Jump to content

Post-Performance Breach


Recommended Posts

Let's say I have a DOD cost-type contract that requires a CDRL (Contract Data Requirements List) deliverable to be submitted 60 days after the end of the contract's Period of Performance (PoP). As the contractor, I have agreed to submit it. But I have failed to do so. Doesn't matter why. I'm not going to submit the required CDRL.

From my point of view the contract is over. The PoP is over and my invoice has been submitted (and paid). I'm not going to submit any future invoices, unless my rates change through DCAA audit. Even if the rates do change, I don't expect them to change significantly--so I'm willing to waive any increased costs that I could bill. (Obviously, if the rates go down I'll pass on a credit.)

Technically, I suppose, I'm in breach because I failed to comply with the requirements in the CDRL. So what?

What remedies does the government have in this situation?

Link to comment
Share on other sites

From my point of view the contract is over.

1 hour ago, here_2_help said:

Let's say I have a DOD cost-type contract that requires a CDRL (Contract Data Requirements List) deliverable to be submitted 60 days after the end of the contract's Period of Performance (PoP). As the contractor, I have agreed to submit it. But I have failed to do so. Doesn't matter why. I'm not going to submit the required CDRL.

From my point of view the contract is over. The PoP is over and my invoice has been submitted (and paid).

Wrong. The contract is not over until all parties have been discharged. The "period of performance" is only one term of a contract. See Restatement of the Law, Second, Contracts § 235:

Quote

Effect of Performance as Discharge and of Non-Performance as Breach:

(1) Full performance of a duty under a contract discharges the duty.

(2) When performance of a duty under a contract is due any non-performance is a breach.

It ain't over until all of it is over.

If your statement really reflects your point of view, then you don't understand the concept of "period of performance." Most COs don't, either. Nor do many agency lawyers. FAR neither defines nor explains the concept, probably because it's not a textbook, and few people think beyond the FAR.

As for what happens if you breach, ask the other party. Depending on what that CDRL item is, failure to deliver as required might be very costly. 

Link to comment
Share on other sites

1 hour ago, Vern Edwards said:

FAR neither defines nor explains the concept, probably because it's not a textbook, and few people think beyond the FAR.

AMEN! 

Link to comment
Share on other sites

2 hours ago, Vern Edwards said:

From my point of view the contract is over.

Wrong. The contract is not over until all parties have been discharged. The "period of performance" is only one term of a contract. See Restatement of the Law, Second, Contracts § 235:

It ain't over until all of it is over.

If your statement really reflects your point of view, then you don't understand the concept of "period of performance." Most COs don't, either. Nor do many agency lawyers. FAR neither defines nor explains the concept, probably because it's not a textbook, and few people think beyond the FAR.

As for what happens if you breach, ask the other party. Depending on what that CDRL item is, failure to deliver as required might be very costly. 

Thank you, Vern. I'm seeking some follow-up information, if you would.

What is the purpose of a PoP, if not to signal contract completion to the parties? Why is it important?

Link to comment
Share on other sites

10 hours ago, here_2_help said:

What is the purpose of a PoP, if not to signal contract completion to the parties? Why is it important?

A PoP is written into the contract (services (not including construction) in experience) as a time constraint on the contractor to complete a task or a number of tasks (SOW/PWS). Other terms used, such as Notice to Proceed (NTP) and After Receipt of Order (ARO), apply the same constraint:

         - Construction NTP – Once issued, you have 400 days to complete.

         - Supply ARO – Once received, you have 30 days to deliver.

These time constraints only apply to the contractor and do not limit the government from accepting supplies, services or construction after their expiration.

Only one aspect of a contract. Performance and payment bonds in construction must be received before a NTP can be issued. PoP in services generally do not include providing final invoice, release of claims and other final items needed to close out the contract. What about the hundreds of thousands of contracts across the federal government that haven't been closed out because the contractors have not invoiced for remaining $8 left on the order?

I am sure Vern's advisement will be more informative, but it has been a slow morning so thought I would give it a go. 

Link to comment
Share on other sites

12 hours ago, here_2_help said:

What is the purpose of a PoP, if not to signal contract completion to the parties? Why is it important?

