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Construction News Articles


3/30/2006

Indefinite Delivery Contracts

 

 

       I.       (§16.1)   What Is an Indefinite Delivery (ID) Contract?

 

A.     (§16.2)   Definite Quantity Contract

B.    (§16.3)   Requirements Contract

 

     II.     (§16.4)  What Is an Indefinite Delivery Indefinite Quantity (IDIQ) Contract?

 

     III.     Basic Rules of ID Contracting

 

A.   (§16.5)  Advisory and Assistance Services

B.    (§16.6)   Task Order or Job Order Contracting

1.     (§16.7)   Contract Requirements

2.     (§16.8)   Minimum Quantity

3.     (§16.9)   Funding the Contract

4.     (§16.10) Inter-Agency Acquisitions

5.     Potential Problem Areas with JOC Administration

a.     (§16.11) Low Bid Factor of Coefficient

b.     (§16.12) Inconsistent Contractor Line Item Proposal vs. Government Scope of Work

c.     (§16.13) Determination of Unit Price Item Inclusions

d.     (§16.14) Unit Price Book Inaccuracies

e.     (§16.15) Distinguishing Pre-Priced From Non-Prepriced Items

f.      (§16.16) Quality Standards

g.     (§16.17) Inaccurate Proposals

 

     IV.       Preparing the Work Statements for TOC/JOC Contracts

 

A.     (§16.18) Indefinite Delivery Contracts

B.    (§16.19) Performance Based Contracting

 

      V.       (§16.20) Pricing

 

A.     (§16.21) Government’s Pricing Problem

B.    (§16.22) Contractor’s Pricing Problem

 

     VI.       (§16.23) Multiple Awards

 

    VII.       (§16.24) FAR Part 36 and Job Order Contracting

 

A.     (§16.25) FAR 36.202 Specifications

B.    (§16.26) FAR 36.204—Disclosure of the Magnitude of Construction Projects

C.    (§16.27) FAR 36.500, et seq.—Construction Contract Clauses

 

   VIII.       (§16.28) Modifying a Task Order

 

     IX.       (§16.29) Conclusion

 

      X.       Representative Cases

 

A.     (§16.30) Defining When a Task Is Not in Scope

B.    (§16.31) Protests of Individual Task Orders

C.    (§16.32) Government Requirement to Honor Acquisition Regulations

D.    (§16.33) Government Duty to Provide Realistic Estimates

E.    (§16.34) Governmental Tort Liability

F.     (§16.35) Equitable Relief vs. Government

G.    (§16.36) Mistake in Bid

H.    (§16.37) Bid Protest

 

I.        (§16.1)  What Is an Indefinite Delivery (ID) Contract?

 

Existing in federal procurement since 1981, and only recently making its way down to state and municipal levels, Indefinite Delivery (ID) contracting is a procurement mechanism designed to streamline the competitive bidding process for governmental owners. Invented by the Department of Defense for use by the North Atlantic Treaty Organization, ID contracts have been used routinely and effectively by the DOD for installation maintenance, minor repair, and construction projects since its inception in 1981. If the indefinite delivery contract covers the provisions of construction services, it is typically referred to as a “JOC,” or “Job Order Contract.” Contracts designed primarily for non-construction related services are referred to as “TOC,” or “Task Order Contracts.” Vernon Edwards, “Task Order Contracting: Understanding and Using Task Order Contracts,” Government Contracting Training and Consulting (January 1999). Whether classified as an ID, JOC, or TOC contract, each shares certain similarities.

 

As a relatively new contracting mechanism at the state level, there are no reported Missouri cases addressing the application of ID, JOC, or TOC contracts. But as there are a number of JOC-type contracts currently in process in the state, this article will attempt to address the overall parameters of the contract form’s use, creation, application, and interpretation.

 

There are essentially three types of Indefinite Delivery contracts: definite quantity contracts, requirement contracts, and indefinite delivery indefinite quantity contracts.

 

Depending on the circumstances, one form or another of these ID contracts is used to acquire supplies and/or services when the exact times and/or exact quantities of future deliveries are not known at the time of contract award. FAR 16.501-2(1), ¶ 30,202. Although the rules governing the application of each vary, all three permit Government stock to be maintained at minimal levels. All three also authorize direct shipment to users. FAR 16.051-2(b). All three permit agencies to defer ordering, and to defer specifications. Vernon, n.2, at 5.

 

In addition, indefinite quantity contracts and requirement contracts permit the government flexibility in both quantities and delivery scheduling, and also the ordering of supplies or services after the requirements materialize. FAR 16.501-2(b)(2), ¶ 30,202. Requirement contracts permit faster deliveries when production lead time is involved, because contractors are usually willing to maintain limited stocks when the Government agrees to obtain all of its actual purchase requirements from the contractor. Id. In contrast, indefinite quantity contracts limit the government’s obligation to a stated minimum quantity identified in the contract, without an exclusivity condition. Costs or pricing arrangements that provide for an estimated quantity of supplies or services must comply with the appropriate procedures under FAC 90-32; 60 FR 48206 (9/18/95); FAC 90-33; 60 FR 49706 9/26/95.

 

To understand what an IDIQ contract is not, it is important to understand the definitions and uses of the other two Indefinite Delivery forms of contracts, Definite Quantity and Requirements. The usage and definition distinctions become important in analyzing case law interpreting the usage, impact and liability issues associated with each.

 

A.   (§16.2)  Definite Quantity Contract

 

A “definite quantity” contract provides “for the delivery of a definite quantity of specific supplies or services for a fixed period, with deliveries or performance to be scheduled at designated locations upon order.” FAR 16.502(a), ¶ 30,203. This type of contract should be used when it can be determined in advance that (1) a definite quantity of supplies or services will be required during the contract period and (2) the supplies or services are regularly available or will be available after a short lead time. Id.

 

B.   (§16.3)  Requirements Contract

 

A “requirements contract” provides for filling all actual purchase requirements of designated Government activities for supplies or services during a specified contract period, with deliveries or performance to be scheduled by placing orders with the contractor.” FAR 16.504(a), ¶ 30,204.

 

Requirement contracts are appropriate for acquiring any supplies or services when the Government anticipates recurring requirements but cannot predetermine the precise quantities of supplies or services that designated Government activities will need during a definite period. Id. Unlike Indefinite Quantity contracts, which may include but do not require estimated quantities from the government owner, requirement contracts require the contracting officer to “state a realistic estimated total quantity in the solicitation and resulting contract.” FAR 16.503(a)(1), ¶ 30,204. The estimated quantity may be obtained from records of previous requirements and consumption, or by other means, and should be based on the most current information available. FAR 16.503(a)(1).

 

Although requiring an estimated quantity schedule in the solicitation, this estimate is not to be construed as a representation to an offeror or contractor that the estimated quantity will be required or ordered, or that conditions affecting requirements will be stable or normal. Id.

 

 

 

II.       (§16.4)  What Is an Indefinite Delivery Indefinite Quantity (IDIQ) Contract?

 

In contrast to Definite Quantity and Requirement Contracts, as defined by the Federal Acquisition Regulations, an Indefinite Delivery Indefinite Quantity contract, also known as JOC (Job Order Contract) or TOC (Task Order Contract): “provides for an indefinite quantity, within stated limits, of supplies or services to be furnished during a fixed period, with deliveries or performance to be scheduled by placing orders with the contractor.” FAR 16.504, ¶ 30,295.

