This book covers all the aspects of contract law that every government manager should know to be both effective and in compliance.
This book covers all the aspects of contract law that every government manager should know to be both effective and in compliance.
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Overview
This book covers all the aspects of contract law that every government manager should know to be both effective and in compliance.
Product Details
| ISBN-13: | 9781567264432 |
|---|---|
| Publisher: | Berrett-Koehler Publishers |
| Publication date: | 04/01/2014 |
| Series: | Government Manager's Essential Library |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| Pages: | 136 |
| File size: | 2 MB |
About the Author
Read an Excerpt
The Government Manager's Guide to Contract Law
By Terrence M. O'Connor
Management Concepts Press
Copyright © 2014 Management Concepts, Inc.All rights reserved.
ISBN: 978-1-56726-443-2
CHAPTER 1
MAKING YOUR DECISIONS LEGALLY DEFENSIBLE
Federal law says that a government manager cannot act in a way that is "arbitrary and capricious." But what does this almost-clichéd phrase mean? It simply means that a government manager must use a reasonable way (process) to reach a reasonable decision (substance).
In determining whether a decision is arbitrary and capricious, the government manager must consider relevant data and provide a coherent and reasonable explanation of the decision he or she makes.
So when the courts say a government manager must make a decision that is "reasonable," it's the same as saying that the decision cannot be arbitrary and capricious.
When you think about it, making a government manager act reasonably can be both a blessing and a curse. It's a blessing because it acknowledges that there is not only one decision that is the right decision. Courts use the phrase "zone of reasonableness" to express this.
For example, if you need a car to use in a carpool, buying a sport utility vehicle (SUV), a minivan, or a six-passenger sedan would all be reasonable. It would be unreasonable to buy a sports car or a bus. If a government manager chose a six-passenger sedan for a carpool vehicle, a judge would have a hard time finding the government manager's decision unreasonable — even if she personally would have chosen an SUV. So, because a government manager simply has to make a reasonable decision to be right, the test of reasonableness is a blessing.
In a sense, the reasonableness test makes judges leave their personal preferences at home. That's the way the founding fathers wanted it. Under the theory of separation of government power, Congress (the legislative branch of government) has told judges (the judicial branch) to let the agency people (the executive branch) do their jobs. Courts generally defer to an executive branch decision — even if the particular judge might not agree with it and might prefer a different decision — as long as the government manager's decision is "reasonable":
If the court finds a reasonable basis for the agency's action, the court should stay its hand even though it might, as an original proposition, have reached a different conclusion as to the proper administration and application of the procurement regulations.
So it's a blessing that a court won't force a government manager to follow a judge's personal belief.
But "reasonable" is also a curse. First, it seems too vague to work with as a practical matter. Aren't we all reasonable? Or at least, aren't we reasonable? (It's the other person who isn't reasonable.) Isn't it hard for everyone to agree on what is reasonable and what is not? People always have a reason for doing something, so isn't everything, therefore, automatically reasonable? It's at this point that the apparently redundant word "good" has to be added to "reason."
Although there may be gray areas allowing reasonable people to disagree, some decisions are clearly unreasonable. Let's look at types of decisions made during the government contract process.
THREE SIMPLE RULES FOR ALWAYS BEING REASONABLE
Here are three good rules for making reasonable decisions:
Rule 1: To be reasonable, the government manager's decision must be in writing.
One of the surest ways for a government manager to be found "unreasonable" is to make an important decision and have nothing in writing to explain it.
[The Government Accountability Office] is able to assess the reasonableness of an agency's source selection process only where adequate documentation of that process exists. Without such documentation, we cannot be certain that the agency action was not arbitrary.
Without documentation, a government manager's decision is deemed unreasonable.
Rule 2: To be reasonable, the government manager's written decision must show that the government manager actually thought about the decision instead of making a knee-jerk decision.
One judge made this point nicely when he said, "Procurement officials must use judgment ... they cannot act as 'automatons.'"
Rule 3: To be reasonable, the government manager's written, thoughtful decision must follow the rules for making a decision.
Agency regulations like the Federal Acquisition Regulation (FAR) often give good advice here. For example, a decision on who won a contract should follow the rules in FAR 15.308:
The source selection decision shall be documented, and the documentation shall include the rationale for any business judgments and tradeoffs made or relied on by the SSA [Source Selection Authority], including benefits associated with additional costs.
BEING FAIR AND REASONABLE IN ADMINISTERING A CONTRACT
Where does it say that a government manager has to be fair and reasonable in administering a contract? Nowhere. Instead, it's implied by the common law; it's called "the implied duty of good faith and fair dealing."
