Contract Law
HIGHLIGHTS
PACKAGE
COPYRIGHT
DEFENSE PROCUREMENT UNIVERSITY INC:
2002 All
rights reserved
COURSE
INTRODUCTION
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GENERAL
Defense
Procurement University designed the Contract Law video curriculum for
personnel who have fundamental experience and training in government
procurement. It will greatly
enhance your employees' understanding of the principles of contract law, and
their ability to apply those principles to actual problems encountered in
contracting.
This
course will provide students with a fairly detailed overview of the legal bases
behind specifications and statements of work; the inspection and acceptance
process; changes in federal government contracts; equitable adjustments; patent
and data rights; disputes avoidance; contractor remedies, including protests,
claims, disputes, and appeals; socioeconomic programs; termination’s for
convenience; and the administration of government property.
COURSE
STRUCTURE
The
course consists of twelve instructional modules and one examination module and
is designed to be completed in thirteen weeks.
Plan to complete one module each week, setting aside approximately the
same time each week to complete the work. The
twelve instructional modules lead the participant through the logical evolution
of the contracting process. The
post-course examination is an open-book test of the student's learning power
over the twelve-week curriculum, and is designed to be completed in
approximately two hours.
COURSE
MATERIALS
The
core knowledge of this course is presented in the written student materials and
the videotapes. Each of the student
digests
contains
an introduction to the module topic, a discussion of key points, and tips and
references. The videotape
presentations are the focal point for learning, with discussion guided by an
in-house facilitator and guest speakers.
References
are made throughout the course to such sources as the Federal Acquisition
Regulation (FAR), Department of Defense Federal Acquisition Regulation
Supplement (DFARS), and the Armed Services Pricing Manual (ASPM), but only the
FAR is actually needed to perform the course work. Students should plan to have a copy available for each
session.
Students
should read the student materials for each module (that is, the introduction and
learning objectives, and the module digest). Then they should view the videotape for the module and refer
to the written materials and the video presentation overlap, the video is not
simply an oral summary of what's in the digest, nor is the digest simply a
transcript of the video. They are
meant to be complementary.
VIDEOTAPE
PRESENTATION: The videotape for
each module brings information to you via a professional skilled in video
communication. The materials
presented were researched and written by contracting and procurement experts
with extensive Federal and private industry experience.
Each
videotape ranges in length from 25 to 50 minutes, and requires standard VHS
playback equipment. (U-Matic
3/4" tapes are available upon request).
Each module is presented in three or four segments, and allows the
viewers the opportunity to pause the presentation for discussion or written
exercises between segments.
Because
procurement policies and techniques change so rapidly, an attempt has been made
to avoid including perishable material in the videotapes, so as to extend their
relevance as long as possible. In
spite of this, procedural, regulatory, and legislative changes will occur that
will make occasion parts of the videotape presentation out of date.
STUDENT
MATERIALS: The heart of the written
materials, and probably of the entire course, is the module digest.
Each module digest includes an introduction, an abstract, a list of
learning objectives, a discussion of the major points, tips and references, and
a self-test. The reference
materials are for the most part source citations from regulatory documents, but
pertinent articles or cases may also be included.
Each module digest is separately-bound, for easy reference when watching
the videotape presentation or participating in a classroom session.
THE
FACILITATOR'S GUIDE; The role of
the facilitator in the Contract Law curriculum is to provide students
with significant information that is specific to your organization.
He or she is generally an in-house expert in government procurement, and
is probably a member of upper management.
In
a unique formatting strategy, the Facilitator's Guide follows the videotape,
point by point, in outline form. The
Facilitator's Guide offers suggestions for class discussion, and includes
guidelines for course administration, supplemental reading materials, guest
speakers, and more.
The
facilitator may arrange for guest speakers to join the class from time to time
to enhance the learning environment. Students
are encouraged to take advantage of the facilitator's and guest's knowledge and
experience, which will be instrumental when it is time for students to apply the
information they have gained to their own jobs.
THE
VIEWER'S GUIDE: The Viewer's Guide
follows the same formatting strategy as the facilitator's Guide, and is for use
by students working at home or in their office without the benefit of a
classroom setting or facilitator. The
Viewer's Guide includes written exercises at the end of each video segment,
which encourage students to apply the information they have learned to their own
contracting environment and experiences.
