2 Session 402 Monday, April 23 1:40 – 2:40 pm Timothy Sullivan Thompson Coburn LLP 1909 K St., N.W. 6 th Floor Washington, D.C (202) , Interpretation Of Government Contracts
3 Why Is This An Important Topic? The answer to the question, “What does the contract mean”? can dictate whether a contractor makes or loses money on a Government contract. Contracts don’t always mean what they say because drafters are human (imperfect), topics are frequently complex, customers and contractors view things from very different angles, and no one ever has enough time to do things right.
4 Isn’t The World Of Government Contracts The Same As The Commercial World? There are similarities. In theory, the Restatement of Contracts Second covers both worlds, but you need to understand the idiosyncrasies of the Government contracts process, including: –Pre-award issues; –Post-award issues; and –Subcontractor wrinkles
5 Who Gets Involved In The Contract Interpretation Process? Pre-Award –Agency Personnel Contracting Officer and team Technical people Lawyers –Contractor Personnel –The GAO
6 Who Gets Involved, cont. Post-Award –Agency personnel –Contractor personnel –Boards of Contract Appeals –U.S. Court of Federal Claims –U.S. Court of Appeals for the Federal Circuit –U.S. Supreme Court –All governed by the common law of Federal contracts
7 Subcontractor Wrinkles The subcontract agreement usually is governed by state law (“Choice of Law” clause). This may mean that a state court could get involved. Subcontracts may have “Disputes” clauses that use Alternative Dispute Resolution methods such as mediation or arbitration. Government Prime Contractor Subcontractor
8 Pre-Award Considerations Solicitations –Can contain mistakes, ambiguities (both patent and latent), omissions, and other objectionable terms –It is the offeror’s duty to read and resolve them, using the “Order of Precedence” clause at FAR for sealed bids or for negotiated procurements –Sometimes there are pre-proposal conferences or site visits offered. These add meat to the bones of the RFP.
9 Tips For Handling Solicitations Don’t bother the C.O. with every question you have one at a time. Do compile a list of questions or concerns as you review the RFP. Try to resolve questions on your own. If you go to the C.O., do it in writing and do it well before offers are due. Remember that all protests regarding solicitation terms must be filed at the GAO before bids or offers are due.
10 Far Order Of Precedence Any inconsistency in this solicitation or contract shall be resolved by giving precedence in the following order: –The Schedule (excluding the specifications). –Representations and other instructions. –Contract clauses. –Other documents, exhibits, and attachments. –The specifications.
11 Oddball Clauses Some solicitations contain clauses that are not from the FAR These will probably be in Section H, “Special Contract Requirements,” or Section I, “Contract Clauses.” These clauses represent a risk to the offeror and need to be evaluated carefully
12 Oddball Clauses, cont. These clauses can cover a variety of topics, such as pricing, risk-shifting, and waiver. If you don’t challenge such a clause during the solicitation stage, you have agreed to it.
13 Sample Oddball Clause INTERPRETATION OF CONTRACT: NOTICE OF AMBIGUITIES This written contract and any and all identified writings or documents incorporated by reference herein or physically attached hereto constitute the parties’ complete agreement and no other prior contemporaneous agreements either written or oral shall be considered to change, modify or contradict it. Any ambiguity in the contract will not be strictly construed against the drafter of the contract language but shall be resolved by applying the most reasonable interpretation under the circumstances, giving full consideration to the intentions of the parties at the time of contracting. It shall be the obligation of the contractor to exercise due diligence to discover and to bring to the attention of the Contracting Officer at the earliest possible time any ambiguities, discrepancies, inconsistencies, or conflicts in or between the specifications and the applicable drawings or other documents incorporated by reference herein. Failure to comply with such obligation shall be deemed a waiver and release of any and all claims for extra costs or delays arising out of such ambiguities, discrepancies, inconsistencies and conflicts.
14 Will GAO Help? Not usually. When you challenge such a clause, you are hoping that the agency will drop it or reach an acceptable compromise. If the agency won’t budge, and the GAO refuses to help, you have a business decision to make. Just remember, the fact that “no one else has objected to it” is not a reason to drop your challenge.
15 Post-Award This is when we traditionally turn to the rules of contract interpretation For Government contracts, the “Restatement Contracts Second” is usually a good guide to contract interpretation, although the Federal Circuit has recently ignored it in one key way For this presentation, we will use a similar set of rules crafted by Walter Pettit, a legendary Government contracts expert, and published in a 1965 Federal Publications Briefing Paper, “Interpretation of Government Contracts.”
16 Rules Of Contract Interpretation A reasonable, logical interpretation is favored over an interpretation which is strained, circuitous, or difficult to follow, which produces and impractical or unworkable result, or which brings about an impropriety or miscarriage of justice.
17 Rules, cont. An important aid to interpretation is the intention of the drafter as manifested by the words, phrases, symbols or legends he elects to use.
18 Rules, cont. A contract must be read as a harmonious whole with no word being rejected or treated as meaningless if at all possible.
19 Rules, cont. Words, symbols, and marks will be given their common and normal meaning, unless it is clearly shown that they were used in a technical sense or have some other meaning accorded to them by the parties.
20 Rules, cont. The principal apparent purpose of the contract is to be given great weight in ascertaining a contract’s reasonable meaning.
21 Rules, cont. Custom and usage of the trade is used as an aide to interpretation when it is necessary to add a term to clarify the obligations of the parties or when there is an ambiguity in the contract.
22 Rules, cont. A contracting party is bound by knowledge of the interpretation of the other party.
23 Rules, cont. Interpretations of the parties prior to the arising of the controversy are to be given great, if not controlling, weight.
24 Rules, cont. The contractually stated order of precedence is binding unless there is inadequate notice of a conflict in the provisions or following the specified precedence prevents the meeting of the overall contract requirements.
25 Rules, cont. If the preceding rules do not clear up an ambiguity, the disputed provision will be construed against the drafter. This is called the rule of contra proferentem.
26 Rules, cont. Negotiations and agreements prior to the execution of a written contract cannot be used to vary, contradict, or add to the terms of the contract.
27 More Subcontract Wrinkles Negotiations between primes and subs often involve tricky issues: –Flowdown clauses –Clauses that look like flowdowns –Choice of law clause –Standard terms
28 Tips Make sure you have the time, the right people, and the right plan to review a solicitation and prepare your proposal. Make sure that you are prepared for negotiations. Keep good records of what was said and who said what during negotiations.
29 Tips, cont. Take the time to review what the other side sends you when they take the responsibility for reducing your agreement to writing. Have a fresh pair of eyes look at the results. Whenever possible, don’t split the responsibility for contract proposal preparation and contract performance between two unrelated groups.
30 Tips, cont. 7.Keep your bid workpapers — you may need them if a contract interpretation problem surfaces during contract performance.