Do contracting parties need a contract provision promising each other to carry out the contract fairly? Not really, although that answer may seem naive in our litigious society. For years, judges have built into contracts an implied duty of good faith and fair dealing.
But being implied, this duty presents problems. Implied duties under a contract are hard to identify and pin down because they are not written, so any implied duty raises hard questions. Is it fair to make people follow unwritten rules? If someone breaches an unwritten rule, does he have to pay damages? Can unwritten rules even be breached? The answer to all three questions is "yes."
Written contracts have unwritten rules. These unwritten rules, called implied duties, are just as binding as the written rules. And they can be breached just like any written rule. The problem with these implied duties is that it's hard to anticipate how they can be broken because they are unwritten.
Although difficult to identify, some violations of this implied duty are obvious. One example, a rare one, shows bad faith on the part of the government.
The Libertatia Associates (TLA) had a grounds maintenance contract at Fort Rucker, Alabama. The contracting officer's representative (COR) on the contract told TLA employees that, in the words of the COR, they should think of him as Jesus Christ and the government manager as God. Some people heard the COR say that he would run TLA off the contract. Others heard him say to the president of TLA that he would break TLA. The court found that the COR had a "specific intent to injure" the contractor. The COR's "Jesus Christ" comparison "showed the COR to be a contracting official without a proper understanding of his role." His personal animosity was clear from his "break them" statements.
Although it might not seem logical to non-lawyers, bad faith and good faith are not flip sides of the same coin. Proving bad faith was not part of proving that the government didn't act in good faith. They are two different concepts. Bad faith is driven by malice. Good faith is violated by self-interest; people who are selfish are not necessarily out to hurt other people — they just want to help themselves.
This implied duty typically can be violated in many ways, such as by failing to cooperate in contract performance or interfering with contract performance. One respected government contract authority believes that "By far, the most important implied duty in government contracting is the duty to cooperate." One of the problems with defining the duty to cooperate is that what one party thinks is "cooperation," the other party often thinks is work well beyond what the contract calls for. Closely related is the duty not to hinder.
Here's the distinction between the two, but notice that the test is the same — reasonableness.
The implied duty to cooperate imposes an affirmative obligation to do what is reasonably necessary to enable the contractor to perform. Determination of a breach of the duty requires a reasonableness inquiry. The nature and scope of that responsibility is to be gathered from the particular contract, its context, and its surrounding circumstances. In contrast, the implied duty of noninterference is a negative obligation that neither party to the contract will do anything to prevent performance thereof by the other party or that will hinder or delay him in its performance. The Government's actions or inaction must be shown to be unreasonable...."
In Chapter 2, we will take a look at what exposure you, as a government manager, have if you do your job the wrong way. We'll focus on your liability to the federal government as well as your liability to members of the public that your work as a government manager might impact.
CHAPTER 2LIABILITY FOR THE GOVERNMENT MANAGER AND THE GOVERNMENT
Like the rest of us, government managers always run the risk of being sued by someone for something. Because government managers may work for the government administering contracts with contractors or may make mistakes in dealing with the general public, they face the threat of potential lawsuits from the government as well as from contractors and their employees.
We first discuss a government manager's personal liability to the government for mistakes, particularly mistakes in handling government contract payments. We then address the government's liability to third parties (like the contractor or the contractor's employees) for mistakes made by the government manager, including the government manager's liability under the Federal Tort Claims Act (FTCA). Finally, we discuss the government manager's personal liability to the general public for mistakes made in the role of government manager.
THE GOVERNMENT MANAGER'S FINANCIAL LIABILITY TO THE GOVERNMENT
A government manager's liability to the government typically involves two situations: making unauthorized commitments to a government contractor and making mistakes in the contract payment process.
The government manager's liability for making unauthorized commitments is clear: The government has the right to make a government manager pay for committing the government to a course of action that is not properly authorized by agency regulations.
On the issue of liability for mistakes in the contract payment process, there's good news for government managers. Even though a government manager may get heavily involved in the contract payment process, there's not much personal, pecuniary liability for the government manager.
This conclusion comes from the GAO's Principles of Federal Appropriations Law (commonly known as the Red Book), which discusses at length how federal law imposes personal liability on "an accountable officer." The Red Book specifies who actually is an accountable officer — personnel like "certifying officers, civilian and military disbursing officers, collecting officers, and other employees who by virtue of their employment have custody of government funds." The Red Book's list does not include other agency employees like a government manager or a contracting officer. This is surprising, because a government manager can get heavily involved in contract payments — -legal and otherwise.