THE
COURSE EXAMINATION: The twelve
instructional modules are followed by a two-hour, open-book course examination.
You may use any of your study materials while taking the exam, but will
only need the student materials and the FAR.
After they have completed the course examination, the facilitator should
review the correct answers with the facilitator's answer key, and point out page
references in the student materials.
MODULE
1 SPECIFICATIONS AND STATEMENTS OF WORK
ABSTRACT
Precision
is the key factor in drafting and interpreting Statements of Work (SOWs).
The SOW must include exacting descriptive terminology, and yet must allow
enough leeway to meet less rigid regulatory and production demands.
Achieving that often requires intradepartmental teamwork of technical,
legal, and contracting personnel.
The
Government must be absolutely precise in its description of the materials,
products, and services it requires. At
the same time, it must not inadvertently place restrictions on free and open
competition by making the specifications too limiting.
As the contractor, you must be perfectly accurate in analyzing the
specifications. The added challenge
is to show how your company will use its special resources and expertise to
creatively meet the Government's requirements without sacrificing efficiency or
accuracy.
Specifications
address three main areas of requirements--design, performance, and functional.
They may be included individually or in combination, depending on how the
Government can best describe the product or service it seeks.
It is important to note the advantages and disadvantages each type of
specification represents in order to better analyze the SOW, once it has been
drafted.
There
has been a recent effort to streamline and standardize the procurement process
when possible. So, for those single
procurements that do not require specifications, less detailed purchase
descriptions may be used. There are policies and procedures that reflect the
increasing use of off-the-shelf items and commercially produced items modified
for Government use. Basic
commercial item descriptions may be used for these, within certain parameters.
Formal
specifications are most appropriate for describing complex items and those items
that involve stockpiling of spare parts or repair equipment.
Government
policy for specification and SOW formats vary from the use of alphabetic and
numeric codes or model numbers to formal, highly detailed descriptions.
Both approaches are needed to accommodate the wide range of civil and
military products and services for which the Government contracts.
Despite
all the attention given to ensuring that specifications are precise and
accurate, not all descriptions meet those standards. Unrealistic, inconsistent, and ambiguous specifications
(including open or indefinite specifications) are written on occasion.
Poorly drafted SOWs affect the procurement process in all phases, from
pre- to post award. Although the problem may be the fault of poor spec writing on
the Government's part, it is always the contractor's duty before continuing
performance to seek clarifications whenever there is any question about a
specification.
LEARNING
OBJECTIVES
Upon
completion of this module, students should be able to--
1. Identify the various
types of specifications
2. Explain the differences
between specifications and
Statements of Work; and
3. Explain the purposes of
specifications and the advantages
and disadvantages of multi-agency specifications.
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MODULE
2 INSPECTION
AND ACCEPTANCE
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ABSTRACT
The
parties' rights in the inspection and acceptance process of any Government
contract are defined by the terms and conditions of the contract itself;
however, when these terms and conditions are silent on a particular issue, the
general operation of law and the Uniform Commercial Code apply.
Government
policy in general is to rely on the contractor's inspection system, but three
standard levels of quality requirements have an effect on that inspection
system. For most small purchases,
the contract requires merely that you establish and maintain an inspection
system, without defining it; a higher level requirement details characteristics
that your inspection system must have.
The
extent of inspection, both yours and the Government's, varies with the dollar
value and type of product. The Government generally has the right to inspect
supplies or services at any time and, with only a few exceptions, at just about
any place during contract performance, as long as these inspections do not
unduly impede your progress in completing the contract.
If your supplies or services are rejected, you have a right to receive
prompt notice of such rejection.
Your
Government contract will specify who can accept your supplies or services for
the Government and where this acceptance will take place.
This is formal acceptance, but if the formal processes break down,
acceptance can occur by operation of general principles of law--a concept termed
"informal or implied acceptance."
