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What does FAR 1.602-3(c)(3) actually mean?? (The resulting contract would otherwise have been proper if made by an appropriate contracting officer;)


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I saw that there was already a post on here about ratification authority (Ratification Authority), but it didn't quite address this statement, so here I go.

I must confess that I've always had a hard time understanding this statement - mostly because of what it implies. Allow me to explain.

Based on a plain reading of this statement, it seems to imply that an action is only ratifiable if the contract would have been otherwise proper (i.e., followed all applicable regulations) except for the fact that it was someone without a warrant, or the appropriate warrant who made it.

I suppose this could be the case if the unauthorized commitment involved a person with an acquisition background (e.g., a CS or a CO acting outside of their COA) who knew about and followed applicable regulations about funding, set-aside requirements, competition, publicizing, evaluation and award, clauses, wage determinations, etc., but in my experience, most unauthorized commitments are made by non-acquisition personnel, who would not even know about most of the applicable regulations, let alone follow them.

So is it really the case that based on what the FAR says, the only way an unauthorized commitment can be ratified is if all the FAR requirements were followed and the only thing that was amiss was that the person who authorized the work did not have the authority to do so?? Seems to me that by that measure, most unauthorized commitments would not be ratifiable and would have to be handled by the GAO on the basis of quantum meruit pursuant to 31 U.S.C. § 71.

I found this letter from the GAO to DOJ on the subject (https://www.gao.gov/assets/b-204388 l/m.pdf), and if I'm reading it right, that's basically what the letter is saying.

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24 minutes ago, MileHighAcq said:

Based on a plain reading of this statement, it seems to imply that an action is only ratifiable if the contract would have been otherwise proper (i.e., followed all applicable regulations) except for the fact that it was someone without a warrant, or the appropriate warrant who made it.

That's exactly what it means. It doesn't "imply" it, it says it in no uncertain terms.

Of course, what it means in actual practice depends on contracting office management policy and judgment.

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Just now, Vern Edwards said:

That's exactly what it means. It doesn't "imply" it, it says it in no uncertain terms.

Of course, what it means in actual practice depends on contracting office management policy and judgment.

yeah, I guess that's what I was getting at...

similar to my last post on here about verbal orders/contracts, it seems like there's a big gap between what the regs say and what we do in actual practice.

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also, even from the perspective of the regs, that interpretation covers such a narrow band of unauthorized commitments (from my experience at least), why even bother with it - especially given the associated hassle (HCA approval).

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16 hours ago, MileHighAcq said:

there's a big gap between what the regs say and what we do in actual practice.

I would be interested in what you do or in other words an example of a ratification that you feel occurred that did not meet the "otherwise"?   

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12 hours ago, C Culham said:

I would be interested in what you do or in other words an example of a ratification that you feel occurred that did not meet the "otherwise"?   

I'm a procurement analyst, so I see my share of ratifications on their way to the HCA.

From what I've seen, many unauthorized commitments occur when a CO fails to exercise an option, but the contractor continues performance, often with the tacit approval of the COR. If the COR (or any other Government official for that matter) is aware of performance without a contract in place and doesn't take action to stop the performance, they've committed and unauthorized commitment. And since they did not make the determinations required by FAR 17.207(c) and did not extend the contract by written notice, I don't see how it's "otherwise appropriate".

Another common case is when a customer with a purchase card obtains services and they anticipate the work to come in below the micro (and sometimes they're unaware that the micro is $2,500 because the services are subject to the Service Contract Labor Standard), but when the bill comes in, it's over the micro. In such cases they committed and unauthorized commitment since they had no authority to bind the Government over the micro and had not followed publicizing, competition, set-aside, acquisition planning, etc. requirements, did not issue a written order, and if the Service Contract Labor Standards apply, would not have included a wage determination. Again, I don't see how that can be "otherwise appropriate" since it didn't follow basic regulatory requirements.

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On 5/19/2023 at 3:27 PM, MileHighAcq said:

Based on a plain reading of this statement, it seems to imply that an action is only ratifiable if the contract would have been otherwise proper (i.e., followed all applicable regulations) except for the fact that it was someone without a warrant, or the appropriate warrant who made it.