 

Accordingly, the IDIQ contract requires:

 

·         an indefinite quantity

 

·         within stated limits

 

·         of supplies or services

 

·         provided within a fixed period

 

·         scheduled by placing individual orders with the contractor.

 

Id.

 

In contrast to Definite Quantity and Requirements contracts, an IDIQ contract may be used when the Government cannot predetermine, above a specified minimum, the precise quantities of supplies or services that will be required during the contract period, and it is inadvisable for the Government to commit itself for more than a minimum quantity. FAR 16.504(b), ¶ 30,205. An IDIQ contract should be used only when a recurring need is anticipated. Id.

 

To provide an element of certainty in an otherwise uncertain contract mode, the parties are required to follow certain rules as set forth in the FAR. FAR 16.504(a)(1). This section provides:

 

(1)    The contract shall require the Government to order and the contractor to furnish at least a stated minimum quantity of supplies or services and, if and as ordered, the contractor to furnish any additional quantities, not to exceed a stated maximum. The contracting officer may obtain the basis for the maximum from records of previous requirements and consumption, or by other means, the maximum quantity should be realistic and based on the most current information available.

 

Id.

 

To ensure that the contract is binding, the “minimum quantity must be more than a nominal quantity, but it should not exceed the amount that the Government is fairly certain to order.” FAR 16.504(2). The contract may also “specify maximum or minimum quantities that the Government may order under each task or delivery order, and the maximum that it may order during a specific period of time.” FAR 16.504(3).

 

While a stated minimum quantity is typically required, the Court of Federal Claims recently ruled that IQ contracts that lack minimum quantity terms are not unenforceable for lack of consideration if the parties establish a clear intention to be bound. Howel v. United States, 51 Fed. Cl. 516 (2002). If this is found, the court will supply the missing terms in the contract. Id. The Court relied on the Restatement (Second) of Contracts § 204 in Howel to hold that if there is “bargained-for exchange” consideration and the parties intended to be bound by the contract, the contract will be enforceable. Id. In determining the missing minimum quantity terms, the court must set a minimum of more than a nominal amount. Id.

 

The Board of Contract Appeals also ruled recently that the absence in the contract document of requirements and IQ clauses, and of a designated minimum quantity of supplies and services, “does not end the inquiry into the type of contract the parties intended.” Trans Com Sys. v. United States, ASBCA No. 53,865, 2003 WL 2012889 (May 1, 2003). The Board ruled that the specified terms and conditions of the contract must be reviewed, including the Government’s estimate of the quantity of supplies or services and the parties’ course of dealing. Id. In this case, the Board stated: “[c]onsidered in isolation from other facts, the original statement of work, ‘The Contractor shall provide all personnel . . . and services necessary to perform medical . . . transcription of clinical services dictated by the 95th Medical Group,’ fell short of the exclusivity language necessary for a requirements contract.” But once the Board reviewed the other language in the contract, it was determined that the intent was of exclusivity, and therefore it was a requirements contract.

 

 

 

III. Basic Rules of ID Contracting

 

A.   (§16.5)  Advisory and Assistance Services

 

Advisory and Assistance Services, defined at 31 U.S.C. § 1105(g)(1) and FAR 37.201, include services to support or improve organizational policy development, management and administration, program and/or project management and administration, and research and development activities. Id. See also Nations, Inc., Comp. Gen. Dec. B-272455 (11/5/96).

 

Classified under the TOC (Task Order) form of contracting, FAR 16.503(d) limits the use of requirements contracts for this type of governmental need. Specifically:

 

·         If your requirement is for advisory and assistance services,

 

·         AND the contract will exceed $10 million and three years (including options)

 

·         THEN you cannot use a requirements contract

 

·         UNLESS the agency determines, in writing, that (1) the services are unique or highly specialized and (2) it is impracticable to make multiple awards.

 

Id.

 

The limit does not apply if the A & A services are:

 

·         Necessarily incident to other services or supplies, and

·         Is not a significant component of the requirement contract.

 

In addition, if a requirement contract is being utilized for Advisory and Assistance Services, under FAR 16.505(c), the ordering period cannot exceed five years.

 

B.   (§16.6)  Task Order or Job Order Contracting

 

As a reminder, Task Order contracts typically refer to the procurement of non-construction related services, while Job Order contracting typically refers to construction related services.

 

1.   (§16.7)  Contract Requirements

 

Under either TOC or JOC, FAR 16.504(a)(4) sets out certain basic requirements for the contract, including:

 

·         A defined period of the contract, including options

 

·         A total minimum and maximum to be ordered

 

·         Minimum and maximum order limitations (optional)

 

·         A state of the required work

 

·         Ordering procedures, and

 

·         If multiple awards are to be made, the criteria to be used in providing a “fair opportunity.”

 

FAR Contract clauses for TOC/JOC contracts include: 52.216-27 (Single or multiple awards); 52.216-28 (multiple awards for advisory & assistance services); 52.216-18 (Ordering); 52.216-19 (order limitations); 52.216-21 (requirements); 52.216-22 (Indefinite quantity); 52.216-28 (multiple awards).

 

2.   (§16.8)  Minimum Quantity

 

The minimum quantity required under FAR 16.504(a)(1), (2), and (4)(ii) is required in order to provide the “consideration” that binds both parties. Vernon Edwards, “Task Order Contracting: Understanding and Using Task Order Contracts,” Government Contracting Training and Consulting n.2, at 17 (Jan. 1999). While the minimum quantity must be more than a “nominal” amount, there are no hard and fast rules as to what is “nominal.” The amount may be stated in terms of units, or dollars; and the agency must obligate the funds to cover the minimum at the time of award. Id. But the agency does not have to order the minimum at the time of the award. Id. See also Mac’s Cleaning & Repair Serv., ASBCA 49652, 97-1 BCA ¶ 28,748.

 

3.   (§16.9)  Funding the Contract

 

Although the agency is required to fund the minimum quantity order under the contract at the time of award, this timing may vary under certain facts and circumstances, particularly where the contract involves the issuance of multiple delivery orders under one umbrella JOC or TOC contract. One authority providing guidance on this point states:

 

A fairly simply generalization can be deduced from the decisions: In a variable quantity contract (requirements or indefinite-quantity), any required minimum purchase must be obligated when the contract is executed; subsequent obligations occur as work orders or delivery orders are placed, and are chargeable to the fiscal year in which the order is placed…thus in a variable quantity contract with no guaranteed minimum -–or any analogous situation in which there is no liability unless and until an order is placed—there would be no recordable obligation at the time of award. 63 Comp. Gen. 129 (1983); 60 Comp. Gen. 219 (1981); 34 Comp. Gen. 459 (1955); B-124901, October 26, 1955 (“call contract”). Obligations are recorded as orders are placed.”

 

Principles of Federal Appropriation Law, 2nd d. GAO/OGC 92-13 (Dec. 1992), pp. 7-17 to 7-18.

 

4.   (§16.10)            Inter-Agency Acquisitions

 

Under the Economy Act, as covered in FAR Subpart 17.5, agencies may make “interagency acquisitions,” by (1) ordering against another agency’s task order contract or (2) ordering from another office within the agency. If done, the ordering agency is the “requesting agency,” and such order requires a Determination and Findings pursuant to FAR 17.503. The D & F must state that:

 

·         The Interagency acquisition is in the best interest of the Government

 

·         It is more convenient or economic than contracting with the private sector.

 

FAR 17.503.

 

5.   Potential Problem Areas with JOC Administration

 

a.   (§16.11)      Low Bid Factor of Coefficient

 

An initial sign of potential contract problems is where one contractor’s bid factor is substantially lower than the next lowest bid.