Let's note that "PoP" is regularly misused in place of more proper terms such as "delivery date" or "completion date" (your original post was not specific as to if this was a supply, service, or project) - I have seen many a contracting practitioner worry or fall prey to a contractor's claim that they could not continue to work beyond the contract's "PoP" and, in some cases, improperly extend the "PoP" without any consideration. The reality is that the contractor could continue to work and that their delivery or completion would just be considered late (based on the "PoP" dates established by the two parties in the contract). An expiration of a "PoP" is not a license to stop fulfilling one's contractual commitments - just consider how a contractor might feel if the government chose to stop paying invoices once a "PoP" ends because it allegedly signals contract completion to the parties...

Link to comment
Share on other sites

@here_2_helpKeep in mind that the following comments are made in the context of this:

On 8/30/2021 at 3:24 PM, here_2_help said:

Let's say I have a DOD cost-type contract that requires a CDRL (Contract Data Requirements List) deliverable to be submitted 60 days after the end of the contract's Period of Performance (PoP). As the contractor, I have agreed to submit it. But I have failed to do so. Doesn't matter why. I'm not going to submit the required CDRL.

From my point of view the contract is over. The PoP is over and my invoice has been submitted (and paid).

Now, here's your question:

On 8/30/2021 at 6:24 PM, here_2_help said:

What is the purpose of a PoP, if not to signal contract completion to the parties? Why is it important?

The purpose of a "period of performance" is not "to signal contract completion to the parties." The purpose of a "period of performance" is to specify the period of time within which the contractor must perform and complete the work it has promised to do.

The principal contract performance requirements must be specified in contract line items. There must be a separate contract line item or subline item for each contract "deliverable," and each line item must have a "separate delivery schedule, destination, period of performance, or place of performance." See FAR 4.1001, 4.1003(d), Subpart 11.4, 14.201-2(f), and 15.204-2(f). Any contract that has more than one line item must have more than one period of performance, delivery schedule, or completion date, even if all the dates are the same.

There really is no such thing as a "contract period of performance," even though FAR uses that phrase in three places. (See FAR 11.501, 16.401, and 16.504). Contracts have line item and subline item periods of performance.

But contracts impose other obligations on the parties in addition to those specified in the contract line items. Many contract clauses impose obligations that continue in effect for years after the expiration of line item periods of performance. Here's one you'll know, from FAR 52.215-2, Audit and Records—Negotiation (JUN 2020): 

Quote

(f) Availability. The Contractor shall make available at its office at all reasonable times the records, materials, and other evidence described in paragraphs (a), (b), (c), (d), and (e) of this clause, for examination, audit, or reproduction, until 3 years after final payment under this contract or for any shorter period specified in subpart  4.7, Contractor Records Retention, of the Federal acquisition Regulation (FAR), or for any longer period required by statute or by other clauses of this contract.

That obligation remains in effect for years after the end of the period of performance and final payment. A warranty on a roof installed under a construction contract may be in effect for as long as 20 years after completion and acceptance of the work and final payment. A conntract is not "over" as long as any obligation has not been discharged by performance, expiration, mutual agreement, or termination.

See Restatement of the Law, Contracts, Second § 235, to which I referred in my first response to you. Here it is again:

On 8/30/2021 at 3:48 PM, Vern Edwards said:

§ 235. Effect of Performance as Discharge and of Non-Performance as Breach

(1) Full performance of a duty under a contract discharges the duty.

(2) When performance of a duty under a contract is due any non-performance is a breach.

Here is an accompanying comment in the Restatement:

Quote

a. Discharge by performance. Under the rule stated in Subsection (1), a duty is discharged when it is fully performed. Nothing less than full performance, however, has this effect and any defect in performance, even an insubstantial one, prevents discharge on this ground. The defect need not be wilfull or even negligent. Although a court may ignore trifling departures, performance that is merely substantial does not result in discharge under Subsection (1).

The Government bears such obligations, as well. A contractor may file a claim at any time within six years of its accrual, and a contracting officer is obligated to make a final decision on such claims within a specified time period thereafter. See FAR 33.206 and 52.233-1. A claim might come in years after the end of the period of performance of a line item from which it arises.

In the case you described in your opening post, you spoke of a data item listed in a Contract Data Requirements List (CDRL), DD Form 1423. If that CDRL was a DOD contract exhibit, then it was identified in a line item. The CDRL form is a convenience, because each data item is a separate deliverable with its own delivery date(s). It eliminates the necessity of creating what might otherwise be a long list of contract line items.