So, FAR 1.602-3(c)(3) says, "The authority in paragraph (b)(2) of this subsection may be exercised only when...[t]he resulting contract would otherwise have been proper if made by an appropriate contracting officer."  I think the use of the word, "resulting" here is meaningful.  To me, the focus of what (c)(3) is asking ratifying officials to consider is NOT whether FAR procedures preceding the unauthorized commitment were followed, but whether the actual content of the agreement is proper.

For what it's worth, the Army's 4th Operational Contracting Course Deskbook (at 2-21) identifies an improper contract as one involving an improper contract type or a contract prohibited by law.

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It seems the Department of Energy did not share my view that "otherwise proper" was solely about the substance of the agreement itself.  See 48 Fed. Reg. 43772 (Sept. 26, 1983) (proposed 48 CFR 901.603-71(b)) and 49 Fed. Reg. 11922 (Mar. 28, 1984) (final 48 CFR 901.603-71(b) provides in part, “As used herein, the phrase ‘otherwise proper’ means that a ratification of an unauthorized commitment can be made only if there occurred no violation of any substantive legal requirement; (e.g., there can be no ratification unless a sole source can be justified; a determination made that the contractor is not debarred or otherwise ineligible for award; the organizational conflicts of interests reviews and determinations, if required, are completed; and where all other substantive legal requirements have been met.”).  However, even under this interpretation, the agency can, after an unauthorized commitment, take steps that would make an otherwise improper contract proper.

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A good source of information about ratification is the Army Contract Attorneys Deskbook.

https://tjaglcs.army.mil/documents/35956/56922/2022+Contract+Attorney+Deskbook.pdf/9a2d2125-61b4-7dbe-8e1c-5ccf1339d9dd?t=1657901660444

The topic is discussed in several places, but see page 3-12 under the heading Unauthorized Commitments.

For an interesting GAO decision, see Maintenance Service & Sales Corporation, 70 Comp. Gen. 664 (Comp.Gen.), B- 242019 (1991). The agency refused to ratify because the unauthorized commitment did not comply with the Competition in Contracting Act. The company then applied to GAO for compensation on a quantum meruit basis, under which the standard is less strict than FAR.

 
 
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On 5/20/2023 at 7:02 PM, MileHighAcq said:

I'm a procurement analyst

Sorry was away for a few days.  Thank you.

Just because the discussion continues I do find it interesting that there seems a minor disconnect between the definition of  unauthorized commitment in FAR 1.602-3  and what it then takes for ratification at least by my read.   So what is an unauthorized commitment something done by an unauthorized person or something done by an unauthorized person who "otherwise" did not follow procedure?  

47 minutes ago, Vern Edwards said:

For an interesting GAO decision

Well I stopped researching as other stuff has taken over but I do wonder if somehow the quantum meruit ideal is somehow wrapped up in GAO Policy and Procedures Manual for Guidance of Federal Agencies, Title 4, Chapter 2 (FAR 1.602-3(d)) and if not why GAO would not defer to it as policy to resolve?    

I would think that rather than the HCA (or their delegated authority) doing something like this  - The request to ratify the unauthorized commitment by John Doe for your services of $2501 has been denied.  Your recourse now Contractor X is to seek resolution via GAO and GAO Policy and Procedures Manual for Guidance of Federal Agencies, Title 4, Chapter 2.

 The HCA/delegated authority might want to consider this - 

FAR 33.102 (b) If, in connection with a protest, the head of an agency determines that a solicitation, proposed award, or award does not comply with the requirements of law or regulation, the head of the agency may-

(1) Take any action that could have been recommended by the Comptroller General had the protest been filed with the Government Accountability Office;

 

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For another competition-related (though obviously pre-CICA) example, Nash & Cibinic, Federal Procurement Law (1977), at 71 states, "Where a contracting agency purchased spark plugs on a sole source basis in violation of statutes requiring formal advertising, the agency could not subsequently legitimize the transaction by classifying spark plugs as an experimental item subject to negotiated procurement."  15 Comp. Gen. 618 (1936).  Sorry that my earlier post is wrong.

