Basic Principles of Government Contract Law

1This block of instruction covers Contract Law.

GeneralIncorporation of safety into Government Contracts - the Regulatory frameworkIntroduction

4 basic requirements for an enforceable contractAgreementOfferacceptanceConsiderationOften gift promises and moral obligations not considered supported by valid considerationContractual capacityLawful objectVoid contractsBasic Elements of a Contract

3There are three basic elements of a contract Offer, Acceptance and Consideration. I will discuss each of these elements.

Basic Elements of a ContractOfferThe manifestation of willingness to enter into a bargain, so made as to justify another person in understanding that his assent to that bargain is invited and will conclude it

Objective theory of contracts uses a reasonable person standard rather than subjective intent of parties

4An offer is an expression of willingness to enter into a bargain so made as to justify another person in understanding that if he agrees to the bargain a contract is formed.

A reasonable person standard is used to determine whether an offer has been made.

ExampleWhile A.H. and Ida Zehmer, husband and wife, were drinking with W.O. Lucy, Mr. Zehmer made a written offer to sell a 471-acre farm the Zehmers owned to Lucy for $50k. Zehmer contends that his offer was made in jest and that he only wanted to bluff Lucy into admitting that he did not have $50k. Instead, Lucy appeared to take the offer seriously, offering $5 to bind the deal, and had Mrs. Zehmer sign it. When the Zehmers refused to perform the contract, Lucy brought an action to compel specific performance of the contract. Is the contract enforceable?

5Did the Zehmers action constitute an offer? Would a reason person in the shoes of Lucy believe the Zehmers were willing to sale their 471 acre farm for on $50,000?

Basic Elements of a ContractAcceptanceA manifestation of assent by the offeree to the terms of the offer in a manner invited or required by the offer as measured by the objective theory of contractsMirror image rule For acceptance to exist, the offeree must accept the terms as stated in the offerWhat happens if you change the terms in the acceptance?

6The second basic element of a contract is acceptance. Acceptance is an expression of agreement by the offeree to the terms of the offer. In determining whether an acceptance is made we look to the mirror image rule. This rule says that in order for acceptance to occur the offeree must accept the terms as stated in the offer.

What happens if you/offeree changes the terms of the offer? Then we have a counteroffer. Which basically says. I will not accept all your terms, but will accept some of them. Are you willing to change your terms to suit me. For example, I offer to sale you a coke for $2.00. You say, I will give you $1.00 for it.

Basic Elements of a ContractConsideration Something of legal value given in exchange for a promiseLegal value = the promisee suffers a legal detriment or the promisor receives a legal benefitBargained-for exchangeGift promises lack the bargained-for exchange

7The third element of a contract is consideration. Consideration is something of legal value given in exchange for a promise. The promisee suffers a detriment or the promisor receives a legal benefit.

Grandmother deeds you a house. You must pay Grandmother at least $1.00 for it. Otherwise it will be considered a gift.

Example Legal ValueSuppose the Dallas Cowboys contract with a tailor to make uniforms for the team. The tailor completes the uniforms, but the team manager thinks the color is wrong and refuses to allow the team to wear them. Here, there has been no legal benefit to either the manager or the players. The tailor, however, has suffered a legal detriment (time spent making the uniforms). Is there sufficient consideration to enforce the contract?

Example Bargained-for ExchangeSuppose Mrs. Langham promised to give her son $10k and then rescinded the promiseEnforceable contract?

Example Bargained-for ExchangeSuppose Mrs. Langham promised to give her son $10k and then rescinded the promiseEnforceable contract?

Suppose Mrs. Langham promised her son $10k for getting an A in his math class and the son performed as requiredEnforceable contract?

Basic Elements of a ContractContractual capacityMinors (The Infancy Doctrine)Mental incompetenceintoxicationLawful objectA contract to perform an illegal act is voidUnenforceable by either party

11In addition to the three basic element to a contract, the individual involved must have capacity to enter a contract. That is, the mental competence to negotiate a contract. Also, the acts to be performed must be lawful. Minors cannot enter into contracts because they cannot form the requisite intent to enter contract. One has to be at the age of majority before they can contract. Normally over age 18.

Lawful object A contract is not valid if it require you to commit an illegal act. It is unenforceable by either party.

ExampleJames Strickland paid an unsolicited $2500 bribe to Judge Woods so that the judge would be lenient on a friend of Stricklands, who had a case pending before Judge Woods. Paying a bribe to a government official is a crime. Judge Woods reported the incident and turned the money over to the states attorney general. The state indicted Strickland for bribery and sentenced him to four years in prison. Strickland filed a motion to recover the $2500 from the state. Can Strickland recover the money?

Statute of FraudsCertain contracts must be in writingReal estates; contracts over a certain dollar amountParole Evidence RuleWritten contractNo oral evidence of agreements prior to written contractBreach DamagesDamages attempting to restore injured partyBenefit of the bargainBasic Rules Governing Contracts

13There are three basic rules governing contracts Statute of Frauds, Parole Evidence rule and Breach Damages.

