contractual disputes are best resolved by applying specific facts to specific contract terms and (occasionally) specific rules. To say the FAR does not apply to a contractor--while true--is not to say that there aren't several decisions by boards and courts whose outcome hinged on whether a contractor's action conformed with language contained in the FAR.

That said (and at the risk of rephrasing points already made by others), perhaps this might be instructive:

A variety of clauses incorporate rules by reference, obligating contractors to act in compliance with those rules. For instance, FAR 52.230-2(a) incorporates the Cost Accounting Standards. (Even absent the Christian doctrine, a decent argument can be made that a contractor must comply with applicable CAS even in the absence of FAR 52.230-2. See, 48 CFR 9901.306 (CAS mandatory for use by all executive agencies and by contractors and subcontractors); 48 CFR 9901.305(e) (properly promulgated CAS have the force and effect of law).) For DoD contracts, DFARS 252.243-7001 make the cost principles applicable to any cost adjustment under the contract. It is not surprising, then, we see "contractor shall" language in Part 31 or in the CAS.

Certifications can effectly incorporate FAR requirements by reference. For instance, FAR 52.243-4 the Certification of Final Indirect Costs (52.242-4) includes a certification that the "proposal does not include any costs which are expressly unallowable under applicable cost principles of the FAR or its supplements."

Several rules require a CO to consider things within the contractor's control, e.g., in negotiating or granting an approval, and a contractor who ignores the rules that inform a CO's judgment shouldn't expect prompt action on those requests (to say the least). See, e.g., partial release of security (FAR 28.204(:)), advance payments (FAR 32.408), novations (FAR Subpart 42.12). Other clauses expressly permit certain contractor actions with CO approval, and leave the considerations that inform that approval decision to the FAR. For instance, FAR 52.228-7 permits self-insurance with CO approval, and FAR 28.308 calls out what the contractor has to do in order for the CO to approve. Even when a contractor is entitled to relief as a matter of right, a contract clause can require the contractor to provide information in a form required by the Contracting Officer or in conformity with the FAR. See, e.g., FAR 52.249-2, Termination for Convenience of the Government (Fixed-Price) (May 2004), at para (e) (final termination settlement agreement in the form prescribed by the Contracting Officer). The CO's judgment, again, would be informed by the FAR.

Finally, as already noted, if a regulation requires a clause, or forbids its use, if the contracting officer fails to follow the regulation, and either includes a forbidden clause, or omits a required one, the government CO is acting beyond his authority. If the clause is "important" enough, and the rule was properly promulgated, the boards and courts can in certain circumstances impose the proper clause or omit the improperly included clause. See both Christian and Charles Beseler Co., 78-2 BCA P 13483, Sept. 22, 1978. (Excuse the oversimplification.)

Jacques--You are hard to understand sometimes. I cannot quite put my finger on why that is, but it is. I want to understand what you are saying. Is there any way you can write more plainly? Your paragraph beginning "Several rules" is so dense, I find myself lost halfway through it. I sense that you are saying something interesting, but I cannot quite figure out what it is. This is a chat room. I cannot devote the time to reading here that I would give to a textbook or a serious treatise. Do you understand what I am saying? Whether I agree with Vern or not, I always know what he's talking about. I hope this helps.

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Regrets, Seeker. I was just trying to give a list of different ways the FAR might apply indirectly to a contractor. I'm going to take Vern's advice and compose in Word. Hopefully I'll be able to catch more poor word choice that way. Blame it on the translation from French to English, even though I don't speak French. :)

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Ordinarily, I believe in keeping it simple, but that hasn't worked for me with garth. The most direct support I can give for my assertion that FAR does not apply to contractors is FAR 1.101 and 1.104, which say that FAR applies to the conduct of acquisitions, see the definition in FAR 2.101. Agencies conduct acquisitions, not contractors. But I've provided that support already and it hasn't worked. I have run out of ideas. Maybe Jacques' more complex arguments will work better than my simple ones.

On a different note, the best way to understand the Christian Doctrine is this: COs have only the authority delegated to them. They do not have authority to enter into contracts in violation of regulations that were promulgated to implement statutes. See FAR 1.602-1. When contractors enter into government contracts they must do so with the understanding that COs must obey the law in order for a contract to be enforceable against the Government.

