How to fix unauthorized approvals?

[Philistines]

We are reviewing some internal processes for contract administration. I was curious how individuals would handle unauthorized approvals issued within scope under an existing mechanism.

Scenario - You are working on a cost plus fixed fee (term or completion) and an individual with apparent authority either a COR or a unwarranted contract specialist issued an approval. Assume in this instance that the Contracting Officer would have issued the approval. However, the request for approval did not reach their inbox through no fault of the contractor. There are funds available and the work is within the scope of the contract. The only issue is that individual who issued the approval did not have the authority.

Example of some possible approvals would be to purchase equipment or to enter into a subcontract agreement.

How would you correct the situation? What would you call it? 

Thank you for sharing your collective experience.

[Retreadfed]

Since you did not say that the approval obligated funds, I assume, perhaps wrongly, that it did not.  If that is the case, I would not call it an unauthorized commitment.  I would not be concerned with what you call it, if the person granting the approval only had apparent authority, then it is an invalid action and the government is not bound.  

[Philistines]

Apologies for the lack of clarity. Your understanding is correct. These approvals would not modify the contract in terms of funding or the period of performance. They are simple approvals associated with the performance of the contract. The government wants to issue the approvals. Some advised that the cognizant CO simply issue an approval after the fact and document the contract file. Others have asked if this is in fact a ratification because it is an unauthorized commitment. 

Examples - In a recent case, the contractor started performance (issued a sub-contract) to perform work authorized in the contract but subcontractor approval was also required in the contract. In another case, a vehicle that was included in the contract budget was approved and subsequently purchased. Again, the contract required prior approval before purchasing the vehicle.

We are just interested in other USG practices and collective experiences.

[joel hoffman]

What duties and responsibilities does the COR have on the contract? For perspective, are the COR’s customer employees or are they your own employees who administer the contracts?

You said “We are just interested in other USG practices and collective experiences.”

What agency “practices” and “collective experiences”  are you referring to?? How to correct the situation? Contract administration practices?  What do you mean by “collective experiences”?

Thanks. 

[Vern Edwards]

6 hours ago, Philistines said:

Scenario - You are working on a cost plus fixed fee (term or completion) and an individual with apparent authority either a COR or a unwarranted contract specialist issued an approval. Assume in this instance that the Contracting Officer would have issued the approval. However, the request for approval did not reach their inbox through no fault of the contractor. There are funds available and the work is within the scope of the contract. The only issue is that individual who issued the approval did not have the authority.

Example of some possible approvals would be to purchase equipment or to enter into a subcontract agreement.

How would you correct the situation? What would you call it? 

Send a memo to the culprit explaining why what they did was wrong, and tell them not to do it again under any circumstances. Send a copy to the culprit's boss. Put a copy in the contract file.

Send a memo to the contractor telling them that unauthorized approvals are not binding on the government, and tell them to know who can and cannot make approvals. Put a copy in the contract file.

End of story.

[C Culham]

Unauthorized Commitment requiring ratification in my view.  Reference FAR 1.602-3(a) and the definition of Unauthorized Commitment.  Tell me why not!

[Vern Edwards]

Withdrawn.

 

[Vern Edwards]

Withdrawn.

[Vern Edwards]

5 hours ago, C Culham said:

Unauthorized Commitment requiring ratification in my view.  Reference FAR 1.602-3(a) and the definition of Unauthorized Commitment.  Tell me why not!

@C Culham The OP asked how I would handle the situation described. I gave my answer. You can give yours.

I wouldn't (and didn't) seek ratification of every innocent screw-up. It's not practical, it's not good for intra-organizational relationships, and it makes you come across like a jackass, sometimes even to your boss and the lawyers. Save it for egregious cases and cases requiring more money.

But you should recommend what you think is best.

[C Culham]

5 hours ago, Vern Edwards said:

@C Culham The OP asked how I would handle the situation described. I gave my answer. You can give yours.

I wouldn't (and didn't) seek ratification of every innocent screw-up. It's not practical, it's not good for intra-organizational relationships, and it makes you come across like a jackass, sometimes even to your boss and the lawyers. Save it for egregious cases and cases requiring more money.

But you should recommend what you think is best.