The Statute of Frauds require certain types of contracts to be in writing to be enforceable. For example Real Estate Contracts.

The parole Evidence Rule Does not allow oral evidence of a agreement prior to written contract.

Breach Damages If one is damaged due to a violation of a contract, the injured party is entitled to monetary damages.

Complex matrix of statutes and regulations modify the basic principlesUnilateral changesAdministrative claims for disputesInjured contractor must attempt settlement with contracting agency before going to courtU.S. Court of ClaimsHas jurisdiction for claims arising under contractApplication of Basic Rules to Government Contracting

14There are some statutes and regulation which modify the basic principles of contracts.

The unilateral change rule prohibit one party from changing the terms of a contract without the other parties consent.

U.S. Claims has jurisdiction for claims arising under contract. The U.S. Court of Claims require an injured party to a contract to attempt settlement with the contracting agency before going to court.

Contracting PowerGovernment Power to ContractInherent powerPower of the purseThe Authority of Contracting Officers to bind the United StatesUnauthorized acts of agentsRatification

15The government has inherent power to enter into contracts. The Federal Government has given the authority to contracting officers to bind the government. The contracting officer must be on orders/warrant to sign on behalf of the government. The contractor can only bind the government in a manner set out in their order. If the contractor goes beyond the scope of his/her authority, it is an unauthorized commitment which has to be ratified by the head of the contracting agency to be binding. Agents who perform an unauthorized act may be punished.

Cant sue the US unless we let you!Tucker ActTort lawWaiver of Sovereign Immunity

ObjectiveCompetition in Contracting ActFull and Open CompetitionExceptionsOne sourceUnusual and compellingMobilizationRequired by StatuteNational securityNot in public interestThe Requirement for CompetitionSealed BiddingStep 1: Preparation of the IFBStep 2: Publicizing the IFBStep 3: Submission of bidsStep 4: Evaluation of awardContract by NegotiationFormal proceduresPrice not primary factorEvaluationCompetitive rangeDiscussions

Contracting Methods

Within the Scope of the ContractCannot expand contractsPermissive vs. cardinal change

Changes

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Discretionary rightFactors to considerWritten noticeBasisTimelinessFailure to make progressRepurchase rightsTermination for DefaultPartial or completeNo common law damagesTermination for Convenience of the Government

InspectionRejectionSubstantial compliance prevents T4DGovernment remedies for nonconforming goodsReject Require replacementAcceptanceAbsent fraud, acceptance is finalCannot later reject or terminateInspection and Acceptance

22The government has a right to inspect all products before accepting them. If the products are not to government standards, the government may accept the items, reject and request the contractor to cure defect or reject outright. If the contractor cannot cure the problem, the government may reject. However if the produce is in substantial compliance with the terms of the contract, the government cannot terminate for default.

Once the items/products are accepted, the contract is final. The government cannot later reject or terminated for default.

Product substitution

Criminal and Administrative remedies

18 USC 1001

Procurement Fraud

23A contractor must provide the product contracted for. If the contractor attempts to deliver non-conforming goods without notifying the government of the deficiencies, the contractor may be prosecuted under federal law for a procurement fraud violation. The prosecution may result in a suspension and debarment.

Product substitutionAttempt to deliver nonconforming goods without notifying government of the deficienciesCriminal and Administrative remediesFederal prosecutionSuspension and debarment18 USC 1001Falsifying a material fact or fraudSubstituting inferior quality raw materials or request for payment based on fraud

OSHAEPAFARSafety personnel involvementInspections during procurementDefining responsibilitiesAssisting in drafting contract Safety Aspects of Public Contract Law

GeneralReceipt of gratuitiesbribesRelease of informationProprietary informationInsider informationStandards of Conduct Relating to Procurement and the Release of Procurement Information

25Cannot bribe a government official

Information/contact may be released under FOIA, but not proprietary information. Must request proprietary information from the contractor.

Insider information cannot use knowledge gained as an employee to win a contract. Government cannot give information to one contractor that is not given to another.

Responsibilities for safety compliance

Oversight

Government furnished property

Safety and the Contractor

Contractor Safety Why is it an Issue?Military uses many different contractorsContractors may be performing work alongside military personnelContractor safety can influence the safety of all installation personnelContractors must implement an occupational injury prevention programCoordination of safety efforts is key to protecting all workers at military workplaces

27A contractor from National Steel and Shipping Company (NASSCO) hydro-blasts the ships screws as part of a preservation program for the ships hull. USS Belleau Wood (LHA 3) is currently in dry dock after returning from a deployment in support of Operation Enduring Freedom. The 40,000-ton Navy vessel is the lead element of a three-ship Amphibious Readiness Group (ARG). Belleau Wood carries a crew of 1,000 Sailors and more than 2,000 Marines. U.S. Navy photo by Photographers Mate 3rd Class Erika Jones. DoD Contractor Safety Policy DoDI 6055.1 (Aug. 1998)DoD Safety and Occupational Health ProgramDoD contractors operating from DoD or privately owned facilities, located on or off DoD installations, are "employers" and are subject to enforcement authority by Federal and State safety and health officials.

