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Interpretation Of Government Contracts. Session 402 Monday, April 23 1:40 – 2:40 pm Timothy Sullivan Thompson Coburn LLP 1909 K St., N.W. 6 th Floor Washington, D.C. 20006 (202) 585-6930, [email protected] Why Is This An Important Topic?.

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Interpretation Of Government Contracts

Session 402

Monday, April 23 1:40 – 2:40 pm

Timothy Sullivan

Thompson Coburn LLP

1909 K St., N.W.

6th Floor

Washington, D.C. 20006

(202) 585-6930, [email protected]


Why is this an important topic
Why Is This An Important Topic?

  • The answer to the question, “What does the contract mean”? can dictate whether a contractor makes or loses money on a Government contract.

  • Contracts don’t always mean what they say because drafters are human (imperfect), topics are frequently complex, customers and contractors view things from very different angles, and no one ever has enough time to do things right.


Isn t the world of government contracts the same as the commercial world
Isn’t The World Of Government Contracts The Same As The Commercial World?

  • There are similarities. In theory, the Restatement of Contracts Second covers both worlds, but you need to understand the idiosyncrasies of the Government contracts process, including:

    • Pre-award issues;

    • Post-award issues; and

    • Subcontractor wrinkles


Who gets involved in the contract interpretation process
Who Gets Involved In The Contract Interpretation Process? Commercial World?

  • Pre-Award

    • Agency Personnel

      • Contracting Officer and team

      • Technical people

      • Lawyers

    • Contractor Personnel

    • The GAO


Who gets involved cont
Who Gets Involved, cont. Commercial World?

  • Post-Award

    • Agency personnel

    • Contractor personnel

    • Boards of Contract Appeals

    • U.S. Court of Federal Claims

    • U.S. Court of Appeals for the Federal Circuit

    • U.S. Supreme Court

    • All governed by the common law of Federal contracts


Subcontractor wrinkles
Subcontractor Wrinkles Commercial World?

  • The subcontract agreement usually is governed by state law (“Choice of Law” clause). This may mean that a state court could get involved.

  • Subcontracts may have “Disputes” clauses that use Alternative Dispute Resolution methods such as mediation or arbitration.


Pre award considerations
Pre-Award Considerations Commercial World?

  • Solicitations

    • Can contain mistakes, ambiguities (both patent and latent), omissions, and other objectionable terms

    • It is the offeror’s duty to read and resolve them, using the “Order of Precedence” clause at FAR 52.214.29 for sealed bids or 52.215-8 for negotiated procurements

    • Sometimes there are pre-proposal conferences or site visits offered. These add meat to the bones of the RFP.


Tips for handling solicitations
Tips For Handling Solicitations Commercial World?

  • Don’t bother the C.O. with every question you have one at a time.

  • Do compile a list of questions or concerns as you review the RFP. Try to resolve questions on your own.

  • If you go to the C.O., do it in writing and do it well before offers are due.

  • Remember that all protests regarding solicitation terms must be filed at the GAO before bids or offers are due.


Far 52 215 8 order of precedence
Far 52.215-8 Order Of Precedence Commercial World?

  • Any inconsistency in this solicitation or contract shall be resolved by giving precedence in the following order:

    • The Schedule (excluding the specifications).

    • Representations and other instructions.

    • Contract clauses.

    • Other documents, exhibits, and attachments.

    • The specifications.


Oddball clauses
Oddball Clauses Commercial World?

  • Some solicitations contain clauses that are not from the FAR

  • These will probably be in Section H, “Special Contract Requirements,” or Section I, “Contract Clauses.”

  • These clauses represent a risk to the offeror and need to be evaluated carefully


Oddball clauses cont
Oddball Clauses, cont. Commercial World?

  • These clauses can cover a variety of topics, such as pricing, risk-shifting, and waiver.

  • If you don’t challenge such a clause during the solicitation stage, you have agreed to it.


Sample oddball clause
Sample Oddball Clause Commercial World?

INTERPRETATION OF CONTRACT: NOTICE OF AMBIGUITIES

This written contract and any and all identified writings or documents incorporated by reference herein or physically attached hereto constitute the parties’ complete agreement and no other prior contemporaneous agreements either written or oral shall be considered to change, modify or contradict it. Any ambiguity in the contract will not be strictly construed against the drafter of the contract language but shall be resolved by applying the most reasonable interpretation under the circumstances, giving full consideration to the intentions of the parties at the time of contracting.