 

Another issue arises where the coefficient is not based on clearly defined parameters, which in turn creates the potential for the government paying for services not actually performed. Unless otherwise specified, the typical contract states that certain items are included within the overall JOC coefficient, which applies to all projects/task-orders. Therefore, unless performed, the government is entitled to a downward equitable adjustment. Id. The most common oversights include: hydrostatic testing, chlorination of new water lines/taps, mechanical systems balancing, and various testing procedures that are performed as standard industry practice, by code, by law, or by specification. Be sure the contract specifies some basic parameters for the coefficient. An example of one installation’s contract states that the contractor’s coefficient must include, but not be limited to, overhead, profit prime contractor, profit subcontractor, insurance, environmental compliance, taxes, protection of and moving government property, administrative work, as-builts, submittals, price quotations, contractor adjustments to government unit prices, final clean up, wastage factors, permits, licenses and fees, modifications, on-site office and utilities, and quality control inspection. Id. It is thus easy to understand, after reviewing this list, why a low bid factor should be an immediate red flag at the time of bid evaluation.

 

b.   (§16.12)      Inconsistent Contractor Line Item Proposal vs. Government Scope of Work

 

In the JOC system, the contractor uses a line item proposal to derive a bottom line, fixed price to apply to the government’s Statement of Work. The analysis of whether the line item proposal is to be considered in determining whether the contractor supplied the ordered items to the government remains a matter of contract interpretation. See Appeal of Brown & Root, ASBCA No. 44,020, 1995 WL 447135 (July 19, 1995) (holding that wording of the contract conditioned contractor’s required performance upon Statement of Work rather than contractor line item proposal); see also Inspection and Acceptance, JOCKey, U.S. Army Center for Public Works (June 1998) (noting that under Army’s JOC system, it is inappropriate to use the contractor’s line item proposal rather than the government’s statement of work for inspection and acceptance purposes, and stressing important of detailed statement of work).

 

c.   (§16.13)      Determination of Unit Price Item Inclusions

 

The final fixed price for the government’s statement of work is derived from a detailed line item proposal prepared by the contractor, utilizing the unit price items, cost and contractor’s bid factor to arrive at the bottom line, fixed price. It is important for both the contractor and the government contracting officer to verify the accuracy of the line item proposal, with respect to quantities and tasks identified. Typically, unit price books include line items for individual components (i.e., install doorknob), or assembly components (i.e., install door and hardware). A savvy contractor can artificially inflate the line item proposal costs by duplicating unit versus assembly items. Likewise, duplication exists for demolition costs versus remove and replace itemizations; and quantities can be overstated or duplicated. In some instances, contractors may derive pricing from including line items clearly non-applicable to a particular scope of work (i.e., brick and mortar tuckpoint on a residence without any brick). Inspection and Acceptance, JOCKey, U.S. Army Center for Public Works n.39, at 2 (June 1998).

 

d.   (§16.14)      Unit Price Book Inaccuracies

 

The government and the contractor should verify the Unit Price costs at the outset, to ensure the costs reflect the market price in that area. Id.

 

e.   (§16.15)      Distinguishing Pre-Priced From

Non-Prepriced Items

 

For Non-Prepriced items, the contractor is typically authorized to charge the fair market price for that work. But the government must double check all notices of NPP items to verify that those items are, in fact, absent from the UPB. Id. If you are dealing with NPP items, be sure to ask for vendor quotes to back up the alleged fair market price requested. Id. at 3. Once the new price is negotiated, it must be added to the UPB book for future use and reference. Id.

 

f.    (§16.16)      Quality Standards

 

Once the government has established quality standards, ensure their delivery by checking line items where specified quality standards are required. If the line item indicates a particular grade of product, or a particular type of installation, which is relied on in deriving the initial cost proposal, then the government needs to ensure that it is receiving the quality for which it has paid.

 

g.   (§16.17)      Inaccurate Proposals

 

This is the prevalent problem with implementing JOC contracting. Some inaccuracy is typical at the initial outset of the project, particularly with parties new to the contract form. But, “if after an initial 6 to 12 months, there is a pattern of abuse, this may be fraud. Doing your homework is the only sure cure.” Id.

 

 

 

 

IV. Preparing the Work Statements for TOC/JOC Contracts

 

A.   (§16.18)      Indefinite Delivery Contracts

 

Under an Indefinite Delivery contract, FAR 16.504(a)(4)(iii) requires a statement of work, specifications or other description that reasonably described the general scope, nature, complexity and purpose of the supplies or services to be acquired under the contract in a manner that will enable a prospective offeror to decide whether to submit an offer.”

 

B.   (§16.19)      Performance Based Contracting

 

In the case of task order contracts, the statement of work for the basic contract need only define the scope of the overall contract. FAR 16.504(a)(4)(iii). The statement of work for each task issued under a task order shall comply with paragraph (b) of this subsection.” FAR 37.602-1-(a).

 

Pursuant to an opinion of the GAO, Letter from GAO to Secretary of the Army (Jan. 26, 1998):

 

Statements of work that are too general provide insufficient information for prospective offerors to decide whether to submit a proposal or what to offer to best meet the agency’s needs. Also, inclusion of broad categories of work in one statement of work constitutes a form of bundling, since different kinds of work (or tasks in different geographical or technical areas) are combined into one procurement, and an overly broad statement of work can unjustifiably diminish competition just as bundling does, by deterring businesses, particularly small businesses, from competing for a contract, notwithstanding their ability to perform some of the work at issue. See National Customer Eng’g., 72 Comp. Gen. 132 (1993), 93-1 CPD ¶225; Airport Markings of Am., Inc., et al., 69 Comp. Gen. 511 (1990), 90-1 CPD ¶543. Provisions or conditions that restrict competition (such as bundling) are permitted only to the extent necessary to satisfy the contracting agency’s needs. 10 U.S.C. 2305(a)(1)(B)(ii); National Customer Eng’g., supra.

 

B277979

 

At a minimum, the contract statement of work should include the following:

 

·         Background Information

 

·         Scope of Services

 

·         Period of Performance

 

·         Place of Performance

 

·         Contract Management Requirements

 

·         Contract Quality Assurance Requirements

 

·         Government Furnished Property and Services

 

·         Data and Reports

 

Vernon Edwards, “Task Order Contracting: Understanding and Using Task Order Contracts,” Government Contracting Training and Consulting n.2, at 26 (Jan. 1999).

 

Contract Management Requirements should include:

 

·         Points of contact and representation;

 

·         Task Order Planning and Processing, including preparation of estimates and schedules; fact-finding and negotiations; work planning and preparation; and

 

·         Task Order Management Pricing Arrangements.

 

Id.

 

 

 

V.      (§16.20)           Pricing

 

Under Task Order contracting, pricing arrangements may include fixed price, cost-reimbursement, time and materials, labor hour, or for negotiated contracts, any type or combination of types of the foregoing. Vernon Edwards, “Task Order Contracting: Understanding and Using Task Order Contracts,” Government Contracting Training and Consulting (Jan. 1999). “Contracts negotiated under Part 15 [i.e., contracts awarded without using sealed bidding procedures, FAR 15.101] may be of any type or combination of types that will promote the Government’s interest, except as restricted in this part.” FAR 16.102(b).

 

Cost plus Percentage of cost is not allowed. FAR 16.102(c).