Jackass or not I posed the thought because the actions of the the COR (or whomever) meets the definition of unauthorized commitment and I read between the lines that many were thinking that if the actions of the COR did not obligate monies no big deal.  That could be but as provided in the opening post the matter was discovered via review of internal processes.  From my chair a internal process review is intended to and is a great opportunity to help reinforce the tenants and guiding principles of the FAR.   WIFCON is full of threads where, what I will call good hygene regarding acqusition matters, is questioned all the time.  It would seem that an review of intermal processes, and I would suspect a report of same, would be the perfect spot to do the reinforcing and in fact the time to practice what is preached - follow the gudinging principles of the FAR.  Further I would offer that my read of  your suggested approach (yes you can make it if you want) basically follows the ratification process and I would even offer inclusive of HCA approval or not as provided by FAR 1.602-3 as I woudl suggest a review of internal processes some how makes it to the HCA's desk.   

In a final thought, that came about after your most recent response is that I find it interesting that the best argument that can be mustered is so one would not look like a jackass and to protect intra-organzational relationships.   I am sorry but while I understand the thoughts I question that they outweigh codified regualtions, especially when found per a review of internal processes.   A review process that I understand is to provide positive reinforcement for following the guiding principles of the FAR so that unauthorized commitments of any kind and degree do not occur.

Now that I have provided my full range of thougts here is my perfected recommendation, like it or not, as please re-read my post,  I posed a thought not a recommendation.  

If me that was conducting the review of internal processes I would write up the matter and recommend to whomever the review is being provided to that the matter meets the definition of unauthorized commitment.  I would then recommend that the agency consider handling the matter as such and follow the ratification process.  I would not demand it, again it would be a recommendation left to the CO, HCA or ????? to handle.   

 

[joel hoffman]

On 10/18/2024 at 3:12 PM, Philistines said:

They are simple approvals associated with the performance of the contract. The government wants to issue the approvals. 

i don’t have any problem with what Vern recommended.

i wonder why you need a COR.🤪

[Philistines]

Thank you for your thoughts. I did not offer to many specifics as I did not want to put a finger on the scale.

In my personal view, there is considerable leeway granted by the FAR in a situation where the contract is in place and it is a contract administration issue defined (perhaps erroneously) as an action that does not modify the contract (Scope, Time, or Money).

In my work, we have occasion to perform audits and will have costs questioned due to a variety of reasons but most frequently because the administrative process was not followed. In those cases, our COs are authorized to issue determinations to make payment if they feel that payment is justified.

Additionally, I look to FAR 33 dealing with claims. There seems to be incredible leeway for a CO to exercise their authority to resolve a claim without a ratification. IMO, if a COR or similar unauthorized individual issued an unauthorized approval and the contractor took action as a result, then it would seem that they would eventually file a claim. In that scenario, the CO could make a determination to pay the claim without a ratification.

It is also my experience that the key to success in any team environment is to direct your effort into the areas that add the most value. Every hour of your day is valuable so you should use it in the manner that will return the most value. Herding a clutter of cats into executing a ratification is far more time lost and thus value lose than simply allowing the responsible parties on the ground to manage a subsequent approval or fight over a claim.

Again thank you for your inputs.

[C Culham]

 

2 hours ago, Philistines said:

Again thank you for your inputs

Thank you for your follow up.  No doubt you will take action as you think best.  

I do question some of your additional thoughts.

2 hours ago, Philistines said:

Additionally, I look to FAR 33 dealing with claims. There seems to be incredible leeway for a CO to exercise their authority to resolve a claim without a ratification. IMO, if a COR or similar unauthorized individual issued an unauthorized approval and the contractor took action as a result, then it would seem that they would eventually file a claim. In that scenario, the CO could make a determination to pay the claim without a ratification.

Consider this from a 2000 WIFCON discussion - https://www.wifcon.com/arc/forum521a.htm#:~:text=If a contracting officer mods,have made an unauthorized commitment.

"I think that it is important for everyone to understand that contracting officers have no authority to mod contracts to make equitable adjustments on the basis of unauthorized commitments, unless he or she is a chief of a purchasing office or above and has been delegated the authority to do so by the head of the contracting activity. See FAR 1.602-3(b)(2) and (3). So contracting officers must seek ratification of the unauthorized commitment.

If a contracting officer mods a contract on the basis of an unauthorized commitment without having obtained ratification in accordance with FAR, then he or she will have made an unauthorized commitment."

You offered a simple scenario in your opening post that your thoughts have expanded on and bring in more complications.  You may want to do some additional research before to conclude on a general approach to all situations.

This from WIFCON is also a good read...

