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Okay, I read the plaintiff-appellant's brief to the Federal Circuit, and it light of its contents it is clear to me that the Federal Circuit's holding is not what it seems.

The court did not make a distinction between commercial items contracts and service contracts. The court made a distinction between commercial items contracts and non-commercial service contracts. The court decided that the contract in question, which did include FAR 52.212-4, was not, in fact, a commercial items contract and that the clause thus did not apply. Think of the decision as applying the Christian Doctrine in reverse.

The government acknowledged that the contract was not, in fact, a commercial items contract, but argued that the court should apply the termination provision of 52.212-4 anyway, because by its own terms the clause was not restricted in its application to contracts for commercial items. The Court of Federal Claims bought the government's argument, but the Federal Circuit did not.

Sometimes court decisions are badly written. JKB Solutions and Services v. U.S. is badly written, but I think it's a good decision.

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Vern, so, the court is not plainly stating that a service does not qualify as a commercial item when it says,

"But,  as  explained  below,  FAR 52.212-4  governs  the  termination  of  commercial  item  contracts  for  the government’s  convenience,  and  it  does  not  apply  to  service  contracts,  such as  the  contract  at  issue  in this case.2"

I don't buy your view...yet. Do you have anything more to add that might convince me?

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On 11/20/2021 at 8:40 AM, FAR-flung 1102 said:

I don't buy your view...yet. Do you have anything more to add that might convince me?

Uhh, I'm not trying to sell my view. I just reported my conclusion, which is based on my reading of the decision and the plaintiff-appellant's brief.

But in order to better inform you, let me refer you to the court's decision in CGI Federal, Inc. v. U.S., 779 F.3d 1346 (2015), a bid protest decision written by Judge Moore, now the chief judge and one of the judges on the JKB Solutions and Services decision at issue. The procurement in CGI was for services. In the decision she wrote:

Quote

FAR Part 12 was created to implement FASA. FAR Part 12 states that it “shall be used for the acquisition of supplies or services that meet the definition of commercial items.” 48 C.F.R. § 12.102(a).  

Emphasis added.

So Judge Moore clearly believed in 2015 that a service can be procured as a commercial item under FAR Part 12. And we know that in JKB she read an appellate brief that quoted and discussed the definition of commercial items in FAR 2.101. Nothing in the language of the JKB decision states that services cannot be procured under FAR Part 12. It merely makes a distinction between a contract for commercial items and the particular service contract involved in the dispute.

The phrase "service contract" appears in only seven sentences in the decision. Here they are, with emphasis added:

  1. Because that clause does not apply to JKB Solutions’ service contract, we vacate and remand for further proceedings.
  2. On appeal, JKB Solutions principally argues that the termination for convenience clause of FAR 52.212-4 does not apply to its service contract.
  3. But, as explained below, FAR 52.212-4 governs the termination of commercial item contracts for the government’s convenience, and it does not apply to service contracts, such as the contract at issue in this case.
  4. For purposes of its summary judgment motion, the government did not dispute JKB Solutions’ characterization of the contract as a service contract (and not a commercial item contract).
  5. The FAR’s own distinction between termination for convenience clauses based on types of contracts confirms that FAR 52.212-4’s termination for convenience clause does not apply to JKB Solutions’ service contract.
  6. In JKB Solutions’ opposition to the government’s motion for summary judgment, JKB Solutions argued that FAR 52.212-4’s termination for convenience clause “is inapplicable here because it concerns only Commercial Item contracts whereas the present dispute concerns a Service Contract.
  7. As noted, FAR 52.212-4 applies only to contracts for the acquisition of commercial items; it has no effect on the service contract between JKB Solutions and the government.

In each sentence the court makes a distinction between contracts for commercial items in general and the particular service contract involved in the dispute, which is exactly what the plaintiff-appellant asks it to do in its brief. That particular service contract did not buy a commercial item, and thus it should not have included the clause at 52.212-4.

I want to be on record as saying that I'm not selling my view. I'm giving it away in an attempt to stop an incipient and unjustified freakout among the cluelessBut I enjoy a good panic every once in a while. It's good for laughs.

😊

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15 hours ago, Vern Edwards said:

The court did not make a distinction between commercial items contracts and service contracts. The court made a distinction between commercial items contracts and non-commercial service contracts. The court decided that the contract in question, which did include FAR 52.212-4, was not, in fact, a commercial items contract and that the clause thus did not apply. Think of the decision as applying the Christian Doctrine in reverse.