 

For indefinite delivery contracts, the contract “may provide for any appropriate cost or pricing arrangement under Part 16. Cost or pricing arrangements that provide for an estimated quantity of supplies or services (e.g. estimated number of labor hours) must comply with the appropriate procedures in this subpart.” FAR 16.501-2(c).

 

A.   (§16.21)      Government’s Pricing Problem

 

“Price” establishes a means to assign a dollar value to the services provided. But under TOC or JOC, contract describes only services. Specific work is unidentified at the time of contract award. The costs of performance typically vary with the details per each delivery order. How does the government set its prices? By using price resources (input and output pricing) to price the specific services.

 

“Output” pricing assigns dollar values to the specific task or job unit to be performed. Typically used in Job Order or Construction contracting, price may be assigned to a job unit, e.g. square foot of painting. Values can be based on industry standards such as R.S. Means.

 

“Input” pricing assigns a dollar value to “resources,” e.g., a “loaded” or “burdened” hourly labor rate. Vernon Edwards, “Task Order Contracting: Understanding and Using Task Order Contracts,” Government Contracting Training and Consulting n.2 at 40–43 (Jan. 1999).

 

B.   (§16.22)      Contractor’s Pricing Problem

 

Obtaining the contract alone costs the contractor money. This includes the cost of the order-processing apparatus, where multiple delivery orders are expected under the contract. Costs also include the administrative time assisting in the preparation of individual delivery or task orders. The contractor is also required to work with a mixture of fixed costs for various job units, incorporated into burdened hourly labor rates, all based on an indefinite sales quantity. The recommended solution is to use a fixed price contract management line item, i.e., to delineate on a unit by unit basis all tasks to be included in that delivery order, multiplied by the Unit Price and the contractor’s bid factor, to arrive at a fixed price for the work to be performed. Vernon Edwards, “Task Order Contracting: Understanding and Using Task Order Contracts,” Government Contracting Training and Consulting p. 46 (Jan. 1999).

 

                 

 

VI.     (§16.23)           Multiple Awards

 

Multiple awards are mandatory if:

 

·         the contracts are for Advisory and Assistance Services; and

 

·         the contract is for an indefinite quantity; and

 

·         the contract will exceed three years and $10,000,000 including options;

 

·         unless:

 

Ø    uniqueness or specialization make it impracticable; or

 

Ø    only one offeror is capable; or

 

Ø    only one offer is received.

 

FAR 16.504(c)(2).

 

Multiple awards do not apply to requirements contracts, and should not be used when:

 

·         services are unique or highly specialized (sole source)

 

·         single award will yield more favorable terms

 

·         administrative costs will exceed benefits

 

·         tasks will be integrally related

 

·         total estimated value is less than $100,000 for non-commercial items, or $5 million for commercial items, or

 

·         not in the Government’s best interests.

 

FAR 16.504(c)(a)(i)–(vi). See also Memorandum from Director of Defense Procurement, Use of Multiple Award Task Order Contracts” (4/30/99).

 

                 

 

VII.    (§16.24)           FAR Part 36 and Job Order Contracting

 

Many of the above regulations deal generically with Task Order Contracting. But in the construction arena, governing Job Order Contracting, the practitioner must take into account the provisions of FAR Part 36. Part 36 deals with “policies and procedures peculiar to contracting for construction and architect/engineer services. It includes requirements for using certain clauses and standard forms that apply also to contracts for dismantling, demolition or removal of improvements.” FAR 36.000, ¶ 30,750.

 

When a requirement under FAR 36 is inconsistent with another regulation, “this Part 36 shall take precedent if the acquisition of construction or architect-engineer services is involved.” FAR 36.101(b). If an acquisition involves both construction and supplies or services, the contract “shall include (1) clauses applicable to the predominant part of the work.” FAR 36.101(c).

 

To date, there are no known reported cases reconciling apparent conflicts between FAR Part 36 and the various provisions relevant to IDIQ contracts. But the following areas are noted as potential conflict areas.

 

Under FAR 36.103(a), “contracting officers shall acquire construction using sealed bid procedures . . .” within the United States, but “negotiation” for acquiring architect-engineer services. FAR 36.103(b). Accordingly, this would imply that mixed pricing arrangements permissible under FAR 16.102(b) would not be permitted for construction contracts. But under FAR 36.207, a combination of lump sum and unit pricing is permissible. Lump sum is preferred, except when:

 

·         large quantities of work such are grading, paving and site preparation are involved;

·         quantities of work, such as excavation, cannot be estimated with sufficient confidence to permit a lump sum offer without a substantial contingency, or

·         estimated quantities of work may change significantly during construction, or

·         offerors would have to expend unusual effort to develop adequate estimates.

 

FAR 36.207.

 

Other relevant provisions under FAR 36 include:

 

A.   (§16.25)      FAR 36.202 Specifications

 

Under FAR 36.202, the contracting officers must insure that references in specifications are to widely recognized standards or specifications promulgated by governments, industries, or technical societies. FAR 36.202(b). When brand name or equal descriptions are necessary, the specifications must clearly identify and describe the particular physical, functional, or other characteristics of the brand name items that are considered essential to satisfying that requirement. FAR 36.202(c).

 

B.   (§16.26)      FAR 36.204—Disclosure of the Magnitude of Construction Projects

 

Under FAR 36.204, the government is required to offer the bidder advance notice stating the magnitude of the requirement in terms of physical characteristics and estimated price range. While the government’s estimate is not to be disclosed, the project must nonetheless state a range of estimated magnitude, e.g., between $500,000 and $1,000,000.

 

C.   (§16.27)      FAR 36.500, et seq.—Construction Contract Clauses

 

FAR 36.500, et seq., sets forth various contract clauses to be inserted into governmental construction contracts, including:

 

·         Performance of the work by Contractor (36.501);

·         Differing Site Conditions (FAR 36.502);

·         Site Investigation (36.503);

·         Physical Data (36.504);

·         Material and Workmanship (36.505);

·         Superintendence by the Contractor (36.506);

·         Permits and Responsibilities (36.507);

·         Other contracts (36.508);

·         Protection of Existing Vegetation (36.509);

·         Operations and Storage Areas (36.510);

·         Use and Possession Prior to Completion (36.511);

·         Cleanup (36.512);

·         Accident Prevention (36.513);

·         Utility Services (36.514);

·         Schedules (36.515);

·         Quantity Surveys (36.516);

·         Layout of Work (36.517);

·         Work Oversight in Cost Reimbursement Contracts (36.518);

·         Organization and Direction of the Work (36.519);

·         Specifications and Drawings for Construction (36.521);

·         Preconstruction Conference (36.522); and

·         Site Visit (36.523).

 

                 

 

VIII.   (§16.28)           Modifying a Task Order

 

A contracting officer can modify a task order, but subject to the following criteria:

 

·         only if the contract permits changes, and only if the changes are in accordance with the procedures of the contract;

 

·         unilateral changes must be within the “scope of the contract”

 

·         changes to the contract may require an “equitable adjustment.”

 

Vernon Edwards, “Task Order Contracting: Understanding and Using Task Order Contracts,” Government Contracting Training and Consulting n.2, at 83 (Jan. 1999).

 

                 

 

IX.     (§16.29)           Conclusion

 

In conclusion, the ID contract in general, and the IDIQ contract specifically, is a complicated form of contracting that requires extensive contract administration and supervision. But given its multiple benefits to governmental owners, the practitioner must become familiar with its use and application as the contract becomes more prevalent on a state and municipal level.