There
are five general types of Government warranties: a failure-free or hardware warranty, a correction of
deficiencies warranty, a supply warranty, a service warranty, and a construction
warranty. Certain DoD weapons
systems production contracts have very specific warranty requirements that are
mandated by law. The details of
most other warranties are left to the discretion of the contracting officer.
In
deficiencies that are covered by warranties, the Government has the burden of
proving probable cause. Once it has
done so, it generally enjoys cumulative rights to corrective action under
warranty and inspection clauses.
LEARNING
OBJECTIVES
Upon
completion of this module, students should be able to--
1. Explain the roles of the
Government and the contractor
in product inspection;
2. Understand the legal
significance of the acceptance
process;
3. Describe conditions under
which you might be able to
overturn a Government rejection of your products or
services;
4. Understand the types or
levels of quality requirements
that a Government contract might contain;
5. Explain your
organization's continuing potential liability
after acceptance of products and services; and
6. Recognize and understand
the implications of the various
types of warranties in a particular contract.
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MODULE
3 CHANGES IN FEDERAL GOVERNMENT CONTRACTS
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ABSTRACT
The
Changes clause is a mandatory clause that allows the Government to change the
terms of its contracts in an almost infinite variety of situations.
When it was first used, the Changes clause had no counterpart in ordinary
commercial contracts. It is now such a recognized and valued part of public
contracts that it is not only used by many state and local governments but has
also been incorporated into the standard forms of the Associated General
Contractors of America and the American Institute of Architects.
The
Changes clause provides Government contracts with needed flexibility.
After award, events may necessitate changes in the basic contract.
New technology or other developments may require alterations in the
product or services being procured or modifications in other aspects of the
basic contract, and the Changes clause allows for these.
Similarly, the clause allows the parties to correct errors or suggest
better ways of performance. The
Clause requires that the contract be equitably adjusted to reflect the change.
The Changes clause is susceptible to unfair use, so its use must be
monitored. For example, a
contractor might deliberately underestimate the cost of performance, either to
be competitive or to stay within the buyer's budget.
Deliberate underestimation is sometimes called a "buy-in",
where the contractor will try during negotiation to minimize the effects of the
underestimate, thereby establishing a better basis for processing changes later.
After award, the contractor will search for any Government action that
can be construed as a constructive change or a change in scope, to increase the
contract price.
Even
if the scope of work is reasonably well defined, contractors may suggest
changes, in or out of the scope of the work, in order to increase sales volume.
Most firms consider current contracts the best source of new
business--derived from selling additional quantities, from finding new uses for
the item, or from making engineering change proposals to "improve" the
item. For the most part, technical personnel want to make the best
possible item regardless of how it will be used, and the contractor frequently
finds it easy to secure enthusiastic support from a customer's technical
personnel for "improvement" changes.
As each of these changes is made, of course, the contractor is in that
respect a sole source.
LEARNING
OBJECTIVES
Upon
completion of this module, students should be able to--
1. Evaluate whether a change
is within the scope of the
contract;
2. Discuss whether a
representative of the contracting
officer can order changes; and
3. Discuss when and how a
change can be ordered
MODULE
4 EQUITABLE
ADJUSTMENTS I
ABSTRACT
In
some ways commercial and Government practices in regard to changed work on
existing contracts are similar, but in other ways they are different, and the
differences are significant. In
Government contracts, with few exceptions, the contractor must perform
the changed work, even if there is a total lack of agreement on the price and
the additional time involved in the change.
The burden of proof in resolving differences as to the value of such
changes ultimately falls on the contractor.
The
written intent of the Government is to be fair and reasonable in making
equitable adjustments, but it is important for you to understand that an
underlying Government objective is to make sure that a contractor will retain
the same profit/loss posture that it had before the change was initiated.
The Government does not wish to use public funds to compensate for a
company's mismanagement of money and time.
This principle will, therefore, affect both the time extensions and the
monetary compensation involved in an equitable adjustment.
When
the Truth in Negotiations Act Applies, it mandates that you make the Government
aware of any changed conditions that resulted from contract performance up to
the point when the change was initiated. As
a result, you must submit or identify cost and pricing data that are pertinent
to the changed work and must certify that such data are accurate, current, and
complete.