A slightly different opinion by me - after reading, I think the distinction is fairly clear.  The court could have done a better job with wording, but I understood what they meant.

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What bothers some readers of the Federal Circuit's decision are two sentences:

  1. But, as explained below, FAR 52.212-4 governs the termination of commercial item contracts for the government’s convenience, and it does not apply to service contracts, such as the contract at issue in this case.
  2. As noted, FAR 52.212-4 applies only to contracts for the acquisition of commercial items; it has no effect on the service contract between JKB Solutions and the government.

In order to understand the decision you have to understand the plaintiff-appellant's argument, which is set forth in its brief to the Federal Circuit.

In referring to "service contract," the court meant a noncommercial service contract. They were not making a distinction between commercial items contracts and service contracts, but between commercial items contracts for services and contracts for noncommercial services. Why do I think that?

The court said: "On appeal, JKB Solutions principally argues that the termination for convenience clause of FAR 52.212-4 does not apply to its service contract." So I read JKB's argument, which appears in its appellate brief. Here is the pertinent part that argument:

Quote

 

As the above definitions [the definitions of commercial items in FAR 2.101, paragraphs (1), (5), and part of (6)] explain, a commercial items contract is intended to allow the government to obtain items which are ordinarily sold to the public, in large quantities, in the commercial marketplace. While FAR 2.101(6) can apply to certain types of services which are “offered and sold competitively in substantial quantities in the commercial marketplace,” this is clearly not the case with the present Contract. JKB taught classes only to U.S. government personnel. This is the only service that JKB provided, and it is not a type of service which is offered in substantial quantities in the commercial marketplace. In fact, by definition, this is not a service that could ever be offered in the commercial marketplace in any form, since the classes were provided exclusively on United States military installations to government personnel. Therefore, FAR 52.212-4 does not apply because the Contract at issue in this appeal is a service contract and not a commercial items contract.

It is important to understand that FAR 52.212-4, upon which the government completely relies, is not a stand-alone provision. Rather, it is merely a clause that supplements FAR Part 12, which applies only to commercial items contracts, not to contracts such as this “Contract” that are not unique to the acquisition of commercial items. This concept is explained in FAR 52.101, which describes how FAR Part 52 works. Under that section's numbering scheme, the two digits following “52.2” correspond to the FAR provision which is being supplemented. FAR 52.101(a). Therefore FAR 52.212-4 is part of FAR Part 12.

FAR 12.000 explains the scope of Part 12, and states, “This part prescribes policies and procedures unique to the acquisition of commercial items.” FAR 12.000 (emphasis added). If that were not clear enough, FAR12.1029(a) [sic] states, “[FAR Part 12] shall be used for the acquisition of supplies or services that meet the definition of commercial items at 2.101” (the definitions section). FAR 12.102(d) again clarifies that the definition of commercial items is the same one outlined in FAR 2.101, and states that commercial items contracts are for purposes “that are not unique to a government.” FAR 12.102(d).

Furthermore, FAR 12.207 explains what type of contracts may be used to acquire commercial items. With the exceptions of time-and-materials and labor hour contracts, commercial items must be procured through fixed price contracts. While FAR 12.207(c) does allow Indefinite Quantity contracts for commercial items, this only applies when the fixed price of the commercial item is set forth in the prime contract. This is not the case in the present Contract, wherein the prime contract did not contain fixed prices for the classes but only estimates, and the government has admitted that the only way to order classes was via Task Orders.

FAR 12.207(e) explicitly states that the use of any other type of contract for commercial items is prohibited. FAR 12.207(e). FAR 16.202-2 confirms this, stating that a fixed price contract is suitable for the acquisition of commercial items when certain conditions are met. It is undisputed that the Contract at issue here is an IDIQ service contract under which classes were ordered via Task Orders. (Appx0589). It was neither a fixed price contract, nor a commercial items contract. Therefore, FAR Part 12, of which FAR 52.212-4(l) is a part, simply does not apply.