 

X.        Representative Cases

 

A.   (§16.30)      Defining When a Task Is Not in Scope

 

Appeal of Brown & Root Services, ASBCA No. 44,020, 1995 WL 447135 (July 19, 1995). In an IDIQ contract, the pricing data used to price individual delivery orders contained references to chutes used for disposal. But the delivery orders (and the included Scope of Work) did not mention such items. B&R claimed for extra costs for the chutes. The court held that:

 

·         the contract was to be interpreted by its express provisions;

 

·         the contract was a lump sum contract based on the accepted delivery order (without integration of the pricing date); and

 

·         B&R was obligated to provide what was contained in the Scope of Work or Delivery Order.

 

Ervin & Associates, Inc., B-279083, B-279219 (4/30/98). In deciding whether a task order is beyond the scope of the contract originally ordered, GAO will look to whether there is a material difference between the task order and that contract. MCI Telecomms. Corp., supra; see AT&T Communications, Inc. v. Wiley, Inc., 1 F.3d 1201, 1205 (Fed. Cir. 1993). Evidence of such a material difference is found by reviewing the circumstances attending the procurement that was conducted; examining any changes in the type of work, performance period, and costs between the contract as awarded and as modified by the task order, and considering whether the original contract solicitation adequately advised offerors of the potential for the type of task order issued. Ervin & Assocs., Inc., supra, at 8. The overall inquiry is “whether the modification is of a nature which potential offerors would reasonably have anticipated.” Neal R. Gross & Co., Inc., B-237434, Feb. 23, 1990, 90-1 CPD ¶ 212 at 3, cited in AT&T Communications, Inc. v. Wiltel, Inc., 1 F.3d at 1207.

 

B.   (§16.31)      Protests of Individual Task Orders

 

A contractor cannot protest the award of an individual task order pursuant to FAR 16.505(a)(7), but they can file a claim based on breach of contract for failure to provide a “fair opportunity.” FAR 16.505(b)(1).

 

C.   (§16.32)      Government Requirement to Honor Acquisition Regulations

 

G.L. Christian & Associates v. United States, 312 F.2d 418 (Ct. Cl. 1963). This case established the rule that clauses that are required by regulations to be included in a contract are incorporated into such contracts by operation of law. The contract at issue did not contain a clause authorizing the government to terminate the contract for its convenience. But the Armed Services Procurement Regulations required that such a clause in be inserted in certain contracts, including the contract at issue. The court ruled that since the Armed Services Procurement Regulations “were issued under statutory authority, those regulations . . . had the force and effect of law. Because they applied, there was a legal requirement that the plaintiff’s contract contain the standard termination clause and the contract must be read as if it did.”

 

Condec Corp. v. United States, 369 F.2d 753 (Ct. Cl. 1966) In this case, a contractor submitted its bid on a project for the Army Corps of Engineers in the amount of $1,952,067. Before bid opening, the contractor sent a bid modification via Western Union. Western Union failed to deliver the modification on time. But at the bid opening it was determined that the contractor’s original bid was already the lowest. The contractor attempted to withdraw its bid modification pursuant to §§ 2.304 and 2.305 of the ASPR, arguing that the bid modification was late and should have been disregarded. The Government sought to hold the contractor to the lower bid. The court considered a regulation binding on the government, even though the regulations did not require that a clause to that effect be inserted in the contract. In holding that the contractor was entitled to modify his bid, the court expressly relied on certain language contained in the regulations—even though the regulation was not inserted into the contract nor was it considered a mandatory clause.

 

American Electric Contracting Corp. v. United States, 579 F.2d 602, 217 (Ct. Cl. 1978). If a governmental agency violates a regulation intended for the benefit of the contracting party, the contract is made in violation of the law and the contracting party is thereby entitled to reformation of the contract.

 

DeMatteo Construction Co. v. United States, 600 F.2d 1384 (Ct. Cl. 1979). The court held that “[f]ailure of a government contracting agency to abide by a provision of its own regulation is material . . . if the provision is for the benefit of the contractor and there is a causal nexus between the failure and the asserted financial injury to the contractor.”

 

General Engineering & Machine Works v. O’Keefe, 991 F.2d 775 (Fed. Cir. 1993). A contractor with the United States Navy appealed from a decision of the Armed Services Board of Contract Appeals confirming Navy’s entitlement to reimbursement of $86,775 in material handling fees. The court held that the Navy was entitled to reimbursement based on the contractor’s failure to maintain material handling charges in separate cost pool in accordance with regulatory payments clause included in contract. In its deliberations, the court stated that “[t]he Christian Doctrine applies to mandatory contract clauses which express a significant or deeply ingrained strand of public procurement policy” as well as “less fundamental or significant mandatory procurement clauses if not written to benefit or protect the party seeking incorporation.” It additionally declared that “[f]ederal regulations which are based upon a grant of statutory authority ‘have the force and effect of law, and, if they are applicable, they must be deemed terms of the contract even if not specifically set out therein.”

 

American Telephone & Telegraph Co. v. United States, 1999 WL 333409 (Fed. Cir. 1999). A contract made in violation of a regulation is not void. The court recognized that “[w]hen a contract or a provision thereof is in violation of law but has been fully performed, the courts have variously sustained the contract, reformed it to correct the illegal term, or allowed recovery under an implied contract theory . . . .”

 

Mid-Eastern Industries, Inc., 02-1 BSA ¶ 31,657, ASBCA No. 53016 (Nov. 16, 2001). The contractor sought payment of the guaranteed minimum price under the IQ contract. The Board ruled that if the contractor is required to have the capacity to provide not only the minimum, but also the maximum service as established by the IDIQ contract and the government fails to order the minimum guaranteed amount, the contractor is entitled to the minimum guaranteed dollar amount less any amount previously paid for orders performed. The Board determined that under the contract the contractor was obligated to provide and maintain the capability of providing up to the maximum amount of services set forth in the contract. The minimum guaranteed amount was the consideration for the contract and the only available source of recovery for the contractor to maintain its capability.

 

Hermes Consolidated, Inc., ASBCA No. 52308 (Feb. 15, 2002). The contractor wanted the Government to pay the original minimum that was guaranteed in the contract, but the Board ruled that when the government partially terminates for convenience an amount of services or material to be provided under an IDIQ contract, the original minimum guaranteed amount is also reduced by that amount, even though the termination did not expressly reduce the original contract’s minimum guarantee.

 

D.                     (§16.33)            Government Duty to Provide Realistic Estimates

 

Coastal States Petrochemical Co. v. United States, 214 Ct. Cl. 520, 559 F.2d 1 (1977). The contractor was one of several contractors awarded contracts to supply the government with jet fuel, at a time when the Vietnam War was in progress. Shortly after plaintiff’s contract began, combat activities in Vietnam substantially decreased, resulting in the government’s jet fuel estimates being sharply reduced. As a result, the plaintiff’s jet fuel obligation was reduced to 57% of the original estimate. In seeking relief for its resultant losses, the plaintiff’s principal argument was that it had a requirements contract and therefore the government breached the contract by failing to obtain all of its jet fuel requirements from Coastal States. The court rejected this argument holding that the contract was an IDIQ contract and, therefore, the government had not breached its contract by obtaining jet fuel from other suppliers. In so ruling, the court specifically held that when the government contracted with the plaintiff, it had properly based its estimates of future needs on its past experience. Thus, the court tangentially addressed the question of whether the estimates were accurate; the court, in essence, held that the government could not have known at the time of contracting that the Vietnam War would de-escalate, causing a reduction in its fuel requirements.