Like other individuals who deal with the Federal Government (see, e.g., Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 68 S.Ct. 1, 92 L.Ed. 10 (1947)), potential contractors can validly be bound to discover the published directives telling them the limits and the scope of the agreements the Government can make.

320 F.2d 345, 351.

A contract or a provision of a contract entered into by a CO in violation of the law is ordinarily not enforceable against the Government, unless someone with authority is able and willing to ratify the CO's unauthorized act. In creating the Christian Doctrine, the courts have adopted a practical compromise between ignoring a CO's unauthorized act and declaring the contract to be void, which would be drastic.

Invalidation of the contract is not a necessary consequence when a statute or regulation has been contravened, but must be considered in light of the statutory or regulatory purpose, with recognition of the strong policy of supporting the integrity of contracts made by and with the United States.

177 F.3d 1368, 1373 (which contains a very interesting discussion of the consequences of entering into a contract in violation of statute or regulation).

The courts justify the compromise on the ground that the contractor should know the limits of CO authority. The courts, in recognition of the fact that they have forged a practical compromise, have limited Christian's application to clauses that implement important and long-standing policies.

nder the Christian Doctrine a court may insert a clause into a government contract by operation of law if that clause is required under applicable federal administrative regulations. However, the Christian Doctrine does not permit the automatic incorporation of every required contract clause.

991 F.2d 775, 779.

The Christian Doctrine does not stand for the proposition that FAR applies to contractors. Quite the contrary. It stands for the proposition (a) that FAR applies to COs, (B) that contractors must understand that COs must obey the law, and ( c) that if they enter into a contract with the Government, the courts will interpret the contract as it should have been written and adjudicate accordingly. It's either that or throw out the baby with the bath water.

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Jacques thanks for the direction to pages 59-63 of Formation of Government Contract.

My take away from those pages is that regulations can have the full force and effect of law if: (1) the regulations are authorized by statute, (2) one can reasonably conclude that the statute contemplated the regulations issued or (3) if the regulations further the congressional purpose of achieving an ?economical and efficient system? of procurement.

The argument that FAR 1.101 and 1.104, state that FAR applies to the conduct of acquisitions, and Agencies conduct acquisitions, not contractors seem convincing, but other references like 15.404-3 and 31.102 introduce ambiguity.

In discussions with various folks there seems to be three broad categories that people fall into: (1) the FAR applies to private industry and federal agencies equally ? where the regulations state contracting officer one can selectively insert ?contractor? or ?subcontractor?, (2) the FAR applies to contractors only to the extent specific provisions are incorporated into a contract, and (3) the FAR applies to contractors if incorporated into a contract OR if there is a provision that expressly states it applies to ?contractors? or? subcontractors?.

(Just as an aside it is our USG customers taking the position (1) that raised this as an issue.)

As a practical matter I think I find myself settling in on number (3). While one may be able to demonstrate in a court of law that a specific provision of the FAR placing a requirement on a ?contractor? or ?subcontractor? does not have a sufficient connection to ?congressional intent? to be enforceable, it ? at least to me ? is uncertain enough that following approach (3) a practical interpretation to work under.

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As a practical matter I think I find myself settling in on number (3). While one may be able to demonstrate in a court of law that a specific provision of the FAR placing a requirement on a ?contractor? or ?subcontractor? does not have a sufficient connection to ?congressional intent? to be enforceable, it ? at least to me ? is uncertain enough that following approach (3) a practical interpretation to work under.

Good luck!

Please advise us the first time you get to the BCA in defense of your attempt to force contractor compliance, absent a contract clause, with a rule or guidance in FAR Parts 1 to 51 because to do so furthers the congressional purpose of achieving an "economical and efficient system" of procurement.

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As a practical matter I think I find myself settling in on number (3). While one may be able to demonstrate in a court of law that a specific provision of the FAR placing a requirement on a ?contractor? or ?subcontractor? does not have a sufficient connection to ?congressional intent? to be enforceable, it ? at least to me ? is uncertain enough that following approach (3) a practical interpretation to work under.

So you award a firm-fixed-price contract and after award the contractor decides to subcontract part of the work. According to FAR, cost analysis is required, and according to your theory FAR 31.102 applies to the contractor. But the contractor does not apply the cost principles when pricing the subcontract.