It shall be the obligation of the contractor to exercise due diligence to discover and to bring to the attention of the Contracting Officer at the earliest possible time any ambiguities, discrepancies, inconsistencies, or conflicts in or between the specifications and the applicable drawings or other documents incorporated by reference herein. Failure to comply with such obligation shall be deemed a waiver and release of any and all claims for extra costs or delays arising out of such ambiguities, discrepancies, inconsistencies and conflicts.


Will gao help
Will GAO Help? Commercial World?

  • Not usually.

  • When you challenge such a clause, you are hoping that the agency will drop it or reach an acceptable compromise.

  • If the agency won’t budge, and the GAO refuses to help, you have a business decision to make.

  • Just remember, the fact that “no one else has objected to it” is not a reason to drop your challenge.


Post award
Post-Award Commercial World?

  • This is when we traditionally turn to the rules of contract interpretation

  • For Government contracts, the “Restatement Contracts Second” is usually a good guide to contract interpretation, although the Federal Circuit has recently ignored it in one key way

  • For this presentation, we will use a similar set of rules crafted by Walter Pettit, a legendary Government contracts expert, and published in a 1965 Federal Publications Briefing Paper, “Interpretation of Government Contracts.”


Rules of contract interpretation
Rules Of Contract Interpretation Commercial World?

  • A reasonable, logical interpretation is favored over an interpretation which is strained, circuitous, or difficult to follow, which produces and impractical or unworkable result, or which brings about an impropriety or miscarriage of justice.


Rules cont
Rules, cont. Commercial World?

  • An important aid to interpretation is the intention of the drafter as manifested by the words, phrases, symbols or legends he elects to use.


Rules cont1
Rules, cont. Commercial World?

  • A contract must be read as a harmonious whole with no word being rejected or treated as meaningless if at all possible.


Rules cont2
Rules, cont. Commercial World?

  • Words, symbols, and marks will be given their common and normal meaning, unless it is clearly shown that they were used in a technical sense or have some other meaning accorded to them by the parties.


Rules cont3
Rules, cont. Commercial World?

  • The principal apparent purpose of the contract is to be given great weight in ascertaining a contract’s reasonable meaning.


Rules cont4
Rules, cont. Commercial World?

  • Custom and usage of the trade is used as an aide to interpretation when it is necessary to add a term to clarify the obligations of the parties or when there is an ambiguity in the contract.


Rules cont5
Rules, cont. Commercial World?

  • A contracting party is bound by knowledge of the interpretation of the other party.


Rules cont6
Rules, cont. Commercial World?

  • Interpretations of the parties prior to the arising of the controversy are to be given great, if not controlling, weight.


Rules cont7
Rules, cont. Commercial World?

  • The contractually stated order of precedence is binding unless there is inadequate notice of a conflict in the provisions or following the specified precedence prevents the meeting of the overall contract requirements.


Rules cont8
Rules, cont. Commercial World?

  • If the preceding rules do not clear up an ambiguity, the disputed provision will be construed against the drafter. This is called the rule of contra proferentem.


Rules cont9
Rules, cont. Commercial World?

  • Negotiations and agreements prior to the execution of a written contract cannot be used to vary, contradict, or add to the terms of the contract.


More subcontract wrinkles
More Subcontract Wrinkles Commercial World?

  • Negotiations between primes and subs often involve tricky issues:

    • Flowdown clauses

    • Clauses that look like flowdowns

    • Choice of law clause

    • Standard terms


Tips Commercial World?

  • Make sure you have the time, the right people, and the right plan to review a solicitation and prepare your proposal.

  • Make sure that you are prepared for negotiations.

  • Keep good records of what was said and who said what during negotiations.


Tips cont
Tips, cont. Commercial World?

  • Take the time to review what the other side sends you when they take the responsibility for reducing your agreement to writing.

  • Have a fresh pair of eyes look at the results.

  • Whenever possible, don’t split the responsibility for contract proposal preparation and contract performance between two unrelated groups.


Tips cont1
Tips, cont. Commercial World?

  • Keep your bid workpapers — you may need them if a contract interpretation problem surfaces during contract performance.


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