 

Applied Devices Corp. v. United States, 591 F.2d 635 (Ct. Cl. 1979). The court held that the provision requiring the government to provide a realistic estimate was incorporated into the parties’ contract by operation of the Christian Doctrine even though there was no FAR clause requiring its inclusion.

 

DOT Systems, Inc. v. United States, 231 Ct. Cl. 765 (1982). The contractor was awarded an IDIQ contract, which provided a minimum quantity of $500 worth of work and an estimated maximum of $11,689. But the plaintiff received orders of less than 10% of the estimates. The plaintiff argued that he was entitled to compensation for the government’s error in its estimates. The estimates were based on the government’s past needs. The director preparing the estimates consulted with other offices. “The actual estimates were prepared by taking a percentage of the historical data and, when in doubt, adopting a higher figure.” While the court recognized that the government with an IDIQ contract is not held to the same negligence standard as a requirements contract, the regulations do set forth the requirement that the estimate be “as realistic as possible.” The regulations stated that “[t]he maximum may be obtained from the records of previous requirements and consumption, or by other means.” Because the estimates were prepared based on historical data of the entity’s past needs, the agency complied with C.F.R. 1-3.409(c)(1) and therefore there was no breach.

 

Art Anderson Associates, ASBCA No. 27807, 84-1 B.C.A. 17,225 (1984). Indefinite quantity contract is used where the United States cannot estimate its needs except in terms of minimums and maximums.

 

Deterline Corp., 89-3 BCA 22,069, ASBCA No. 33,090 (May 19, 1989). The plaintiff-contractor was awarded an IDIQ contract with a $12 million maximum quantity. He contended that he “reasonably anticipated” that the orders would meet or exceed that amount based on the amounts the government had ordered under prior similar contracts and based on the government’s oral representations that they anticipated the orders would “approach the maximum amount.” Although the contractor claimed the government negligently prepared its estimates, the facts established the estimates admittedly were properly based on prior history. Thus, the ASBCA rejected the contractor’s arguments, stating:

 

The contractor was on notice prior to submitting its bid of the minimum amount it could receive and bore the risk it would be limited to that amount. Even assuming for purposes of this motion that the Government indicated at a pre-bid conference that it anticipated ordering or exceeding the maximum amount, no facts have been indicated, even for purposes of this motion, which would absolve appellant from the terms of the contract which set forth the minimum dollar amount which the Government was obligating itself to order. To interpret the contract as appellant argues would vitiate a major provision of the contract.

 

Crown Laundry & Dry Cleaners, Inc., 90-3 BCA 22,993, ASBCA No. 39,982 (May 21, 1990). This case involved a mistaken assumption on the part of the contractor that the government would order more than was ordered. The government ordered 66% of the maximum quantity identified under an IDIQ contract. Crown Laundry argued that the government negligently prepared the estimates based solely on the fact that the actual orders were less than the estimate, and based on the disparity between the $85,000 minimum and $991,644 maximum. There was no mention that the government completely disregarded FAR 16.504, or that the government knowingly included a project that was clearly outside the scope of an IDIQ contract. In the 1990 decision, the court held that it would not examine the reasonableness of an IDIQ governmental estimate. But see 29 Fed. Cl. 506 (1993) below.

 

C.F.S. Air Cargo, Inc., 91-2 BCA 23,985, ASBCA 40,694 (April 30, 1991). The contractor sought an equitable adjustment based on the fact that the government estimates had been grossly overstated. The contractor argued that:

 

·         the estimates were negligently prepared;

 

·         the estimates were not realistic and based on the most recent information available in violation of FAR 16.504(a)(1);

 

·         the Navy was estopped from denying the accuracy of its estimates; and

 

·         the contractor was entitled to relief for mutual or unilateral mistake.

 

The court merely reiterated the holdings in Deterline and Crown Laundry, that “we do not examine the reasonableness of the estimates in indefinite quantity contracts.”

 

Medart v. Austin, 967 F.2d 579 (Fed. Cir. 1992). The regulations provided that the government “should base the estimate on the most current information available.” 48 C.F.R. § 16.503(a)(1). A contractor was awarded a requirements contract to supply storage and wardrobe cabinets to several hundred federal agencies. The government prepared the estimates based on the number of units ordered during the previous fiscal year. The actual requirements varied from 24% to 70% less than the estimate. The contractor complained that simply relying on the previous year’s orders to prepare the estimates was unreasonable, and that the use of other methods would have improved the accuracy of the estimates. Although the court rejected this argument, it did so only because it found that the estimate had been made in good faith in that it was based on a method expressly authorized by federal regulations.

 

Crown Laundry & Dry Cleaners, Inc. v. United States, 29 Fed. Cl. 506 (1993). The court recognized that a government agency may be held liable for failing to provide good faith estimates when it knew that the contractor had to rely on those estimates in formulating its bid. Here, the plaintiff was awarded a contract to provide laundry and dry cleaning services to the U.S. Missile Command at Redstone Arsenal. Soon after beginning performance of the contract, the plaintiff discovered that it was receiving far less work than had been estimated. It complained to the contracting officer, to no avail. After completing the contract, it was determined that the actual requirements were 45% less than the estimate. The plaintiff sought damages as a result of the government’s alleged lack of due care in preparing its estimate. The court noted that “[i]t is settled that a bidder on a government contract is entitled to rely on government estimates set forth in the contract as representing honest and informed conclusions.” Where a government contracting officer knows that the contractor “had to rely on the estimates in the formulation of its bid, . . . the government was required to act in good faith and use reasonable care in computing its estimated needs. The court held that “[w]here a contractor can show by preponderant evidence that estimates it relied on were negligently prepared or were unreasonably inadequate, indicating a lack of due care in the preparation at the time the estimates were made, the government may be liable for resulting damages. The government is not free to carelessly guess at its needs.”

 

Rice Lake Contracting, Inc. v. United States, 33 Fed. Cl. 144 (1995). The contractor argued that it had a requirements contract and, therefore, the government breached the contract when it failed to purchase the “full complement of services under the contract . . . .” The government contended that the contract was an IDIQ contract. Thus, it did not breach the contract since it had ordered more than 11 times the minimum quantity. The court’s ruling that the government had not breached the contract turned on the fact that this was an IDIQ contract rather than a requirements contract. Because it was an IDIQ contract, the government was not required to purchase all of its requirements from the plaintiff, as plaintiff claimed, and, therefore, the cause of action failed.

 

Travel Centre v. General Services Administration, 1999 WL 636168, GSBCA No. 14057 (Aug. 18, 1999), and its original decision found at 1997 WL 745049, GSBCA 14057, 98-1 BCA 29,422, 98-1 BCA 29,536 (Nov. 26, 1997. In Travel Centre the Board of Contact Appeals held that the GSA may be held liable for breach of an IDIQ contract for providing grossly inaccurate estimates to bidders when it knows that such estimates are irrational (or recklessly disregards information that would give it such knowledge) and withholds that material information from bidders, even though the government has satisfied its obligation to purchase at least the stated minimum quantity. In Travel Centre, the GSA solicited bids for an IDIQ contract to operate a travel management center for federal agencies in the New England area. The solicitation provided that the successful bidder would be the preferred—but not the mandatory—travel agent in that region. The solicitation further provided estimates of expected business from which the bidders were instructed to base their bids. During the solicitation process, the GSA received notices from the incumbent contractor, Dube Travel, that another contractor had been awarded a separate contract to provide travel services to the Department of Defense and its related entities. The Department of Defense business comprised more than 50% of the anticipated business from the State of Maine and, as a result, the estimates provided in the bid solicitation were “vastly overstated.” The GSA did not notify the bidders of this material information. The contract to provide travel services to Maine and New Hampshire was subsequently awarded to Travel Centre. Travel Centre began performance of the contract, and the GSA ordered more than the minimum quantity of $100. But when the additional anticipated revenue failed to materialize, Travel Centre had to close its business.