Okay, what court is the CO going to go to? U.S. District Court? Does that court have jurisdiction? Under what law? U.S. Court of Federal Claims? On what basis does that court have jurisdiction? What remedy is the CO going to seek? Does the court have the power to grant that remedy?

Absurd.

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What if a prime contractor negotiates FFP subcontracts with a number of their suppliers prior to negotiation of the prime contract. In pricing the subcontracts, the prime contractor includes the cost of boarding the CEOs pet, trips for their spouses the Bahamas, etc.

Then in negotiating the prime's proposal - requiring cost analysis - with the government the prime includes the FFPs subs ? including the presumed unallowable cost. The prime contractor subsequently receives payment for the work performed under the prime contract.

If the theory is correct and that portion of the FAR has the full force and effect of law, could the argument be made that it was a false claim to the Government?

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What if a prime contractor negotiates FFP subcontracts with a number of their supplier prior to negotiation of the prime contract. In pricing the subcontracts, the prime contractor includes the cost of boarding the CEOs pet, trips for their spouses the Bahamas, etc.

Then in negotiating the prime's proposal - requiring cost analysis - with the government the prime includes the FFPs subs ? including the presumed unallowable cost. The prime contractor subsequently receives payment for the work performed under the prime contract.

If the theory is correct and that portion of the FAR has the full force and effect of law, could the argument be made that it was a false claim to the Government?

Garth, what is your understanding of what "force and effect of law" means?

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Not that I have a high confidence in my understanding, but in this context it is that it places a requirement on a private entity independent of any contractual obligation, similar to the Walsh-Healy Act and the payment of a minimum wage, or the anti Kickback laws.

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Garth, sometimes authors use it that way. Often, though, what it means is that courts should give effect to the regulation as a reasonable implementation of the statute upon which it is based. If the regulation (or, really, the statute being implemented) is not directed at regulating the conduct of an industry, or if the regulation lacks any sanctions for failing to follow it, etc., then more often than not the meaning is limited to the judicial deference meaning. Hope this helps.

"What does the rule that an agency regulation has the legal effect of a statute mean in practice? Simply, that 'an agency issuing a legislative rule is itself bound by the rule until that rule is amended or revoked.' National Family Planning v. Sullivan, 979 F.3d 227 (D.C. Cir. 1992)." Bernard Schwartz, Administrative Law (4th Ed. 1994), at 270.

The impact on industry (or the regulated) occurs though an agency's authority to license, set rates, or approve or prohibit practices employed in business. That authority comes from a statute. To repeat what has been repeated several times here, the FAR generally implements procurement statutes; statutes that don't give individual agencies the three types of authority listed above.

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Not that I have a high confidence in my understanding, but in this context it is that it places a requirement on a private entity independent of any contractual obligation, similar to the Walsh-Healy Act and the payment of a minimum wage, or the anti Kickback laws.

The meaning of "force and effect of law" depends on whether a regulation is a "legislative rule," promulgated under the authority of the Administrative Procedures Act, 5 USC Ch. 5, or a nonlegislative rule. The Department of Labor's regulations for the Walsh-Healey Public Contracts Act in 29 CFR are legislative rules. If you are talking about a legislative rule, then read the Supreme Court's decision in U.S. v. Mead, 533 U.S. 218 (2001).

FAR is not promulgated under the Administrative Procedures Act, but under the Office of Federal Procurement Policy Act. In the case of the FAR, "force and effect of law" means that courts must base their rulings on its terms. It does not mean that "the contractor shall" or "contractors shall" imposes a positive duty on a contractor independent of a solicitation provision or contract clause. It does mean that offerors and contractors are on notice of how a court or board must rule if an issue of compliance arises.

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I learn more from this forum... For those interested in the public contracts exemption to the APA's rulemaking requirements, see 5 USC 553(a)(2). It has been interpreted in, e.g., Essex Electro Eng'rs, Inc. v. United States, 960 F.2d 1576 (Fed. Cir. 1992). More importantly, if the rule is procedural, housekeeping, or interpretative, it also is not subject to the procedures on promulgating rules; but these three types of rules are not given as much deference as substantive (or legislative) rules. A useful primer on this stuff is Nash & Cibinic, Legal Status of Government Manuals and Instructions: Putting the Fox in Charge of the Chickens, 1 N&CR ? 77 (Oct. 1987).