 

[Vern Edwards]

😂 

@Philistines The 25 year old Wifcon archive to which the link was provided was about an unauthorized purchase. Your scenario is not about that kind of thing:

On 10/18/2024 at 7:17 PM, Philistines said:

Scenario - You are working on a cost plus fixed fee (term or completion) and an individual with apparent authority either a COR or a unwarranted contract specialist issued an approval. Assume in this instance that the Contracting Officer would have issued the approval. However, the request for approval did not reach their inbox through no fault of the contractor. There are funds available and the work is within the scope of the contract. The only issue is that individual who issued the approval did not have the authority.

Let's try some good old nuance.

That scenario does not describe an unauthorized commitment. It describes an unauthorized communication. The CO should have communicated the approval, on which they would likely have relied on the COR for guidance. The COR communicated it, instead, because the CO didn't receive the request. 

Was an "approval" that was consistent with the terms of the contract, that was supposed to be made and communicated by the CO, with which the CO concurs, but was communicated by someone else, an "agreement"? And is it an unauthorized commitment merely because it was communicated by someone other than the CO? I say, No.

COs cannot ratify unauthorized commitments. So is the CO now prohibited from granting the approval because the COR forwarded the approval instead? Must the work be delayed pending ratification by higher authority?

You don't have an unauthorized commitment in any reasonably meaningful sense of that term.

Now you raise a possibility:

11 hours ago, Philistines said:

Additionally, I look to FAR 33 dealing with claims. There seems to be incredible leeway for a CO to exercise their authority to resolve a claim without a ratification. IMO, if a COR or similar unauthorized individual issued an unauthorized approval and the contractor took action as a result, then it would seem that they would eventually file a claim. In that scenario, the CO could make a determination to pay the claim without a ratification.

See FAR 1.602-3(b)(5);

Quote

(5) Unauthorized commitments that would involve claims subject to resolution under 41 U.S.C. chapter 71, Contract Disputes, should be processed in accordance with subpart  33.2, Disputes and Appeals.

Send the memo I wrote about. Do it for "training purposes". Document the file to show that you are administering the contract responsibly and educating your CORs.

You do not need and should not want a ratification in this instance. It's uncalled for.

[C Culham]

🤔

Well well it sure is interesting that now "How to fix an unauthorized approval" that was stated as happening because "either a COR or a unwarranted contract specialist issued an approval."  is now nuanced into unauthorized communication.  I guess there is nothing wrong with the Federal acquisition system, just nuance it and everything is fine and dandy!

[Vern Edwards]

2 hours ago, C Culham said:

🤔

Well well it sure is interesting that now "How to fix an unauthorized approval" that was stated as happening because "either a COR or a unwarranted contract specialist issued an approval."  is now nuanced into unauthorized communication.  I guess there is nothing wrong with the Federal acquisition system, just nuance it and everything is fine and dandy!

There is a lot wrong with the FAR System, more than I have enough life left to tell. That is one of the reasons that the ability to perceive and cope with nuance, and to use it to get the job done, is an essential professional skill, which some people lack.

See Ralph Nash, Professor Emeritus of Law, The George Washington University School of Law, The Plain Meaning Rule: Too Much of A Good Thing, 12 NASHCIBINIC ¶ 57, December 2006:

Quote

Many terms have nuances that are not fully comprehended by the average contractor or Government employee. 

See, also, Pangia, "The Unpredictable and Often Misunderstood Christian Doctrine of Government Contracts: Proposed Approaches for Removing Harmful Uncertainty", Public Contract Law Journal, Summer 2020:

Quote

In a confounding wrinkle to the Christian doctrine, the Federal Circuit has held that, in some cases, the Christian doctrine may apply to clauses that represent less significant or not deeply ingrained policy if the clause is not for the benefit or protection of the party seeking inclusion of the clause. This nuance of the doctrine is rarely applied, but practitioners should be aware of its existence.

Footnote omitted. Emphasis added.

Finally, there is this:

 

Quote

Compliance is a crucial aspect of any business, but it is often misunderstood and overlooked. It encompasses a wide range of rules, regulations, and laws that organizations must adhere to in order to operate legally and ethically. From data privacy to financial reporting, compliance touches every aspect of business operations. However, navigating the complexities and nuances of compliance can be a daunting task. 

https://www.linkedin.com/pulse/complexities-nuances-compliance-bahga-hassan-bouh--afrxe/

In short, some of us strive to be above average, because there are more things in Heaven and Earth than are dreamt of in some philosophies. 

 

I could go on, but the above might be enough to help people understand where I'm coming from and how I would handle the OP's scenario.

[joel hoffman]

I agree with Vern. Take the corrective actions that he described. 