 

The Board of Contract Appeals held that the GSA acted in bad faith by withholding the information about the exclusion of the Department of Defense’s business from the contract and that such bad faith constituted a breach of the contract. It held that bidders are “entitled to rely on Government estimates as representing honest and informed conclusions;” otherwise, the inclusion of such estimates would be merely surplusage. Travel Centre, 1997 WL 745049. It noted that the GSA’s “irrationally-arrived-at estimate was not merely the result of a run-of-the-mill mistake,” but rather the GSA either knew that its estimates were vastly overstated or recklessly disregarded information that would reveal such inaccuracies, and yet it failed to disclose that information to the bidders. Id. In addition, the GSA’s bad faith was further noted by the court in that the GSA knew that bidders had based their bids on the solicitation’s estimates. Furthermore, the court rejected the GSA’s arguments that the solicitation expressly provided that the estimates were “‘solely for informational purposes.’” The Court held: “It is well established that where the Government requires offerors to base their proposals on information it provides, it may not absolve itself of risk merely by labeling data supplied in the solicitation ‘for information purposes only.’” Id. (emphasis added) (citing Cherry Hill Constr. Corp. v. Gen. Servs. Admin., GSBCA 11217, BCA ¶ 25,179). Accordingly, the court held that the “GSA withheld crucial information material to an offeror’s decision whether to submit a proposal at all and, if so, how to structure it. By withholding this information from offerors, GSA exhibited the ‘bad faith’ necessary to sustain a finding of breach of contract.” Travel Centre, 1999 WL 636168. The court further noted that “[t]here is no type of contract; including one for an indefinite quantity, in which the contractor assumes the risk that the Government has intentionally misled it.” Id. (emphasis added). Importantly, the Court characterized the holdings in prior cases such as Dot Systems, Inc. v. United States, 231 Ct. Cl. 765 (1982), C.F.S. Air Cargo, Inc., ASBCA 40694, 91-2 BCA ¶ 23,985, and DynCorp., ASBCA 38862, 91-2 BCA ¶ 24,044 (all suggesting that the Government cannot be held liable under IDIQ contracts where it orders at least the minimum quantity) as standing for the proposition that “Anyone who is dumb enough to rely on the Government’s promises deserves what he gets”—a proposition that the Travel Centre court expressly rejects. Travel Centre, 1999 WL 636168.

 

Petcham, Inc., 01-2 BCA ¶ 31,656, ASBCA No. 51,687 (Nov. 20, 2001). In an IDIQ contract, the Government is only obligated to order the minimum quantity stated in the contract, not the estimated, guaranteed, or expected amount of service.

 

Varilease Technology Group, Inc. v. United States, 289 F.3d 795 (Fed. Cir. 2002). The contractor expected the contract to be a requirements contract while the Government believed the language of the contract made it an IDIQ contract. The court ruled that when determining the type of contract, the plain language of the contract should be relied on rather than the expectations of a party. “[T]he intention of a party entering into a contract is determined by an objective reading of the language of the contract . . . .” Id. at 799.

 

If an IDIQ contract has option periods, such periods does not result in the formation of separate and distinct requirement contracts. “We discern no basis in either the relevant regulations or case law for treating option periods of an ID/IQ contract as separate contracts . . . Minimum quantities are not required to be associated with each option period.” Id. at 799, 800.

 

J. Cooper & Associates, Inc. v. United States, 53 Fed. Cl. 8 (July 12, 2002). Contractor sued the Government for breach of contract because (1) the government failed to provide work in excess of the minimum quantity and (2) for not awarding all the work in the government’s pre-contract estimate to the contractor. The court stated that an IDIQ contract only requires the government to order a stated minimum quantity of supplies or services, and once that minimum has been met, the government does not need to provide contractor with any more work and may purchase additional supplies or services from any other source it chooses. “An IDIQ contract does not provide any exclusivity to the contractor.” Travel Centre v. Barram, 236 F.3d 1316, 1319 (Fed. Cir. 2001). “The minimum quantity guaranteed … was not nominal, so purchase of that quantity ended the government’s legal obligation.” 48 C.F.R. § 16,504(a)(2).

 

Under an IDIQ contract, the contracting agency is not under an obligation to terminate the letter contract for convenience, and can allow it to lapse, when no task orders will be interrupted or terminated by the agency by allowing such lapse and when the agency has paid the contractor in excess of the minimum guarantee in the letter contract.

 

The presumption is that government officials have acted in a lawful manner, and such can only be overcome with clear and convincing evidence.

 

E.               (§16.34)      Governmental Tort Liability

 

Gemsco, Inc. v. United States, 115 Ct. Cl. 209 (1950). “In the interpretation of contracts dealing with ‘indefinite quantities,’ . . . unless all considerations of equity and justice are disregarded, a high degree of good faith should be required on the part of the Government and its agents.” Thus the court held that the U.S. had breached its contract with the plaintiff.

 

United States v. Neustadt, 366 U.S. 696 (1961). Misrepresentation allegations are claims in tort, which are beyond Tucker Act jurisdiction.

 

Bird & Sons, Inc. v. United States, 420 F.2d 1051 (Ct. Cl. 1970). Where an alleged “negligent” act of a governmental entity constitutes a breach of contractually created duty, the Tucker Act does not preclude relief. An action may be maintained that arises primarily from a contractual undertaking regardless of the fact that the loss resulted from the negligent manner in which defendant performed its contract.

 

H.F. Allen Orchards v. United States, 749 F.2d 1571 (1984). Here no contractual duty exists; negligent performance of a non-contractual duty cannot be the basis of a breach of contract claim. Rather, the negligent disclosure of information by the government, when the government had no contractual duty to supply such information, may sound in tort.

 

H.H.O. v. United States, 7 Cl. Ct. 703 (1985). The Court of Federal Claims has jurisdiction over cases in which it is alleged that the government tortiously breached its contract. “The test for jurisdiction in this Court, under the Tucker Act, is whether there has been a “tortious” breach of contract, rather than a tort independent of the contract. In order for this Court to have jurisdiction over suits of this nature, there must be a direct connection between the Government’s contractual obligations and the alleged tortious conduct. It is not jurisdictionally sufficient if the alleged tortious conduct is merely “related” in some general sense to the contractual relationship between the parties.” Here the plaintiff alleged that the government breached its implied obligation “not to hinder or delay the plaintiff’s performance nor to increase his costs.” The court held that “insofar as plaintiff’s references to defendant’s alleged misrepresentations are merely another way of asserting that a breach of contract occurred,” the court had jurisdiction over such a claim.

 

Edwards v. United States, 19 Cl. Ct. 633 (1990). The court held that it had jurisdiction over the plaintiffs’ claims that a Postal Service agent made false representations concerning the suitability of a certain tract of land for the construction of post office. Thus, the Court of Federal Claims has jurisdiction over cases in which it is alleged that the government tortiously breached its contract.

 

Beckering v. United States, 22 Cl. Ct. 30 (1990). The government’s duties were imposed by law, not contract, thus injury resulting from incomplete or insufficient performance of duties, if redressable at all, is actionable only as tort.