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2 hours ago, Jacques said:

So, FAR 1.602-3(c)(3) says, "The authority in paragraph (b)(2) of this subsection may be exercised only when...[t]he resulting contract would otherwise have been proper if made by an appropriate contracting officer."  I think the use of the word, "resulting" here is meaningful.  To me, the focus of what (c)(3) is asking ratifying officials to consider is NOT whether FAR procedures preceding the unauthorized commitment were followed, but whether the actual content of the agreement is proper.

For what it's worth, the Army's 4th Operational Contracting Course Deskbook (at 2-21) identifies an improper contract as one involving an improper contract type or a contract prohibited by law.

yeah, that's what I was hoping the consensus would be - that it basically meant that unless the contract was somehow illegal (e.g., fraud involved), the action could be considered "otherwise proper". but I'm not so sure, because in the typical ratification cases I see, the action was done by a COR or an end user, so there's no contract in place at all prior to the ratification. in addition, the GAO letter to the DOJ that I cite in my initial post seems to support the case that "otherwise proper" means following the regulations, since they basically say that a contract that did not include the required wage determination is not "otherwise proper" and cannot be ratified, and therefore must follow the GAO procedures pursuant to 31 U.S.C. § 71 on the basis of quantum meruit .

1 hour ago, Jacques said:

It seems the Department of Energy did not share my view that "otherwise proper" was solely about the substance of the agreement itself.  See 48 Fed. Reg. 43772 (Sept. 26, 1983) (proposed 48 CFR 901.603-71(b)) and 49 Fed. Reg. 11922 (Mar. 28, 1984) (final 48 CFR 901.603-71(b) provides in part, “As used herein, the phrase ‘otherwise proper’ means that a ratification of an unauthorized commitment can be made only if there occurred no violation of any substantive legal requirement; (e.g., there can be no ratification unless a sole source can be justified; a determination made that the contractor is not debarred or otherwise ineligible for award; the organizational conflicts of interests reviews and determinations, if required, are completed; and where all other substantive legal requirements have been met.”).  However, even under this interpretation, the agency can, after an unauthorized commitment, take steps that would make an otherwise improper contract proper.

I'm  not a fan of this interpretation, but I think this is the most reasonable interpretation of FAR 1.602-3(c)(3).

1 hour ago, Vern Edwards said:

A good source of information about ratification is the Army Contract Attorneys Deskbook.

https://tjaglcs.army.mil/documents/35956/56922/2022+Contract+Attorney+Deskbook.pdf/9a2d2125-61b4-7dbe-8e1c-5ccf1339d9dd?t=1657901660444

The topic is discussed in several places, but see page 3-12 under the heading Unauthorized Commitments.

For an interesting GAO decision, see Maintenance Service & Sales Corporation, 70 Comp. Gen. 664 (Comp.Gen.), B- 242019 (1991). The agency refused to ratify because the unauthorized commitment did not comply with the Competition in Contracting Act. The company then applied to GAO for compensation on a quantum meruit basis, under which the standard is less strict than FAR.

 
 

thanks Vern! hope I can find some downtime this week to get into Deskbook a bit more. the GAO decision you cite is similar to the information contained in the GAO letter to DOJ on the subject. it appears that GAO has held this view of "otherwise proper" for quite some time - which is a lot less generous than I would like. 

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7 minutes ago, Jacques said:

For another competition-related (though obviously pre-CICA) example, Nash & Cibinic, Federal Procurement Law (1977), at 71 states, "Where a contracting agency purchased spark plugs on a sole source basis in violation of statutes requiring formal advertising, the agency could not subsequently legitimize the transaction by classifying spark plugs as an experimental item subject to negotiated procurement."  15 Comp. Gen. 618 (1936).  Sorry that my earlier post is wrong.

so going as far back as 1977, GAO seems to have held that "otherwise proper" means having followed applicable laws and regulations. based on that interpretation, I just don't see how most unauthorized commitments are ratifiable under FAR 1.602-3.

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That Comptroller General decision from 1936 continues to be cited in McBride & Touhey, 1 Government Contracts: Law, Administration & Procedures § 4.60[4][b].  I think the idea is, if the substantive law can be complied with prior to ratification, then it is within the ratifying official's authority to ratify.

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7 minutes ago, Jacques said:

That Comptroller General decision from 1936 continues to be cited in McBride & Touhey, 1 Government Contracts: Law, Administration & Procedures § 4.60[4][b].  I think the idea is, if the substantive law can be complied with prior to ratification, then it is within the ratifying official's authority to ratify.