It is not unusual for data items to be deliverable after the end of the period of performance of the work that generated the data, specified in a different line item. You didn't say what the data item was. It could have been a mere status report or crucially important technical data. To say that the contract is "over" before that and other continuing obligations have been discharged by performance, mutual agreement, termination, or expiration, is to misunderstand the concepts of "period of performance" and contractual obligation.

The regulations and our "profession" are very careless with concepts and terminology, sloppy even, and goodness knows we don't educate newbies well.

But somehow, here_2_help, knowing you, I suspect that you already knew all this, but wanted to see something posted in which some independent source confirmed it, perhaps for the benefit of some clueless third party.

Please forgive any typos in this post. It's long and I'm tired.

Vern

 

Link to comment
Share on other sites

Addendum to my last post.

The phrase "period of performance" has been used in government contracts since at least the middle of the 19th Century. The earliest case to mention it was an 1875 decision of the U.S. Court of Claims. The phrase has been used rather indiscriminately in supply contracts, service contracts, and construction contracts.

It has appeared in 420 Court of Federal Claims (and predecessors) decisions, 1,634 board of contract appeal decisions, and 1,094 GAO decisions.

It appears in 18 places in the United State Code, including nine places in Title 10, but nowhere in Title 41.

It appears in 298 places in the Code of Federal Regulations.

It appears in the FAR itself 41 times, but is not defined. It appears in the entire FAR System (FAR + supps) 121 times, but is not defined in any of the FAR supplements.

If you look it up in the online DAU Glossary of Defense Acquisition Terms and Acronyms the entry reads, "See also fiscal year." That's it.

There is no entry for it in the recently released 5th edition of The Government Contracts Reference Book.

The term does not appear in Black's Law Dictionary.

In my opinion it is closer to jargon than to a term of art, because usage is inconsistent.

Link to comment
Share on other sites

33 minutes ago, Vern Edwards said:

@here_2_helpKeep in mind that the following comments are made in the context of this:

The principal contract performance requirements must be specified in contract line items. There must be a separate contract line item or subline item for each contract "deliverable," and each line item must have a "separate delivery schedule, destination, period of performance, or place of performance." See FAR 4.1001, 4.1003(d), Subpart 11.4, 14.201-2(f), and 15.204-2(f). Any contract that has more than one line item must have more than one period of performance, delivery schedule, or completion date, even if all the dates are the same.

There really is no such thing as a "contract period of performance," even though FAR uses that phrase in three places. (See FAR 11.501, 16.401, and 16.504). Contracts have line item and subline item periods of performance.

But contracts impose other obligations on the parties in addition to those specified in the contract line items. Many contract clauses impose obligations that continue in effect for years after the expiration of line item periods of performance. Here's one you'll know, from FAR 52.215-2, Audit and Records—Negotiation (JUN 2020): 

Vern,

Thank you. This has been very helpful. And while I knew some of your information, I didn't not know it all. As Matthew F. noted, many people (including contracting officers) place an undue emphasis on Period of Performance with respect to what can or cannot be invoiced to a government customer as an allowable contract cost. Your response helped me clarify my position on the matter and gave me solid talking points to take back to [contracting officer].

Finally, for those wondering, my issue was with respect to a supply contract where the item supplied has been inspected/accepted and the associated invoices have been paid. There are a few straggling deliverables (status reports, not tech data), and it has been "suggested" that [contractor] not invoice such costs because they are properly contract close-out costs and should be charged to overhead.

I thought I'd throw the issue out and see what came back. As usual, I'm gratified at the responses. Thank you all.

Link to comment
Share on other sites

H2H,  you mentioned close-out costs.  Have you looked at FAR 4.804-4?  In your view, is this contract physically complete so that it is a candidate for close-out?

You asked about government remedies.  You said this is a cost reimbursement contract.  The discussion of what constitutes a default is limited in these circumstances.  However, it could be possible that the contractor is in default and subject to termination for that default.  Also, the government could write a derogatory CPARS on the contractor.

Link to comment
Share on other sites

1 hour ago, Retreadfed said:

However, it could be possible that the contractor is in default and subject to termination for that default. 