 

LeBlanc v. United States, 50 F.3d 1025 (Fed. Cir. 1995). The court rejected the allegation that the contractor’s claim was based on the False Claims Act rather than the Tucker Act. It found that the Tucker Act did not grant the Court of Federal Claims jurisdiction over tort claim of illegal government interference.

 

Morris v. United States, 33 Fed. Cl. 733 (1995). The plaintiff was the purchaser of surplus government real estate. He alleged that a government agent misrepresented the tenant’s payment history. The court held that it had jurisdiction over the plaintiff’s claims of misrepresentation, failure to disclose superior knowledge and breach of implied obligation of good faith and fair dealing. In addition, it held that an “obligation of good faith dealing is implied in every contract with the government . . . . Where there is privity of contract, misrepresentation has a contract aspect in addition to its tort aspect . . . . In its contract aspect, a claim of misrepresentation is in large measure analogous to a claim for breach of warranty . . . . [B]inding precedent indicates that the government may be held liable when it makes erroneous representations to those with whom it enters into contractual relations.”

 

Nematollahi v. United States, 38 Fed. Cl. 224 (1997). The plaintiffs, purchasers of HUD property, alleged that HUD had contractually misrepresented the “existence, nature, magnitude and effects” of hazardous waste in the property’s groundwater. The court held that these misrepresentation claims “revolve around the defendant’s alleged breach of contract, not an action in tort,” and therefore it had jurisdiction over such claims.

 

F.               (§16.35)      Equitable Relief vs. Government

 

Bowen v. Massachusetts, 487 U.S. 879 (1988). The Court of Claims has no power to grant equitable relief. Injunctive relief is equitable relief over which the court lacks jurisdiction. Furthermore, Claims Court does not have the general equitable powers of a district court to grant prospective relief. But regarding the Tucker Act, a limited exception may apply. Equitable relief may be available in the context of a bid protest.

 

Brookter v. United States, 14 Cl. Ct. 232 (1988). Because inspection and appraisal were not contractual obligations, improper inspection and appraisal cannot give rise to breach of contract claim; claim is one of misrepresentation, which falls outside Tucker Act Jurisdiction.

 

Bobula v. Department of Justice, 970 F.2d 854 (Fed. Cir. 1992). Regarding the Tucker Act, a limited exception may apply. Equitable relief is available pursuant to the Tucker Act if the equitable relief is an incident of and collateral to a claim for money damages.

 

ABF Freight System, Inc. v. United States, 2003 WL 1024483 (Fed. Cl.) (Feb. 26, 2003). Three bidders—one received an award, one did not receive an award, and one did not bid—filed a post-award bid protest, challenging the terms of the solicitation. The Court stated: “Injunctive relief for a disappointed bidder is appropriate ‘only in extremely limited circumstances.’” Id. at 2 (quoting CCL Serv. Corp. v. United States, 48 Fed. Cl. 113, 120 (2000) (quoting C.A.C.I., Inc.-Fed v. United States, 719 F.2d 1567, 1581 (Fed. Cir. 1983) (quoting United States v. John C. Grimberg Co., 702 F.2d 1362, 1372 (Fed. Cir. 1983)))). “Because injunctive relief is extraordinary in nature, a plaintiff must demonstrate the right to such relief by clear and convincing evidence. ABF Freight System, Inc., 2003 WL 1024483 at 2.

 

To obtain injunctive relief, plaintiff must show four things:

 

1.   either a likelihood or actual success on the merits of the case;

 

2.   that it will suffer irreparable injury unless injunctive relief is not granted;

 

3.   that, if the injunction is not granted, the harm to plaintiff outweighs the harm to the Government and third parties; and

 

4.   that no harm will be inflicted on the public interest.

 

G.               (§16.36)      Mistake in Bid

 

Chris Berg, Inc. v. United States, 426 F.2d 314 (1970). A contractor submitted a bid on a contract with the Navy. The bid contained a computation error, which resulted in a lower bid than was intended. The Navy suspected the bid was in error, and the contractor confirmed the error. The contractor sought to modify its bid by increasing it to the correct amount, but the Navy refused, giving the contractor the option of either rescinding the bid or accepting the contract at the lower bid price. The applicable regulations governing mistaken bids provided that the contractor was entitled to modify its bid under these circumstances. The court held that the Navy’s “award of the contract to plaintiff at the bid price, with knowledge of its mistake and over its protest, was a clear-cut violation of law,” thereby entitling the plaintiff to reformation of the contract reflecting the modified bid amount. In so holding, the court stated: “If officials of the Government make a contract they are not authorized to make, the other party is not bound by estoppel or acquiescence or even failing to protest.”

 

 

H.               (§16.37)      Bid Protest

 

Dynamic Decisions, Inc. v. Dep’t of Health & Human Resources, 95-2 BCA 27,732 (May 4, 1995). The court considered a contractor’s protest of a bid solicitation for an IDIQ contract based on the government’s failure to comply with FAR 16.504(a)(1). It held that the government lacked a reasonable basis for providing its maximum estimated quantity. It also found that the estimate “was not reached because of any established budgetary limitations or because of any true analysis of requirements, but because of the expedience of avoiding a level of review by GSA.” Accordingly, the court granted the bid protest.

 

ABF Freight System, Inc. v. United States, 2003 WL 1024483 (Fed. Cl. Feb. 26, 2003). For standing in a bid protest case, potential bidder must establish that it had a substantial chance of securing the award. Such suing bidder must be a disappointed bidder—if the bidder received a contract award, then such bidder did not have standing to assert a bid protest. If contractor participated in the bid preparation process, and then did not submit a bid due to the alleged improprieties in the solicitation, such contractor had standing to bring bid protest—it must show it would have had a substantial chance of securing the award if not discouraged by the alleged improprieties. Essentially, bid protesters must show they were themselves injured by improprieties.

 

Al Ghanim Combined Group Co. Gen. Trad. & Cont. W.L.L. v. United States, 2003 WL 21302931 (Fed. Cl. May 22, 2003). A losing bidder, in protest of the Government’s solicitation of a construction contract, sought injunctive relief requiring the United States to resolicit the contract due to the arbitrariness of the Government’s decisions. For a court to find that the procuring agency’s actions was arbitrary and capricious, the offeror must establish that (1) the Government officials involved in the procurement process were without a rational and reasonable basis for their decision or (2) the procurement procedure involved a clear and prejudicial violation of applicable statues and regulations. “A protester has the burden of proving by a preponderance of the evidence the arbitrary and capricious nature of the Government’s actions or the violation of an applicable procurement regulation.”

 

________

Ms. Farris received her B.L.A. and J.D., with honors, from the University of Missouri-Kansas City School of Law. She is a past chairperson of The Missouri Bar Construction Law Committee and is a member of the American Bar Association’s national steering committee for the Forum on the Construction Industry, Division 10, Environmental and Legislative. Ms. Farris has litigated IDIQ/JOC contracts from the perspectives of a governmental owner, a general contractor, and a subcontractor. She is a solo practitioner with Farris Law Firm, L.L.C., Kansas City, Missouri.

 

 

 

 

© Denise E. Farris, Esq. (2003).  All rights reserved. 

Farris Law Firm LLC, 20355 Nall, Stilwell, KS  66085. Tel: 913-685-3192.

 Email: dfarris@farrislawfirm.com  Web page:  www.farrislawfirm.com. 

The above article is provided free for generally informing the reader; and is not intended to provide legal advice. For specific information reader should seek legal counsel licensed to practice law in the state of Kansas.  

 

 


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