In its Opinion, the Court of Claims acknowledged that FAR 52.212-4(l), upon which the government relies to overcome the threshold requirement, was intended to apply to a “different sort of contract,” from the service Contract at issue here, but nonetheless found that “Nothing in the FAR limits the applicability of Section 52.212-4(l) to commercial item contracts.” (Appx0004). This legally is incorrect. Contrary to the Court of Claims' Opinion, the applicability of FAR Part 12, and therefore of FAR 52.212-4(l) which supplements it, is limited only to commercial items contracts and may not be used to terminate a contract for non-commercial items services. The incorporation of FAR 52.212-4(l) into government contracts is regulated under FAR 12.301(b). That provision requires Contracting Officers to insert the termination for convenience clause “in solicitations for the acquisition of commercial items, and clauses in solicitations and contracts for the acquisition of commercial items.” Because the contract at issue is not a commercial items contract, FAR 52.212-4(l) is inapplicable and the Claims Court's ruling otherwise is legal error.

 

Note the acknowledgement in the first paragraph that some kinds of services are commercial items and can be procured under FAR Part 12.

In short, what JKB argued was that the contracting officer could not terminate the service contract for convenience because it did not include an applicable termination clause. FAR 52.212-4, which was in the contract and includes a T for C paragraph, was not applicable because the contract was not for a commercial service. The Court of Federal Claims said that the clause could be applied anyway, because the clause itself does not say that could not be applied to noncommercial service contracts. That was a dumb, even shameful argument by the government and a dumber decision by the court. See FAR 1.401(c) and 1.403.

The Federal Circuit overruled the claims court because it erred, and sent remanded the case for reconsideration. In so doing the Federal Circuit did not say that there is a distinction between commercial items contracts and service contracts or that you cannot have a commercial items contract for services. It made a distinction between contracts for commercial services and contracts for noncommercial services and said that a clause for commercial services cannot be applied to a contract for noncommercial services.

The courts don't write case reports to teach people, but to explain their decisions. They do not write for laypersons. They did not do good jobs of explaining themselves in this case.

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The court described the contract as a--

Quote

...contract for instructor services for the Operational Contract Support course. Military personnel enroll in the course to learn, inter alia, “contractor management” and the “development of acquisition-ready requirements packages.” J.A. 121. Under the contract, JKB Solutions agreed to provide instructional services to support a maximum of fourteen classes per year.

Based on this extract, I agree with the decision.

The term "commercial item" is defined in FAR 2.101.  There are eight numbered definitions.  Paragraphs (5) and (6) apply directly to services, and neither of these seem to reach the facts of this case.  I'm not certain, but I feel comfortable saying that these classes for “contractor management” and the “development of acquisition-ready requirements packages” are probably not offered and sold competitively in substantial quantities in the commercial marketplace based on established catalog or market prices.  If so, then the contract is not a contract for commercial items.  

Sure, teaching happens in the commercial marketplace.  Sure, classes are offered in the commercial marketplace.  But that isn't good enough -- one actually has to read the definition of commercial item in FAR 2.101, particularly paragraphs (5) and (6) for services.  Even if similar classes are offered offered and sold competitively in substantial quantities in the commercial marketplace based on established catalog or market prices, I doubt that "instructional services" are offered and sold competitively in substantial quantities in the commercial marketplace based on established catalog or market prices.  And this contract wasn't for classes, it was for instructional services.

An illustration:  If I want a hamburger for lunch, I can (1) buy a hamburger (a supply contract); or (2) hire a chef (a service contract).  Then, whether or not that contract is a contract for commercial items depends on the definition of commercial item in FAR 2.101.

Maybe, the outcome might have been different if the contract was for classes instead of for instructional services.  These are different.

 

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I have long been told that many of the lawyers and most of the judges that handle these kinds of cases don't really understand government contracting. Over the course of time I have come to believe that what I have been told is true and I have seen it to be true many times. But I have never seen that truth demonstrated as dramatically as I did when I listened to the oral argument before the Federal Circuit in this case.

Go here: https://cafc.uscourts.gov/home/oral-argument/listen-to-oral-arguments/

In the search box type JKB Services and Solutions and download the mp3 file and listen. The argument lasts slightly longer than 50 minutes. The judges are Moore, Newman, and O'Malley. The volume is low and you may need earphones.

Prepare to be shocked.

Here at Wifcon we are used to beginners asking questions using the wrong terminology and being confused about concepts. We have seen people think that "commercial items" refers to things, not services, even after they've read the definition of commercial items and been reminded that commercial items include services. We have seen them confuse "clauses" and "provisions." We have had to explain how FAR definitions, policies, provision and clause prescriptions, and provisions and clauses are connected. But you might not be ready for what you're going to hear in that oral argument.