On 10/18/2024 at 3:12 PM, Philistines said:

They are simple approvals associated with the performance of the contract. The government wants to issue the approvals. 

It appears to me that, at the most  they were unauthorized communications, if the KO and the government team agree that the contractors actions should be “approved.”

That suggests to me that the KO WOULD HAVE approved the actions had the COR sent the action to the KO

There appears to have been no deleterious impact on the Contractor’s compliance with the contract’s technical requirements or its contract performance.  

 

[C Culham]

5 hours ago, Vern Edwards said:

See Ralph Nash, Professor Emeritus of Law, The George Washington University School of Law, The Plain Meaning Rule: Too Much of A Good Thing, 12 NASHCIBINIC ¶ 57, December 2006:

Quote

Many terms have nuances that are not fully comprehended by the average contractor or Government employee. 

Where I am coming from is that the definition of "unauthorized commitment" is not one of those areas where there is subtle difference between an approval demanded of the CO but given by another in a communication is the same thing.  As a rule of the FAR the definition of unauthorized commitment and action required due to same is unambigious and clear on its face.   

The specifics of this thread, by my read, does not deal with an instant real case but a suggestion that the approvals by other than CO's  happens all the time.  The results of a review of internal processes are trying to decide how to address for the the future based on some premises that are distorted.  By example - 

16 hours ago, Philistines said:

there is considerable leeway granted by the FAR in a situation where the contract is in place and it is a contract administration issue defined (perhaps erroneously) as an action that does not modify the contract (Scope, Time, or Money).

Yes the FAR does provide for discreation but in the case of unauthorized commitment it doesnot have to modify the contract it is an action that is "an agreement that is not binding solely because the Government representative who made it lacked the authority to enter into that agreement on behalf of the Government."   Again I conclude a contract stipulated approval is such an agreement.  I am at a loss why others would think a contract stipulated approval required of the CO can be nuanced.

16 hours ago, Philistines said:

IMO, if a COR or similar unauthorized individual issued an unauthorized approval and the contractor took action as a result, then it would seem that they would eventually file a claim. In that scenario, the CO could make a determination to pay the claim without a ratification.

Here I disagree completely with the original poster.  Because I offered opinion, that by my read agreed with my view but was not specifically on point to an approval but an unauthorized purchase I was called to task with nuance.   So be it, but I still think it would be an erroneous interpretation of the FAR for a CO to think that if someone issued an unauthorized agreement approval and that in settling a claim for same the CO would be okay with doing so without a ratification.

16 hours ago, Philistines said:

Herding a clutter of cats into executing a ratification is far more time lost and thus value lose than simply allowing the responsible parties on the ground to manage a subsequent approval or fight over a claim.

Here I am just left to wonder.  I would offer that the whole of the ratification guiding principle in FAR subpart 1.603-2 is there to address a long standing problem with govenment contracting whereby unauthorized commitments resulted in and still result in a whole bunch of hand wringing, confused contract administration, disputes and subsequently claims.  As one poster questioned in this thread why even have a COR, I would question why have CO at the most and at the least why have approvals if those approvals can be nuanced into communication?   In the end maybe instead of wrestling with ratification or not the original poster should look at the root cause of the matter so that both the agency and the contractors they use can comprehend the contracts between them and get rid of approvals and just go with communications!   Here is a simple example of what a contract clause might say and what it could be changed to  - "The contractor shall have the written approval and consent  of the CO before buying trucks or to enter into a subcontract." versus  "The contractor shall have  written communication from the agency before buying a truck or entering into subcontracts under this contract." 

For me I am left with the opinion that for a contract action that demands that the contractor shall have the acceptance or approval of the CO and that  acceptance or approval is given by other than the CO, the acceptance or approval shall be ratified to make it legally binding on both parties.  

[joel hoffman]

In my former organizations, COR delegations included routine approvals concerning administration of the contract, even where the contract used  language like “for approval of the KO”.  The definition of KO stated that the term included authorized representIves acting within their authorities . We notified the contractor of each COR’s authority.

So, my perspective of the examples here would doubt the severity of the offense or the effect (apparently none) on the contract performance.

Of course, I don’t know the context of the COR responsibilities here. Seems to me like the KO has plenty of time to administer many of the details of their contracts. Not so in my organizations. Especially on cost reimbursement contracts. 

 I would chide the COR if they overstep their authority but approve the (described sample) submittal actions. If the contractor knew that the COR didn’t have the authority to approve anything, I’d remind them too.

[C Culham]

10 minutes ago, joel hoffman said:

COR

Okay so let me pose a question.   

