Clause background

[sackanator]

Cross referencing Clauses for a contract (PIEE CLS for ACWS and DAU Matrix).  Came across 52.204-1 "Approval of Contract".  Its prescription is "if required by agency procedures."  I was curious as to the necessity of this clause.  I am not aware of our Agency having a procedure to use this clause but did see it in some other contracts awarded by a different state in our agency (NGB).  The clause date is December 1989 so my search on the federal register didn't seem to turn up any history.  A search on WIFCON did result in a court case mention (https://safe.menlosecurity.com/doc/docview/viewer/docN80E2F6DDF944a8cad188fc6cbed775294b02b795f6e3e906dc5a6c26946b95515a5608d76262) or COFC No. 14-1076C (in case link doesn't work) which lists the clause in its opinion and order.  Formerfed mentioned it on a quote in a discussion.  Doesn't seem like much else is showing up on internet searches.  My question is were would a good source be to better understand how some of these clauses came about, what was their intention.  It would seem to be better when making clause selection if there was a better understanding of why they were created or what Act/Law was responsible for their implementation in the FAR/DFARS.  I know the prescription seems rather straight forward for its usage, but am still curious as to the necessity of having this clause, doesn't FAR Part 1 go over KO warrant authority.  I still really like a little background to better understand things.  I mention one clause but the question is in general for those I can't find in the online version of the Federal Register.  

I won't be able to look at this post for a while (probably tonight or tomorrow) so apologize if I get great advice, ridicule, or crickets for the post and don't respond timely.    

[Vern Edwards]

1 hour ago, sackanator said:

Cross referencing Clauses for a contract (PIEE CLS for ACWS and DAU Matrix).  Came across 52.204-1 "Approval of Contract".  Its prescription is "if required by agency procedures."  I was curious as to the necessity of this clause.... My question is were would a good source be to better understand how some of these clauses came about, what was their intention.  It would seem to be better when making clause selection if there was a better understanding of why they were created or what Act/Law was responsible for their implementation in the FAR/DFARS.  I know the prescription seems rather straight forward for its usage, but am still curious as to the necessity of having this clause, doesn't FAR Part 1 go over KO warrant authority.  I still really like a little background to better understand things.  I mention one clause but the question is in general for those I can't find in the online version of the Federal Register.  

Approval of contract clauses go waaaay back. Here's one from Title 25 of the CFR, 1938 edition:

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Approval of contract. All contracts made pursuant hereto amounting to $2,000 or over shall be subject to approval by the Secretary of the Interior.

The idea was very simple: Above a certain amount of money, some official at a level above a mere contracting officer should review and approve a contract before it takes effect. You can't let ordinary humans obligate that kind of money without a superior's approval.

As my friend, Jim Nagle, a former Army lawyer now in private practice wrote in the November 1986 edition of Army Lawyer, in an article entitled, "Contracts Subject To Approval By Higher Authority":

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Clemenceau once remarked that "war is too important to be left to the generals." Some contracts become too important and complicated to be left to contracting officers if they involve certain matters or exceed a certain value. This is not disparaging to contracting officers. Rather, it indicates a need for uniformity or a realization that contracting officers often do not have the requisite, legal and technical staff or experience to ensure correctness.

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Such clauses are especially important as the nature of contracting changes and the complexity of the procured goods or services accelerates. Nowhere is this more apparent than in installation contracting. Many contracting officers and specialists are very experienced at small purchases and fixed price minor construction matters, such as painting and roof repairs contracts. They are now confronted with contracting out huge installation-wide service operations such as the Directorate of Engineering and Housing or Directorate of Logistics with cost reimbursable contracts.

***

Regardless of these instances of difficulties for well-meaning contractors, the Approval of Contract clause is a legitimate and logical tool for the government to use. As the cost and complexity of contracting spirals upward, realistic management must make do with a limited number of contracting, legal, and technical personnel qualified in numerous increasingly harrow fields of esoterica. TheApproval of Contract clause is a force multiplier to ensure a uniform, experienced approach. Commanders and supervisory personnel should evaluate the needs of the command and the experience of the individual contracting personnel and technical staff involved. They should then identify the contracts that demand higher level approval for whatever reason, be it complex subject matter, high dollar value, or. unique type of contract (e.g., time and materials contract), and obtain that approval expeditiously.

The same logic applies to civilian agencies.

In order to find that kind of information you need a subscription to a VERY expensive database or access to a very large public library or university law school library.

[formerfed]

Treasury used a variation of this clause.  It notified offerors/prospective contractors that Departmental approval was needed.  That approval was annotated on the face page of award (SF 26, SF 33, or other documents) with a stamp signed by the Senior Procurement Executive and before contracting officer signature.

This was before 9/11 and creation of Homeland Security.   Treasury had law enforcement responsibilities (Customs, Secret Service, and ATF) and well as fiscal (Customs again, IRS, FLETC, Comptroller of Currency, Engraving and Printing, and Mint).  The mission was diverse and some contract awards by the bureaus were controversial and surprised senior Treasury staff when they became aware.  The approval process allowed senior management to become aware of these awards in advance.