Safety Policy28SECNAV 5100.10J, 26 Oct 05 Navy Policy for Safety, Mishap Prevention, Occupational Health and Fire Protection ProgramsApplication and ScopeApplies to government owned contractor operated facilities only if they involve the OSH of DoD personnel and only if DoD exercises statutory authority per DoDI 6055.1In all other matters, the contractor is responsible directly to OSHA

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OPNAVINST 5100.23G Navy Safety and Occupational Health Program ManualDefinitionsContractor Employee - An employee of a contractor performing work at a contractor workplace under a Navy contract.Contractor Workplace - Any place on a Navy installation, located within the United States, its territories, or possessions, where work currently is being, recently has been, or is scheduled to be performed by contractor employees under a Navy contract, including a reasonable access route to and from the workplace. The term contractor workplace does not include any area structure, machine, apparatus, device, equipment, or material therein, with which a contractor employee is not required or reasonably expected to have contact nor does it include any working condition for which OSHA jurisdiction has been preempted under section 4(b)(1) of the OSH Act.Navy Contractor - A non-Federal employer engaged in performance of a Navy contract, whether as prime contractor or subcontractor.30Navy Contractor Safety ResponsibilitiesOPNAVINST 5100.23G, Chapter 1, section 0105Contractors must comply with applicable federal, state and local codes and standards, including safety and occupational health requirements, as well as any additional specific requirements invoked by contract. The contractor is responsible directly for compliance with OSHA standards or those of the approved OSH state plan.Exceptions:(1) Situations in which the United States, by admiralty law or other law, is responsible for contractor employee injury compensation (e.g., for employees working under the Commander, Military Sealift Command) (2) Situations where the Navy exercises statutory authority for safety and health and, as a result, the OSH Act does not directly apply.

31Application of Hazard Control PrinciplesOPNAVINST 5100.23G, Chapter 5The Federal Acquisition Regulation (FAR) Subpart 42, Appendix A prescribes policies and procedures for contract administration & summarizes some of the key provisions of the Navy acquisition regulations requiring application of safety in contracting. In addition, certain types of construction and demolition contracts require inclusion of the FAR Accident Prevention Clause that requires compliance with the US Army Corps of Engineers Safety and Health Requirements Manual, EM-385-1-1. By adding the US Army Corps of Engineers requirement, the Navy is requiring the contractor to develop an Activity Hazard Analysis for each phase of implemented work and to provide an Accident Prevention Plan. 32Role of Navy Safety & Occupational Health Personnel OPNAVINST 5100.23G, Chapter 5Administrative oversight of contractors is the primary responsibility of the Contracting Officer. Safety and Occupational Health personnel do not assume a regulatory role relative to oversight of contractor safety activities and performance except in an imminent danger situation. The role of the safety and occupational health offices: Serve as an advisor and provide professional safety and occupational health support to the Contracting Officer Assist in identifying specific safety and health requirements to be included in contractsParticipate in pre-performance or pre-construction conferencesParticipate in review of safety and health issues/concerns with the Contracting Officer regarding all contractors working on the facilityReview and provide comments to the Contracting Officer on issues concerning occupational safety and health. 33

Hazardous Material Control and Management OPNAVINST 5100.23G, Chapter 7Provide a mechanism for informing:Informing contractors of Navy-owned hazardous materials to which their personnel may be exposedInforming Navy personnel of contractor-owned HM to which they may be potentially exposedProviding Navy personnel with MSDSs for contractor-owned HM

34Key West, Fla. (Nov. 1, 2005) - A row of contractors repair power poles knocked down by Hurricane Wilma on board Naval Air Station Key West's Boca Chica Field. Hurricane Wilma passed within 15 miles of Key West Oct. 24 and caused flooding up to five feet in parts of the lower Florida Keys. U.S. Navy photo by Journalist 1st Class Trice Denny

Federal and State Occupational Safety and Health Inspections at Contractor Workplaces on Navy Shore Installations OPNAVINST 5100.23G, Chapter 11DOD contractors located on or off Navy shore installations are subject to enforcement authority by Federal and certain State safety and health officials. These inspections may be routine or based on reports of unsafe or unhealthful conditions, specific complaints, accidents or illnesses of contractor employees.

35Key West, Fla. (Nov. 1, 2005) - A row of contractors repair power poles knocked down by Hurricane Wilma on board Naval Air Station Key West's Boca Chica Field. Hurricane Wilma passed within 15 miles of Key West Oct. 24 and caused flooding up to five feet in parts of the lower Florida Keys. U.S. Navy photo by Journalist 1st Class Trice Denny

Questions

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