So much of federal contracting discussion is focused on the pursuit of contracts (set-aside certifications, size status, solicitation terms, bid protests etc.). But, what sometimes gets lost in all of that is what happens after. The performance of a contract is where the rubber meets the road in federal contracting, but that doesn’t mean agencies are without limits on what they can do during performance.
It is a monumental feat for any contractor to win an award, and it should always be celebrated when it occurs. But, focus should quickly shift to contract performance. As part of that, contractors should be aware of what sort of authority agencies, and their staff, hold during performance.
Authority of Agency Staff and Modifications
FAR Subpart 1.6 states that Contracting Officers (COs) have authority to “enter into, administer, or terminate contracts.” COs are also expected to ensure performance of the contract, and compliance by contractors with the contract’s terms.
Something that arises in this context are modifications to contracts. Under FAR 43.102, COs are the only individuals that can modify a contract (or rather, bind the agency to a modification). But it is important to also remember that modifications or changes to contracts are not always unilateral, meaning that the CO or agency cannot do it without contractor approval. Under FAR 52.212-4, changes to commercial products or services contracts must be agreed to by both parties, requiring most changes to be bilateral. So in those contracts, the CO generally cannot change a contract, without the approval of the contractor.
All this indicates that when there are problems, changes, or questions with the performance of a contract, there is one person who can bind the agency to anything. That would be the CO. So, if you are a contractor, be careful of how much you rely on statements from anyone at the agency below the level of the CO, such as Contracting Officer Representative (COR). However, if someone from the agency, other than the CO, like a COR, takes action that the contractor relies on, it does not completely eliminate that action from being binding on the agency.
Ratification
As you know, the CO has the authority to bind the agency. With that in mind, in certain situations the CO can come in and “ratify” an action by a position that did not have binding authority (like a COR). In that situation, under FAR Subpart 1.6, a CO could review an unauthorized action by someone, like a COR, and retroactively approve it, (i.e. ratify), making such action now binding on the agency.
While this is a possible safety net, over reliance on this could lead to something we refer to as the “Ratification Trap.” The Ratification Trap is receiving behind-the-scenes ratifications that could mislead contractors into believing that unauthorized actions were authorized, and contractors rely on this ratification possibility going forward. Receiving one ratification does not mean that agency will grant future ratifications. To avoid this, contractors should keep in mind the authority limits we discussed earlier and obtain commitment from a CO with actual present authority before proceeding.
Duty of Good Faith and Fair Dealing
In addition to the authority limits placed on agency contracting staff, there is an inherent duty within all contracts that could also limit an agency’s contracting authority—the duty of good faith and fair dealing.
Read into every contract is an implied duty of “good faith and fair dealing.” An agency has an inherent obligation to administer contracts in good faith and in a manner that does not interfere with the contractor’s performance. For example, the Armed Services Board of Contract Appeals in Relyant, LLC, ASBCA No. 59809 (2018), found that Agency delays in responding to a contractor’s requests could constitute a breach of these implied duties.
What this duty boils down to is that an Agency must act reasonably and fairly with regards to any contractor during the performance of a contract. While somewhat subjective, this duty can pop up after multiple issues between a contractor and an agency, and serves as a baseline of how interactions should be between parties.
Common Misconceptions and Key Takeaways
Some common misconceptions and key takeaways regarding agency officials are:
- A COR can direct a contractor to do more work.
- They cannot. Only COs can.
- A COR can modify a contract.
- They cannot. Modifications have many requirements, and can only be made binding by the CO.
- A Government business card must mean they have proper authority.
- A business card does not indicate proper authority for binding an agency.
- An agency can treat me however they please, such as ignoring my calls and delaying work since they control the contract.
- There is an implied duty of good faith and fair dealing that the agency should adhere to.
It is important to have a baseline of the limits of what an agency can do during contract performance. This can help avoid performance issues, and could help prevent the need for filing a claim or request for equitable adjustment (more on these in a future back to basics).
Of course, all of these issues can change depending on the facts involved, and can be quite complex. So if you find yourself facing a contract authority and administration issue, please reach out to a federal contracting attorney, such as ourselves, to discuss it further.
Questions about this post? Email us. Need legal assistance? Give us a call at 785-200-8919.
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