If I were the CO I wouldn't terminate for default. A T-for-D settlement of a cost-reimbursement contract is too generous to the contractor. Instead, I would send the contractor a claim for breach damages (assuming I could show them), write a final decision, and send the contractor a bill. If necessary I would recover through offset against other contracts. And then there's the CPARS.

Link to comment
Share on other sites

Retread,

Well, I think the term "physically complete" may be ambiguous. On one hand, everything that was supposed to be delivered was, in fact, delivered, inspected, accepted, and paid for. On the other hand, Vern points out that completion means, essentially, that all obligations have been discharged. Can a contract be physically complete without being complete? Only in government contracting ...

Can a contract be terminated for default after all deliveries have been made? It's not like the contractor didn't make progress. I think a court might find such a drastic sanction a bit untenable, but maybe that's my bias showing.

Finally, to Vern's latest point -- breach damages -- I think, in my [totally hypothetical] case at least, the government would be hard pressed to prove damages from a few reports that, at best, end up in a Fourth Estate file cabinet somewhere in a Pentagon annex.

Thanks for all the input.

Link to comment
Share on other sites

16 minutes ago, here_2_help said:

On one hand, everything that was supposed to be delivered was, in fact, delivered,

Not according to your outline of the facts.  The CDRL items were not delivered.  Because they were not delivered, they could not be inspected and accepted.  Further, because timely delivery of the CDRL items is an element of contract performance, it seems the contractor is in default on the contract.  In this regard, failure to make progress in not the only basis for a default under a cost reimbursement contract.  Failure to make progress is only one example of what constitutes a default.  What the contracting officer wants to do in light of this default is up to the contracting officer.

Link to comment
Share on other sites

2 minutes ago, Retreadfed said:

Not according to your outline of the facts.  The CDRL items were not delivered.  Because they were not delivered, they could not be inspected and accepted.  Further, because timely delivery of the CDRL items is an element of contract performance, it seems the contractor is in default on the contract.  In this regard, failure to make progress in not the only basis for a default under a cost reimbursement contract.  Failure to make progress is only one example of what constitutes a default.  What the contracting officer wants to do in light of this default is up to the contracting officer.

Fair point.

What do you suppose the value of the CDRL item(s) is? Let's assume that they were NSP (not separately priced). 

Shrug. I'm agreeing with you, basically. I just don't see how the fact pattern I came in with supports a T4D or even a breach damages kind of discussion. I fully agree the CPARS rating would suffer -- and should suffer.

Anyway, fun [totally hypothetical] discussion.

Link to comment
Share on other sites

20 minutes ago, here_2_help said:

Fair point.

What do you suppose the value of the CDRL item(s) is? Let's assume that they were NSP (not separately priced). 

Shrug. I'm agreeing with you, basically. I just don't see how the fact pattern I came in with supports a T4D or even a breach damages kind of discussion. I fully agree the CPARS rating would suffer -- and should suffer.

Anyway, fun [totally hypothetical] discussion.

The CDRL should be identified in a line item. Do you have a DD 250 or something equivalent showing the Government accepted what was provided under that line item?

Link to comment
Share on other sites

17 minutes ago, Don Mansfield said:

The CDRL should be identified in a line item. Do you have a DD 250 or something equivalent showing the Government accepted what was provided under that line item?

Nope

Link to comment
Share on other sites

Since it is hypothetical, I hope that the government would be smart enough not to make a final payment or closeout a supply (or any) contract until confirming that all contract deliverables have been delivered. 

Link to comment
Share on other sites

On 8/30/2021 at 6:24 PM, here_2_help said:

Period of Performance (PoP)

 

On 8/31/2021 at 10:18 AM, here_2_help said:

my issue was with respect to a supply contract

I was going to say that, IAW FAR 32.102(d), next time the USG should not authorize interim payments on a non-severable supply deliverable.  They could eliminate the term "Period of Performance" from the contract entirely and stick with a delivery date.  Until I read:

On 8/30/2021 at 6:24 PM, here_2_help said:

DOD cost-type contract

And I realized FAR 52.216-7(a) Invoicing would be in the contract.

Link to comment
Share on other sites

Guest
This topic is now closed to further replies.
×
×
  • Create New...