LEARNING
OBJECTIVES
After
completing this module, students should be able to--
1. Explain the essential
differences between common law
practices and Government contracting ground rules in
regard to changes on existing contracts;
2. Outline types of changes
according to the effect the
change has on the resulting equitable adjustment;
3. Understand the
Government's objectives when it is
negotiating equitable adjustments;
4. Explain the statutory and
administrative mechanics of
administering equitable adjustments;
5. Understand the basic
legal principles and exceptions
involved in releases of claims; and
6. Describe the types of
situations that might form an
adequate basis for a request for a time extension on
a Government contract.
MODULE
5 EQUITABLE
ADJUSTMENTS II
ABSTRACT
Two
basic schools of thought have evolved in the courts and boards about pricing
equitable adjustments: the specific
cost concept (the subjective theory), and the reasonable value concept (the
objective theory). Each theory has
given rise to several approaches that have been used in particular contractual
circumstances.
Of
these approaches, the most significant is the Bruce case rule, which established
the precedent upon which most court and board settlements of equitable
adjustments currently rely. Its
basic precept is that the settlement should be based on the contractor's actual
costs, as long as they were incurred reasonably.
A
change, whether formal or constructive, has the potential for far-reaching
effects that could influence the costs on both changed and unchanged work.
Typically, these costs will include direct costs, indirect costs, delay
and disruption costs, and profit/fee margins, but there are likely to be other
costs in any contractual circumstances which cannot be neatly categorized.
A careful investigation for possible "ripple effects" in each
functional discipline encompassed by the contract work is well advised.
Recovery
of the costs of claims presentation and defense costs is uncertain at best.
Case precedent sets up few guidelines.
The only really prudent approach is to settle any differences outside of
a formal litigation process if at all possible.
LEARNING
OBJECTIVES
After
completing this module, students should be able to--
1. Define the two basic
concepts used to measure equitable
adjustments, and identify aspects of actual equitable
adjustment cases that exemplify these concepts;
2. Understand the various
approaches used under the two
basic concepts, and explain the circumstances under
which each would be appropriate;
3. Cite and discuss the
impact of the landmark ruling that
established the basic test upon which most equitable
adjustment pricing relies today;
4. List the various
cost/price elements that are properly
contained within requests for equitable adjustments; and
5. Understand which major
costs involved in the presentation
and defense of a claim may be reimbursable to a claimant,
and which circumstances will be likely to increase the
chances for a favorable decision on recovering those
costs.
MODULE
6 PATENT
AND DATA RIGHTS
ABSTRACT
There
are three legal mechanisms available to contractors to protect propriety
rights--patents, copyrights and trade secrets.
Each gives different forms of protection and is addressed in standard
contract clauses used by the Federal Government.
Patent
rights to inventions made in the performance of Government contracts are
generally divided--the Government has the right to make free use of the
invention in Government work, and the contractor retains the right to use the
invention in commercial work. An
invention is made in the performance of a Government contract if either of two events--conception
or actual reduction to practice--occurs in performing the work called for by the
contract.
Rights
in technical data are determined on the basis of a financial test.
If the data pertains to an item, component, or process developed at
private expense, the Government's rights are limited unless an exception
applies. There are more exceptions
in the clauses used by DoD than in clauses used by the civilian agencies; but
DOD is evolving to a policy permitting more negotiation of rights on a
contract-by-contract basis. This
area is confused by the lack of a uniform Federal policy and constant
Congressional intervention in policy formulation.
Rights
in computer software are the most difficult current problem in dealing with
proprietary rights. The Federal
agencies are generally willing to restrict their rights to software developed at
private expense, but the current clauses are not uniform and contain different
concepts. Furthermore, contractors
use different legal theories to protect software.
The result is that this area demands special attention when a contractor
has valuable proprietary rights in computer software.
The
Government follows different policies with regard to the use of commercial
proprietary rights in its procurements. Patents
are infringed to obtain competition, while the policy is to honor trade secrets.
No clear policy is enunciated on copyrights but contractors are directed
not to infringe copyrights without prior Government approval.
LEARNING
OBJECTIVES
After
completing this module, students should be able to--
1. Name the three
intellectual property rights and identify
their key characteristics;
2. Identify the distribution
of rights between the Government
and its contractors in the FAR Patents Rights clauses;
3.