The good news is that what I heard confirmed what I have long believed: The contracting system is a mess, so the government needs experts in contracting to protect its interests. Contracting officers must be those experts. COs must not go to lawyers for explanations, they must go to lawyers to explain. And in order to be experts would-be contracting officers must read and study and think and discuss and read and think some more throughout their professional careers, in order become and remain expert. And given the importance of contracts and contracting to our contracted-out government, on which the security of our country and the well-being of our citizens depend, they must treat that necessity as a duty.

We will make mistakes. But beyond understandable and forgivable mistakes, half-baked thought and work is dereliction of duty and cause for shame.

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Vern,

Shocked I am.  I have never been before or heard contract law proceedings until now.  The exception is the old GSBCA on IT matters.  But I expected someone well versed and highly knowledgable in the subject.

I also totally agree with your assessment that Contracting Officers need to become the experts rather than deferring to lawyers.  Even here, “go ask your attorney” seems to be the advice frequently given instead of “check these for information.”

Getting people to that level is the challenge.  Until the bar for rewards and advancement gets raised to where demonstrated expertise and success counts, we seem stuck on marginal performers and risk adverse people advancing just because they spend the time in the job.

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@formerfedI have been told that the judges on the Federal Circuit are patent attorneys, not contract law attorneys.

The following is from a very famous case:

Quote

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. 

See G. L. Christian and Associates v. U.S., 320 F.2d 345, 351  (1963). I was taught that. I have believed that and taught it to others, but it is wrong.

During the oral argument at the Federal Circuit one of the judges asked the plaintiff's attorney why, if the contract was not for commercial items and inclusion of FAR 52.212-4 was improper, his client did not object to the terms of the contract before signing. The lawyer was unable to answer. The answer is that his client didn't have a clue until it got into a dispute with the government and had to hire an attorney.

The "published directives" today are so voluminous, so convoluted, and change so often that the government cannot reasonably expect to attract more companies to do business with it and hold them responsible to know and understand what its own employees don't know and understand. Congress should enact legislation if necessary to overrule that holding of the old Court of Claims, which was the predecessor to the Federal Circuit.

The government's contracting officers must be held responsible to (1) comply with the rules and (2) be able to explain the rules to clueless prospective contractors. The idea that companies that are not traditional defense contractors like Boeing, Lockheed, Northrop Grumman, and others like them should know the rules and understand what they're getting themselves into is ridiculous, especially when the contracting officers who must comply (see FAR 1.602-1(b)) and the judges who must decide cases don't know.

Just my two cents worth.

 

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6 hours ago, formerfed said:

Getting people to that level is the challenge.  

People have to get themselves to that level. I did, and if I did, anyone can.

Read and study and think and discuss and read and think some more. And reject all opinions from opinionators who cannot or will not justify their opinions on the basis of established facts and clear, sound reasoning. Apply Hitchens's razor.

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17 hours ago, formerfed said:

Shocked I am.  I have never been before or heard contract law proceedings until now.  The exception is the old GSBCA on IT matters.  But I expected someone well versed and highly knowledgable in the subject.

Don’t believe that the “old GSBCA” necessarily was competent in IT matters. Congress repealed the Brooks IT Act and GSBCA’s jurisdiction over all agency Federal Information Processing (“FIP”) acquisitions in the mid 1990’s.

The FIP regulations put a stranglehold on DoD agency acquisitions for such innocuous things as controls for HVAC systems, fire alarm systems or any other building system that had chips and when a building’s utility monitoring and control systems used only one desktop computer.

Unsuccessful proposers on BV Tradeoffs routinely appealed to GSBCA, delaying acquisitions for months (in one case for a year). An appeals court finally ruled that such systems were not “FIP”, removing GSBCA from protest jurisdiction over routine DoD agency construction contracts.

 

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1 hour ago, joel hoffman said:

Don’t believe that the “old GSBCA” necessarily was competent in IT matters.

I didn’t mean the GSBCA was competent.  I meant I personally had never heard any proceedings before except the GSBCA.   A lot depended on which judges heard the cases.  The Board started out with some poor decisions but got better over time.

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You should start a GSBCA thread. Of course, it doesn't exist today and hasn't existed since 2006.