Better yet, from a government manager's perspective, the Red Book describes how rare it would be for, say, a contracting officer to be an accountable officer:
With rare exceptions, other officials who may have a role in authorizing expenditures (contracting officers, for example) are not accountable officers for purposes of the laws discussed in this chapter...."
The Red Book cites a 1992 GAO opinion as authority. In this decision, a contracting officer and a contract specialist messed up spectacularly. Both approved a progress payment being made directly to a contractor even though the contract's payments should have gone to a bank first because payments had been assigned to that bank and even though the contract did not allow progress payments. Trying to turn the law on its head, the Air Force wanted to hold these procurement people liable instead of making the accounting and finance officer and the certifying officer liable, as federal law requires. GAO concluded that the Air Force could not make the contracting officer and the contracting specialist liable:
There is no authority to assess pecuniary liability against the government employee for losses resulting from an error in judgment or neglect of duty....
In another case, the Department of Veterans Affairs (VA) improperly used VA money for three gift certificates to local restaurants and a silk plant in connection with a contest advancing VA's celebration of Women's Equality Week. GAO refused to hold any procurement employees financially liable:
VA's certifying officers necessarily rely on various participants in the procurement and payment process to ensure that only legal and accurate payments are made. However, these officials, including contracting officers and voucher auditors, do not become certifying officers subject to liability for improper payments merely because certifying officers rely on their review or approval of purchases or payments. Therefore, while officials other than certifying officers may be subject to administrative sanctions, our Office has never looked to them for reimbursement in cases of illegal or improper payments.
The Red Book goes on to add that government managers like contracting officers "may be made accountable in varying degrees by agency regulation." Whether this remains good law is in question, however. As stated in an important 2000 GAO decision:
Over the years our Office has taken the position in a number of different contexts that agencies may not hold employees liable for losses caused the government as a result of errors in judgment or neglect of duty in the absence of administrative regulations.... On one occasion, we concluded that an agency solely by regulation may establish pecuniary liability for employees supervising a certifying and disbursing process. This conclusion was repeated in passing or in dicta in some other decisions.... Regardless of [these decisions], in light of the Supreme Court decisions ... we believe that an agency may impose pecuniary liability only with a statutory basis. Accordingly, we will no longer accept our earlier case law in this regard as precedent and any decision inconsistent herewith is overruled.
Other government employees, like certifying officials, are not so lucky.
In September 2001 a forest fire in the Gifford Pinchot National Forest (GPNF) led to the Forest Service's contracting with Evergreen Bus Service for buses to carry firefighters. To get paid, Evergreen sent the Forest Service four invoices on Department of Agriculture forms. These invoices, totaling $5,631.85, were paid after the government's certifying officer signed them on September 25. The next day, the government got four more invoices for the same work, in the same amount, but this time on Evergreen stationery, not on USDA forms. Two of these Evergreen invoices even had copies of the USDA forms signed earlier attached to them. The same certifying officer certified them, one two days later and the others eight days later. When the Forest Service realized a mistake had been made, it tried to get the money back from Evergreen, but Evergreen's bankruptcy proceedings prevented that. The Forest Service asked GAO if the employee could not be held liable for the mistake because she paid the invoices in good faith and with reasonable diligence.
GAO said she had to pay the government back. Federal law makes certifying officers repay the government for any "illegal, improper, or incorrect" payments they make. Because the contractor had already been paid once, paying the contractor again was improper, so the certifying officer had to pay the government back unless the employee could come within one of the two exceptions to personal liability.
(Continues...)
Excerpted from The Government Manager's Guide to Contract Law by Terrence M. O'Connor. Copyright © 2014 Management Concepts, Inc.. Excerpted by permission of Management Concepts Press.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
Contents
PREFACE,CHAPTER 1 Making Your Decisions Legally Defensible,
CHAPTER 2 Liability for the Government Manager and the Government,
CHAPTER 3 Unique Aspects of Government Contracts,
CHAPTER 4 Types of Government Contracts,
CHAPTER 5 Interpreting Government Contracts,
CHAPTER 6 The Legal Landscape for Government Managers,
CHAPTER 7 Types of Government Contract Litigation,
CHAPTER 8 Protests,
CHAPTER 9 Claims,
CHAPTER 10 Procurement Ethics for Government Managers,
ACRONYMS,
INDEX,