[Vern Edwards]

I should add that "approval of contracts" has been mentioned in 17 COFC decisions, the most recent being Samsara, Inc. v. U.S., 172 Fed.Cl. 201 (June 28, 2024), concerning the U.S. Postal Service (USPD). It includes a description of how the clause works in their  contracting process, which is not subject to the Federal Acquisition Regulation:

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The solicitation informed offerors that the USPS will award the contract in accordance with USPS Supply Management, SP&Ps based on best value, that is “the best combination of Technical and Price Proposals.” AR 136. The USPS will assess those proposals in “a tradeoff between technical merit and price to determine best value.” Id. Per SP&P 2-31.2, a committee will evaluate proposals, and this committee “will determine the proposal most responsive and advantageous to USPS, taking into consideration technical evaluation factors and price.” Id.; 2-31.2 Individual Evaluation, USPS, https://about.usps.com/manuals/spp/html/spp2_235.htm (last modified April 1, 2023). Specific to the technical proposal, a team of evaluators will have its members evaluate and score proposals against the Technical Evaluation Criteria. AR 136. Upon reaching a consensus, the team “will rank technical proposals in relation to each other to judge their comparative value and achieve final consensus,” id., and then submit “a written report with narrative statements identifying the major strengths and weaknesses of the various proposals.” 2-31.3 Comparative Evaluation, USPS, https://about.usps.com/manuals/spp/html/spp2_236.htm (last modified April 1, 2023). “After proposal evaluation, comparative analysis, and ranking of the proposals ... [t]he contracting officer must then make a recommendation” for award. 2-40.2 Best Value Determination and Award Recommendation, USPS, https://about.usps.com/manuals/spp/html/spp2_302.htm (last modified April 1, 2023). Finally, after the CO makes a recommendation, when the contract is valued at $20 million or more, the Vice President of Supply Management “must [ ] review[ ] and approve[ ]” the award recommendation. 2-41.3.2 Reviews and Approvals of Contract Awards, Modifications, and Ordering Agreements, USPS, https://about.usps.com/manuals/spp/html/spp2_308.htm (last modified April 1, 2023). 

Footnotes omitted. Emphasis added.

The first and oldest Claims Court decision to mention approval of contracts is Sun Shipbuilding & Dry Dock Co. v. U.S., 76 Court of Claims 154 (November 14, 1932).

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The machinery, equipment, and outfit will be delivered f.o.b. railroad cars or at wharf at the contractor's yard within six months from date of notification of approval of contract. 

Approval of contract has been mentioned in 38 board of contract appeals decisions, from as recently as December 2022 to the first time in August 1958. A 1961 decision quotes the clause in that case as follows:

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‘ARTICLE 22. Approval of Contract. This contract, if it amount to $1,000,000 or more, shall be subject to the written approval of the Commanding General, Army Forces, Far East, or his duly authorized representative and shall not be binding until so approved.’

Historically, a 1946 War Department regulation stated:

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Approval of contracts by the Chief of Transportation. Manual approval of the contract instrument by the Chief of Transportation or his duly authorized representative is required for the following types of contracts: (i) All contracts which provide for facilities expansion to be financed in whole or in part by the Government for the furnishing of Government-owned plant facilities to the contractor. (ii) All contracts which contain a provision for upward price adjustment. (iII) Any contract which is not entered into on a fixed-price basis. (iv) Any contract which contains a provision making it expressly subject to the approval of the Chief of Transportation or his duly authorized representative.

When I started out in contracting with the Air Force in 1974, certain contracts required "manual approval" by the Secretary of the Air Force or a designee..

And see: Amending the Federal property and administrative services act of 1949 : hearing before a subcommittee of the Committee on Government Operations, House of Representatives, Ninety-sixth Congress, first session, on H.R. 5381 ... October 15, 1979, p. 47, quoting a GSA document:

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Manual approval. Manual approval is defined as the requirement to obtain the signature of the designated clearance official on the face of a contractual document prior to execution of a legally binding contract. The signature will represent final review, approval, and clearance of a contractual action for execution by the contracting officer. Manual approval will be required on all contractual actions forwarded to the Central Office for clearance.

The term "manual approval" does not appear in today's FAR System.

And see, e.g., Appeal of W. H. Shields Construction Company, ENGBCA No. 644, March 8, 1955:

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Also relevant are intra-departmental regulations of the Corps of Engineers governing the relationship between contracting officers and their higher headquarters. They provide that a contract modification of the type here involved must be manually approved by higher authority if in excess of $10,000.00 in amount. These regulations also direct that if a modification will require such manual approval, no prior decision will be reached or commitment made to the contractor until there shall have first been an understanding between the contracting officer and the approving authority with regard to the proposed change order, and prior approval of the latter has been obtained.

Approval of contracts is a practice used in state and local government contracting, commercial contracting, international law, and Native American tribal law. Sometimes a legislature must approve a contract.

In short, it has long been quite common for organizations of all kinds to require approval by higher authority of certain contracts made by their agents.

There is a lot of historical background on contract approval, but, unfortunately, most of it is difficult to find and out of reach of persons at the working level, and most agencies provide poor educational background to their personnel.

[sackanator]

Thank you for the feedback.  It was very insightful information!