Identify the distribution of rights between DoD and its
contractors in the DFARS Rights in Technical Data and
Computer Software Clause and discuss the procedures for
negotiating and determining these rights;
4. Identify the major
differences between the FAR and DFARS
policies regarding technical data;
5. Identify the major
policies of the Federal Government in
protecting rights to computer software; and
6. Identify the policies of
the Federal Government in buying
products and services covered by proprietary rights.
MODULE
7
DISPUTES AVOIDANCE I
ABSTRACT
The
best way to avoid disputes is to set up early warning systems within your
organization that alert management and the contract administration team to
changes in conditions, and to speedily resolve disagreements on how such changes
affect the contract. Such a system
involves conscientious recordkeeping, personnel continuity, forward pricing
agreements for expected changes, and internal management controls.
Once
you have identified a change as affecting either the price or performance time
of your contract, you must make pertinent decisions about if, when, and how you
should submit a claim.
Besides
the normal organizational chain of command, your company may have a special
support network to help you in these important decisions.
The network would include something like a corporate ombudsman's office
and your corporate legal counsel.
Your
ultimate goal is to make an early and truly equitable settlement directly with
the contracting officer. To do
this, you must use effective negotiation techniques and concentrate on solving
your mutual contractual problem, rather than obtaining a "victory" as
in a clever game of chess. As you
consider negotiation techniques that are thought by many authorities to be
appropriate, remember that Government contracting is probably part of a
long-term business relationship for your company.
This makes some otherwise effective negotiation techniques inappropriate
for your purposes.
LEARNING
OBJECTIVES
After
completing this module, students should be able to--
1. Explain the necessary
elements of a good disputes
avoidance management system;
2. Recognize the main
decisions necessary to identify and
submit early claims;
3. Structure a claim that
will mirror your customer's
administrative needs;
4. Identify the support
network within your company and use
it to your advantage in the claims decision process; and
5. Use proven negotiation
techniques to effect your ultimate
goal of an early claims settlement.
MODULE
8 DISPUTES
AVOIDANCE II
ABSTRACT
After
the contracting officer's final decision, you can try several additional
techniques as well as keeping the negotiation channels with the contracting
officer open, but more important than techniques will be the research you do and
the in-depth knowledge you accumulate on the laws, policies, and precedents in
the subject area of your claim.
Perhaps
classifiable as a technique, but more appropriately classified as an informal
forum, are alternate disputes resolution (ADR) methods.
Some of these are relatively new (minitrial, fact-finding, settlement
judges), whereas others (mediation, arbitration) have been used for other
business purposes such as labor-management disputes for some time.
None has been used extensively in Government contract disputes to date,
but the progressive agencies that have used them support them, on the basis of
past success. A major problem is
the lack of a specific government-wide statutory or regulatory basis for their
use in settling the Government's contract disputes with private contractors.
Other problems include the psychological barriers that lawyers and
Government personnel have against the process and the need to find a neutral
advisor who is knowledgeable in the ADR methodology as well as in the Government
contracting process.
LEARNING
OBJECTIVES
After
completing this module, students should be able to--
1. Explain additional
techniques available to you in
settling directly with the contracting officer and
other ways by which you might make settlements more
likely after the contracting officer's adverse decision;
2. Explain how some of the
more common ADR methods work and
how they are best used in settling Government contract
disputes;
3. Understand the advantages
and disadvantages of ADR methods
in the arena of Government contracting disputes;
4. Understand current
barriers to more widespread use of ADR
methods so that you know which are beyond your ability to
resolve a particular situation and which might be overcome
by your persuasive efforts; and
5. Understand the steps in
completing settlements after an
appeal of a contracting officer's decision has been filed,
but before a board or court has handed down a decision.
MODULE
9 CONTRACTOR
REMEDIES I
ABSTRACT
Several
different forums are available to actual and prospective offerors on Government
solicitations: the agency
(contracting officer), the General Accounting Office (GAO), the General Services
Board of Contract Appeals (GSBCA) for protests addressing automated data
processing equipment (ADPE) procured under the authority of the Brooks Act, the
Claims Court, and the Federal district courts. Of these, only the district
courts offer both monetary and nonmonetary relief to any person adversely
affected or aggrieved by an agency contract action, not just to actual or
prospective offerors.