I agree. but I think the basic rules governing the acquisition process (funding, publicizing, competition, set-aside, wage rates) are all based on substantive laws. maybe things like not having done acquisition planning, market research, price reasonableness, evaluation and award, etc. can be corrected and if the substantive aspects of the laws and regulations were followed, the action ratified, but otherwise, I think the recourse for contractors is to apply to GAO for relief under quantum meruit. 

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On 5/22/2023 at 9:45 AM, MileHighAcq said:

...but otherwise, I think the recourse for contractors is to apply to GAO for relief under quantum meruit. 

I would think the first place to look when an unauthorized commitment can't be ratified would be FAR Part 50, but I don't have any personal experience with that.

EDIT:  I see FAR 1.602-3(d) now, but see National Parks Serv. Contract--Payments to Subcontractors, B-303906, Dec. 7, 2004.

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Vern, I suspect what the drafters of the Department of Energy language had in mind was that purely procedural requirements did not necessarily have to be followed at the time of the unauthorized commitment.

Not that the 1936 decision is all that important to the discussion, but I attach it here since it is hard to find.

Comptroller Gen. McCarl to the Sec'y of War , 1936 U.S. Comp. Gen. LEXIS 20.pdf

EDIT:

At the time of the memorandum in The Department of Energy’s Ratification of Informal Commitments and Use of Precontract Cost Authorizations, B-197057 O.M., Aug. 22, 1980, the Federal Procurement Regulation, 41 CFR 1-1.405 provided:

Quote

Execution of otherwise proper contracts made by individuals without contracting authority, or by contracting officers in excess of the limits of their delegated authority may be later ratified. ***  Generally such ratification may be made only by an official on whose behalf the contract was made and then only (a) if he could have given authority to enter into the contract before it was awarded and (b) if he still has power to do so at the time of the ratification.

(emphasis added).  (This is the civilian agency predecessor to what we're discussing.)  The Comptroller General noted in the memorandum, “Under the terms of the quoted regulation, an informal commitment may be ratified only if the commitment could have been properly made by the contracting officer in the first place.  In other words, a contracting officer cannot ratify an agreement which does not include the clauses and conditions required by law or regulations, which would violate any substantive legal requirement, or which would be in excess of the contracting officer's authority.  For example, a contracting officer may not ratify a sole-source commitment of a program official if a sole-source procurement would not have been proper in the first instance or would not be proper at the time of the ratification.” (emphasis added).
 

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4 minutes ago, Vern Edwards said:

@Jacques @MileHighAcq

Please explain what you mean by "substantive law." Why not just "law"?

I don't think this is quite how we were using it, but since you asked... ;)

Law which governs the original rights and obligations of individuals. Substantive law may derive from the common law, statutes, or a constitution. Substantive law is contrasted with procedural law. 

https://www.law.cornell.edu/wex/substantive_law 

Substantive law is the set of laws that governs how members of a society are to behave.[1] It is contrasted with procedural law, which is the set of procedures for making, administering, and enforcing substantive law.[1] Substantive law defines rights and responsibilities in civil law, and crimes and punishments in criminal law.[1] It may be codified in statutes or exist through precedent in common law.

https://en.wikipedia.org/wiki/Substantive_law

Substantive law and procedural law are terms used to describe and distinguish two different types of law:

Substantive law establishes the rights and obligations that govern people and organizations; it includes all laws of general and specific applicability.
Procedural law establishes the legal rules by which substantive law is created, applied and enforced, particularly in a court of law.

In the United States, both of these types of law are derived from a variety of sources, including common law, constitutions, legislatively enacted statutes, and judicial decisions.

https://ballotpedia.org/Substantive_law_and_procedural_law

I think some laws, like CICA, are foundational for government procurement. others are just laws.

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2 hours ago, Vern Edwards said:

So now we have substantive law, procedural law, and foundational law?