As I understand it, though, one shouldn't confuse the Christian Doctrine with the discussion of legislative rules. The distinction between substantive (legislative) rules and housekeeping rules is, as I understand it, a product of the APA. Christian was decided before the APA, and, as interpreted, has been applied to clauses that implement a significant or deeply engrained procurement policy. A clause can be read into a contract even if that clause is the result of a housekeeping rule. Hope I'm stating this fairly.

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If you would like to learn more about the distinction between legislative rules and nonlegislative rules, see Gersen, Legislative Rules Revisited, University of Chicago Law Review, 2007, Special; 74 UCHILR 1705; 74 U. Chi. L. Rev. 1705. See also the decision by the great Judge Richard Posner in Hoctor v. U.S. Dept. of Agriculture, 82 F.3d 165 (7th Cir. 1996).

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If you would like to learn more about the distinction between legislative rules and nonlegislative rules, see Gersen, Legislative Rules Revisited, University of Chicago Law Review, 2007, Special; 74 UCHILR 1705; 74 U. Chi. L. Rev. 1705. See also the decision by the great Judge Richard Posner in Hoctor v. U.S. Dept. of Agriculture, 82 F.3d 165 (7th Cir. 1996).

?Even Big Cats are not safe outside their compounds, and with a lawyer?s ingenuity the Deparment?s able counsel reminded us??

??though one might have supposed the Big Cats able to protect themselves against the native Indiana fauna.?

?The Department?s counsel made the wonderful lawyer?s argument??

?But our task in the case is not to plumb the mysteries of legal theory??

?But we attach no weight to the Department?s inconsistency??

Thank you! Thank you! Thank you! for introducing me to this Judge!

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Judge Posner is one of the most brilliant men in this country. He is the author of many books and articles and the leader of the Law and Economics movement. Some of his titles are:

Law and Economics

The Crisis of Capitalist Democracy

How Judges Think

Breaking the Deadlock: The 2000 Election, the Constitution, and the Courts

Sex and Reason

Not A Suicide Pact: The Constitution in a Time of National Emergency

Preventing Surprise Attacks: Intelligence Reform in the Wake of 9/11

There are many, many more. He teaches at the University of Chicago Law School. He and Nobel Prize Winning economist Gary Becker maintain a blog at http://www.becker-posner-blog.com/.

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I agree with Vern that CO's price contracts, but I would argue that contractors price subcontracts and 31.102 reads to me as in the pricing of new fixed-price contracts and subcontracts (not just modifications) the contractor shall follow the cost principles. This seems to be placing a requirement on the subcontractor to price the proposal honoring the cost principles and a requirement on the contractor to ensure as much. This is all prior to the award of a contact, outside the scope of the COs task and independent of the negotiation of FPRAs or final indirect cost.

garth,

I think that you are misinterpreting FAR 31.102. Here's what it says:

The applicable subparts of Part 31 shall be used in the pricing of fixed-price contracts, subcontracts, and modifications to contracts and subcontracts whenever (a) cost analysis is performed, or (B) a fixed-price contract clause requires the determination or negotiation of costs.

In accordance with FAR 1.108(f), the contracting officer is responsible for this action. See FAR 1.108(f):

Imperative sentences. When an imperative sentence directs action, the contracting officer is responsible for the action, unless another party is expressly cited.

Applying the requirement at FAR 31.102 to a contractor would not be interpreting the FAR in accordance with FAR 1.108(f).

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Jacques, are you reading that exemption under 5 USC 553(a)(2) as exempting the FAR from APA or just the portion addressing Rule Making?

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If you would like to learn more about the distinction between legislative rules and nonlegislative rules, see Gersen, Legislative Rules Revisited, University of Chicago Law Review, 2007, Special; 74 UCHILR 1705; 74 U. Chi. L. Rev. 1705. See also the decision by the great Judge Richard Posner in Hoctor v. U.S. Dept. of Agriculture, 82 F.3d 165 (7th Cir. 1996).

Vern, can you explain to me again why this would not apply the Title 48 of the CFR?

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Don, If a CO priced an action would it not be a contract - as opposed to a subcontract?

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