To
improve your chances of obtaining nonmonetary (equitable) or monetary relief,
you must know the basic procedures and characteristics of each protest form.
Beyond
that, it is helpful to keep in mind that the Competition in Contracting Act of
1984 provided that protests whose basis is restrictive competitive practices of
the procuring agencies receive more favorable consideration.
So it is important to identify any such restrictions as well as any
statutory or regulatory violations that may be inherent in the basis for your
protest.
LEARNING
OBJECTIVES
After
completing this module, students should be able to--
1. Define terms to describe
aspects of preaward challenges to
contract award;
2. Explain who can file a
protest in the various protest
forums;
3. Know the factors you must
consider in selecting a protest
forum;
4. Explain what types of
relief you can expect as a result of
a sustained protest;
5. Explain what kind of an
effect the current climate of
Government procurement has on preaward protests;
6. Identify bases of
protests that are indicators of
appropriate administrative forums; and
7. Identify basic procedures
and characteristics of each
of the administrative and judicial protest forums.
MODULE
10 CONTRACTOR
REMEDIES II
ABSTRACT
The
most important event in recent years affecting the post-award remedies of
Government contractors was passage of the Contract Disputes Act (CDA) of 1978.
The act not only allowed more claims to be settled administratively, but
it also gave a contractor a real choice of forums when appealing from a
contracting officer's adverse final decision.
However, in fulfilling one of its goals of making post-award dispute
procedures more equitable to both the contractor and the Government, the act
also cut back from six years to 120 days the period during which an appeal from
an adverse board of contract appeals decision was allowed and gave the
Government as well as the contractor the right to appeal such decisions.
The
CDA is implemented generally by FAR Subpart 33.2 and specifically by the
Disputes clause in each Government contract.
One of the new terms of the clause is a requirement that claims exceeding
$50,000 have a certification attesting to the good faith of the claimant and the
completeness and accuracy of the claim's supporting data.
Together
with the Federal Courts Improvement Act of 1982 (FCIA), the CDA dramatically
changed the organizational structure for handling a CDA claim.
The FCIA established two new judicial organizations.
The new Claims Court, in addition to the agency boards, was given
postaward claims jurisdiction immediately after the contracting officer's
decision. The new Court of Appeals for the Federal Circuit became the
appeal forum for both the Claims Court and the agency boards.
Although
most claims can be classified as CDA claims, some cannot.
If the contract is one that facilitates the national defense, a non-CDA
claim against that contract may be processed administratively through the
"extraordinary" relief of Public Law 85-804, if that claim is not
detailed in FAR Part 50. One important restriction is that a contractor must have
completely exhausted other avenues of administrative relief before it becomes
eligible for relief under this public law.
Otherwise, there is no general forum for the settlement of non-CDA claims
except the Claims Court.
Subcontractors
cannot make any claim against the Government unless their claim is sponsored by
their prime contractor or unless a clause in their subcontract allows it.
LEARNING
OBJECTIVES
After
completing this module, students should be able to--
1. Discuss how the Contract
Disputes Act (CDA) of 1978
changed the way disputes claims on Government contracts
are resolved;
2. Discuss the impact of the
Federal Courts Improvement Act
of 1982;
3. Explain the necessary
elements of a CDA claim;
4. Define what constitutes a
CDA claim as opposed to a non-
CDA claim;
5. Explain the different
forums available for the resolution
of CDA claims and non-CDA claims;
6. Make an appropriate
choice among the claims resolution
forums by identifying the advantages and disadvantages of
each.
7. On pre-CDA contract
claims, make an appropriate choice
between pre-CDA and post-CDA procedures by identifying the
advantages and disadvantages of the two sets of procedures
as they relate to a particular forum.
8. Recognize typical issues
o post-award claims; and
9. Discuss subcontractor
remedies in various Government
contract situations.