How does this terminology help us to understand ratification?

oh yeah, and don't forget annoying law and impossible to understand law (e.g. Buy American Act) too!

on a serious note though, I think it helps us understand what "otherwise proper" means. I suppose you can take an absolutist approach to it and say that either the unauthorized commitment complies with ALL applicable laws and regulations and is therefore ratifiable, or it doesn't and therefore it's not ratifiable. and maybe that's the textbook answer. but I think in the real world people recognize that such an approach isn't practical and looking at whether the unauthorized commitment complied with substantive laws makes more sense. just trying to bridge that "wide gap between what the regs say and what we do in actual practice".

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49 minutes ago, MileHighAcq said:

...I suppose you can take an absolutist approach to it and say that either the unauthorized commitment complies with ALL applicable laws and regulations and is therefore ratifiable, or it doesn't and therefore it's not ratifiable...

I think you need to focus on the authority of the ratifying official, rather than on the unauthorized commitment.  By way of example, make a change to the facts in In Sec'y of War, A-66806, Jan. 16, 1936, 15 Comp. Gen. 618.  Instead of the agency claim the spark plugs were for "experimental purposes," assume the agency COULD come up with a valid post-hoc rationalization for the sole source award.  Would the contract then have been illegal?  It seems to me the answer would be the resulting contract was legal.  In other words, if the Army could have come up with a valid after-the-fact explanation for the sole source award, the GAO would have accepted it and permitted the ratification.

It seems to me if the Government can reform (what would have been) an illegal contract to make it legal, that contract may be ratified.  Perhaps another example:  Say the only illegality in an unauthorized commitment was that it omitted the "Restrictions on the Use of Mandatory Arbitration Agreements" clause at DFARS 252.222-7006 even though the clause was prescribed.  It seems to me the parties can "reform" the unauthorized commitment in the process of awarding a proper contract ratifying the unauthorized commitment to include the mandatory clause, and that would be within the authority of the ratification approval authority.  This is true despite the fact that, in the absence of the clause, one might reasonably describe the resulting  contract as illegal.

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7 minutes ago, Jacques said:

I think you need to focus on the authority of the ratifying official, rather than on the unauthorized commitment.  By way of example, make a change to the facts in In Sec'y of War, A-66806, Jan. 16, 1936, 15 Comp. Gen. 618.  Instead of the agency claim the spark plugs were for "experimental purposes," assume the agency COULD come up with a valid post-hoc rationalization for the sole source award.  Would the contract then have been illegal?  It seems to me the answer would be the resulting contract was legal.  In other words, if the Army could have come up with a valid after-the-fact explanation for the sole source award, the GAO would have accepted it and permitted the ratification.

It seems to me if the Government can reform an illegal contract to make it legal, that contract may be ratified.  Perhaps anther example:  Say the only illegality in an unauthorized commitment was that it omitted the "Restrictions on the Use of Mandatory Arbitration Agreements" clause at DFARS 252.222-7006 even though the clause was prescribed.  It seems to me the parties can "reform" the unauthorized commitment in the process of awarding a proper contract ratifying the unauthorized commitment to include the mandatory clause, and that would be within the authority of the ratification approval authority.  This is true despite the fact that, in the absence of the clause, one might reasonably describe the resulting  contract as "illegal."

I think this only works if you use the looser interpretation of "otherwise proper" - i.e. that the contract is illegal or improper because it doesn't have required clauses or wage determinations. If that's how you interpret "otherwise proper", then yes, the contract could be made proper by modifying it to add the necessary clauses. But if hold to a stricter interpretation of "otherwise proper" to encompass the whole process and not just the resultant contract, then I don't think any amount of after-the-fact modifying and justifying will get you there. Competition is just one aspect of the procurement. The agency would also have had to justify not publicizing and possibly not following set-aside requirements among other things after the fact.

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4 minutes ago, MileHighAcq said:

I think this only works if you use the looser interpretation of "otherwise proper" - i.e. that the contract is illegal or improper because it doesn't have required clauses or wage determinations. If that's how you interpret "otherwise proper", then yes, the contract could be made proper by modifying it to add the necessary clauses. But if hold to a stricter interpretation of "otherwise proper" to encompass the whole process and not just the resultant contract, then I don't think any amount of after-the-fact modifying and justifying will get you there. Competition is just one aspect of the procurement. The agency would also have had to justify not publicizing and possibly not following set-aside requirements among other things after the fact.

I guess I need to better understand what folks think the phrase "resulting contract" means under your second interpretation.

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