Remember the OP threw a few positions in the laundry basket ( COR, unwarranted contract specialist, clutter of cats) so what do you think are you going to pick an choose who in the agency to chide based on "delegations" if any?  And what if it was other than the contractors designated representative that requested the approval that is provided by other than the stated authority of the CO, what then?  Simply throw everything into laundry basket?

The "what if" in this thread is the crux of the problem.   In truth it depends but the premises on which the OP attempts to sweep the FAR guiding principles of Ratification of Unauthorized Commitments under the carpet is a red herring.   He/she wants everyone to say "forget about it" ratification even though it is in the FAR for a purpose.  Sorry not me. 

[joel hoffman]

Carl, I described the conditions (COR) and the described examples, and considered other circumstances

On 10/18/2024 at 12:17 PM, Philistines said:

Assume in this instance that the Contracting Officer would have issued the approval. However, the request for approval did not reach their inbox through no fault of the contractor. There are funds available and the work is within the scope of the contract. The only issue is that individual who issued the approval did not have the authority.

Example of some possible approvals would be to purchase equipment or to enter into a subcontract agreement.

I think that the OP edited the examples since the initial post. 

 

On 10/18/2024 at 3:12 PM, Philistines said:

These approvals would not modify the contract in terms of funding or the period of performance. They are simple approvals associated with the performance of the contract. The government wants to issue the approvals.

 

On 10/18/2024 at 3:12 PM, Philistines said:

Some advised that the cognizant CO simply issue an approval after the fact and document the contract file. Others have asked if this is in fact a ratification because it is an unauthorized commitment. 

Some others have stated that it is an “unauthorized commitment” that would require ratification. The examples of unauthorized commitments that I’ve seen or read about are actions that created new or altered obligations and/or could result in REAs or claims.

Nothing new was required by the sample actions. No requirements were waived or changed. Here, the KO agreed with the actions that were approved and would have approved the actions themselves. Apparently, no additional costs were incurred. There is nothing for the contractor to dispute or claim.

What a waste of time and resources it would be for the KO to seek approval to ratify those actions, when they are already busy… 

I have never experienced where a KO would have to personally become involved in and approve every routine contract admin action, especially on cost reimbursement contracts.

Also my perspective: Any organization issuing and administering cost reimbursement contracts darn well better have some qualified staff administering such contracts…

 

 

[Philistines]

Thank you all for your thoughts. I think we have ridden this train to the end of the line.

Differences of opinion are always welcomed in my world as it helps a conversation flourish and guides my research. I always worry when everybody agrees with me without debate or discussion.

I do truly appreciate your experience and time to help me think an issue through.

Regards,

Phil I. Stines

[Vern Edwards]

7 hours ago, C Culham said:

I would offer that the whole of the ratification guiding principle...

@C CulhamRatification is not one of the guiding principles in FAR 1.102. It is a rule.

Do you understand the difference?

And do you understand the reason for the ratification rule in 1.602-3? Do you know why the rule exists?

What have you read about ratification other than FAR 1.602-3? (Have you read the AGAR coverage?)

What does FAR 1.602-3(c) suggest to you about the OP's problem in light of the OP's scenario?

[joel hoffman]

This thread just reminded me of when I first began my civil service career in 1980. The GS-15, Area Engineer for the then $1 Billion Tennessee-Tombigbee Waterway construction program had the approval authority as the COR for all construction submittals that required review by A-E’s, the District Office Engineering Designers or the Area Office. There were eight Resident Engineer Offices under our Area Office with warranted  [Pre-FAR, ACO equivalent] Resident Engineers.

This was on about 50 large contracts for ten new locks and dams, over 200 miles of waterway construction, utility and railroad bridge relocations, new parks, etc., etc.The District Engineer (an O-6 Colonel) was the KO for all Tenn-Tom Waterway contracts.

I spent my first year in the Tenn-Tom Area Office as a GS-11, reviewing contractor submittals, reviewing the A-E and Engineering’s designer review comments and recommendations, then assigning the final approval action and stamping the Area Engineer’s name and approval or disapproval on every copy of the paper submittals

Our Area Office maintained copies of every Tenn-Tom contract, which I kept up to date to reflect every mod. I had to read all the applicable plans and specs for every submitsls.

Do you think that a GS-15 area engineer had the time to read all those recommendations and personally approve them? (There were Zero claims concerning construction submittals.)

Sheesh. 

[Vern Edwards]

Withdrawn pending a response to my last post, if any..