Why not post something other than reminisces of the dead past—something informative, that would help people learn? Isn't that what people say we're supposed to do?

https://www.cmaanet.org/sites/default/files/2018-04/THE NEW BOARDS OF CONTRACT APPEALS - ARE THEY STILL RELIABLE.pdf

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=521042

https://core.ac.uk/download/pdf/235402767.pdf

https://www.wardberry.com/govcon/contract-disputes-act-forum-selection/

https://www.hklaw.com/en/insights/publications/2018/08/cbca-issues-new-rules-of-procedures

 

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Good point . Will delete. But remember that you discussed the competency in contracting decisions  of various judicial jurisdictions in this thread.  

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44 minutes ago, joel hoffman said:

But remember that you discussed the competency in contracting decisions  of various judicial jurisdictions in this thread.

@joel hoffmanI didn't use the word "competency." I spoke mainly about the responsibility of contracting officers and recommended listening to the oral argument at the Federal Circuit.

The GSBCA was history in 2006 and, if I remember correctly, its authority to decide IT protests ended in 1995, 25 years ago. That is ancient history. You and I are ancient, too. If we're going to tell war stories we should tell ones that have some bearing on now. Otherwise, young people will think Wifcon is Geezerville.

 

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On 11/22/2021 at 12:31 PM, Vern Edwards said:

I have long been told that many of the lawyers and most of the judges that handle these kinds of cases don't really understand government contracting. Over the course of time I have come to believe that what I have been told is true and I have seen it to be true many times.

Vern, please excuse me for thinking that you were referring to competency issues “over the course of time.”  Yes and why would their successors be extremely better? 

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On 11/22/2021 at 7:19 PM, Vern Edwards said:

I have been told that the judges on the Federal Circuit are patent attorneys, not contract law attorneys

I got curious and looked over the experience of each judge.  Most were very heavily involved with patent and trademark issues.  A few looked like patent law is the only thing they did with their practice.  Contract law didn’t show for any.

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  • 2 weeks later...

I'm going to get into the weeds here.  Per the decision, these were services where, "Military personnel enroll in the course to learn, inter alia, 'contractor management' and the 'development of acquisition-ready requirements packages.'"  Sounds to me like courses for CORs.  Per the oral arguments on September 2, 2021, though, JKB's lawyer alluded that these were services for, "[T]eaching government employees government regulations that they will utilize as government contracting officers to procure goods for the government."  If this contract were written by COs acquiring professional expertise to teach other COs the regulations, then the irony that neither side of the contract could make a logical argument about the FAR in court would be quite thick.  If these courses were not for COs, then JKB's oral argument last September was even less defensible, and all its arguments lose a bit of credibility.

I was curious about an answer to this, so I tracked the award down on USAspending.gov:  IDV to JKB SOLUTIONS AND SERVICES, LLC | USAspending.  The description of this contract at the link says the Army Logistics University (ALU) at Ft. Lee required these services for its Operational Contract Support courses.  From the ALU's website, About Us link, I found "The College of Professional and Continuing Education [CPCE] conducts functional education and training of military and civilian students in the areas of...acquisition and contracting education for both acquisition career field officers and civilians, and non-contracting professionals in the area of operational contracting support."  The course being procured by this IDV falls under ALU CPCE's curriculum for non-contracting professionals, and is therefore not, "Teaching government employees government regulations that they will utilize as government contracting officers", contrary to JKB counsel's oral argument.

Flying back up to 30,000 ft, I have an observation.  We look up to experts in our career field.  A lot of people go work in niche fields so they can be experts and have people seek them out.  DCAA and DCMA are full of these experts, holding down some of the best job security in the American economy.  Northrop Grumman, Lockheed, etc. compliance departments and counsel are as well.  The money is in expertise!  I think it only natural for the complexity of rules to deepen in government contracting when the incentives of higher pay and lifelong security are linked to that complexity.  I would argue confusing regulations like the Contractor Business Systems rules, CAS, etc. created excellent niches for people in DCMA and in large businesses - so no one hesitates to act like a little economic unit, and go pursue the jobs associated with these rules.  The reformers that want government contracting to just go commercial must be aware that subconscious bias and concerns for financial hygiene are operating against them all throughout the ranks, on both sides of contracts.

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On 11/22/2021 at 9:12 AM, ji20874 said:

…offered and sold competitively in substantial quantities in the commercial marketplace based on established catalog or market prices.  And this contract wasn't for classes, it was for instructional services.

WifWaf,  It apparently wasn’t a commercial services contract because the contractor won’t  provide contractor pre-developed class curricula sold at established catalog prices or market prices. 

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