MODULE
11 TERMINATIONS FOR
CONVENIENCE
ABSTRACT
Default
and convenience termination’s have many similarities because both have the
same final outcome: your Government
contract is prematurely voided. They
also have differences, because the reasons for the action taken are different.
In a default, you are perceived as the reason for the termination.
In a convenience termination, you are merely the victim of circumstance.
In either case, the contract can be terminated in whole or in part.
Some
of the same rules apply for notification and your duties upon notification.
Other rules are very different. In
a default, you are liable for excess costs of reprocurement and will not be
afforded such things as an equitable adjustment on any continued portion of a
contract, partial payments before a settlement agreement, or extra compensation
in the form of settlement expenses. In termination for convenience, you are entitled to some of that
compensation.
There
has been some controversy about using partial termination’s for convenience
versus deleting work under the Changes clause of the contract.
Although there is some legal precedent that requires the deleted work to
be analyzed as "minor" (indicating Changes clause procedures) or
"major" (indicating partial termination procedures), uncertainty and
the need for judgment still prevail. Government-wide
regulations do not address the issue.
Government
rights to default are permissive rather than mandatory but can be waived if the
Governments waits too long in making a decision about whether to exercise its
rights. The Government can also
waive its rights to default if it neglects to comply with appropriate default
procedures, such as giving a contractor prenotification in the form a
"cure" notice or a "show cause" notice before issuing the
official termination notice itself.
Not
only may the Government take actions that constitute a waiver, but also you may
be able to prove that any default based on untimely delivery was an
"excusable delay" under the termination clauses in your contract.
LEARNING
OBJECTIVES
After
completing this session, students should be able to--
1. Explain the differences
between a default and a
convenience termination;
2. Discuss the clauses that
apply in contract termination’s;
3. Explain your duties as a
contractor in a termination
action;
4. Recognize the accounting
procedures used in settling
convenience termination’s;
5. Understand some basic
rights that your company has in
recouping expenses as a result of a convenience
termination; and
6. Advance possible
arguments in response to a Government
default action.
MODULE
12
GOVERNMENT PROPERTY
ABSTRACT
Having
legal title means having all of the rights of ownership.
Equitable title recognizes rights in connection with the use of
property. When Government property
is provided to a contractor, legal title for Government-furnished property (GFP)
always remains with the Government, but legal title to contractor-acquired
Government property depends on the administrative classification of the property
itself and on the terms, conditions, and clauses in a particular Government
contract.
One
of the most important distinctions is between property classified as facilities
and property in all other classifications.
This distinction may determine whether more than one contract is used for
a single contractual undertaking, whether the Government property will be
furnished at all, and, if it is furnished, the terms and conditions that will
govern its use.
The
Government must carefully decided whether to furnish property on a particular
contract, balancing cost considerations and the furtherance of Government
programs against its own management costs and the liability for its own
involvement. A contractor must also
weigh the benefits of accepting such property against any perceived
disadvantages, such as a possible negative effect on profit and the impact of
GFP that may not be suitable for its intended use.
The
Government is generally responsible for providing property that is in the
condition and quantities described in a solicitation and is suitable for the
purposes described. The contractor
is generally responsible for inspecting such property promptly upon receipt,
using the property only as provided in the contract, and accounting for and
controlling the use of such property, assuming the risk of loss as specified by
the terms of the contract, and disposing of the property in accordance with the
Government's instructions. A
subcontractor's responsibilities in regard to such property are generally the
same as the prime contractor's.
LEARNING
OBJECTIVES
After
completing this module, students should be able to--
1. Understand the concept of
title and how the standard FAR
clauses affect title to Government property;
2. Identify the major
classifications of Government property
(a contract's terms and conditions will most likely apply
different rules according to these classifications);
3. Identify what motivates
the Government to furnish property
to a contractor, and why the Government sometimes prefers
not to furnish property on a particular contract;
4. Understand the basic
Government policies governing
property, and how these policies may affect a particular
contract;
5. Safeguard your company's
interests by being aware of some
of the common trouble areas when GFP is accepted;
6. Understand Government,
prime contractor, and subcontractor
responsibilities relating to Government property; and
7. Be able to explain the
special aspects of facilities
contracts.
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