Government Contract Law

1. Government Contract Law Presented by the Office of the Chief Counsel – Federal Lands Legal Team with assistance from Western Federal Lands Procurement Office and Western Federal Lands Construction Branch No rights reserved Winter Training 2014

2. Government Contract Law – 2014Overview of United States Legal System

3. Government Contract Law – 2014Overview of United States Legal System The United States legal system is based on the concept of divided powers. There are multiple sovereigns. --the Federal government --each of the State governments --each of the Tribes Each sovereign has jurisdiction over certain matters, as determined by the people of the U.S.

4. Government Contract Law – 2014Overview of United States Legal System The people of the United States have determined the extent of each sovereignty in the Constitution of the United States which begins with: “We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America.”

5. Government Contract Law – 2014Overview of United States Legal System The Constitution --removes certain powers from the States and places them in the central government --divides the powers of the central government into three separate, but co-equal branches: the Legislative, the Executive, and the Judicial --empowers relations with foreign powers and tribes

6. Government Contract Law – 2014Overview of United States Legal System The Legislative Branch enacts laws The Executive Branch administers laws The Judicial Branch decides the constitutionality of laws and decides Cases in Law and Equity arising under the Constitution, the Laws of the United States, and Treaties.

7. Government Contract Law – 2014Overview of United States Legal System In our systems, States and Tribes are governments with general authority. The Federal government is one of limited authority. What this means is that the States and Tribes can generally enact laws and govern their subjects on any and all subjects, except for those subjects reserved from the States and Tribes by Constitutional power. In contrast, the Federal government only has those powers granted by the Constitution.

8. Government Contract Law – 2014Overview of United States Legal System As a government of limited authority, two important points follow: (1) Congress can only enact laws that fall within the Constitutional grant of authority. (2) Domestic federal agencies can only act as authorized by a law of Congress. Agencies do not have authority to “do what is right and good.” They must look to their statutes to determine what they can do.

9. Government Contract Law – 2014Overview of United States Legal System Based on Constitutional principles, there exist a hierarchy of laws and authorities within the Federal government: (1) The Constitution – the Supreme Law (2) Statutes and Treaties (3) Federal regulations (4) Executive policies (includes Executive Orders, White House directives, OMB Circulars, and agency policies

10. Government Contract Law – 2014Overview of United States Legal System The Supremacy Clause (Art. VI, Section 2) means: The Constitution, Federal statutes and Treaties, and Federal regulations take precedence over any State, local, or other law that may be in conflict. Further, no State, local, or other government can interfere with a Federal agency in the Federal agency’s performance of its delegated duties.

11. Government Contract Law – 2014Overview of United States Legal System The Legislative Branch is divided into two houses: The House of Representatives (435 members) apportioned by population The Senate (50 members) apportioned by States Statutes must be passed by both houses and signed by the President. If the President does not sign, the House and the Senate can enact the law with a 2/3rds vote in each chamber.

12. Government Contract Law – 2014Overview of United States Legal System The Judicial Branch is composed of: The Supreme Court (9 Justices) And lower courts. There are many lower courts, including --U.S. Courts of Appeals (13 courts) --U.S. District Courts (94 courts) --Court of Federal Claims (where contract cases are heard)

13. Government Contract Law – 2014Overview of United States Legal System Questions?

14. Government Contract Law – 2014General Contract Principles

15. Government Contract Law – 2014General Contract Principles What is a contract? A contract is any agreement between two parties where there is an offer, an acceptance of the offer, and consideration. Consideration exists when one party receives a benefit or suffers a detriment from the contract. Consideration must exist with both parties for there to be a contract.

16. Government Contract Law – 2014General Contract Principles A mere offer is not a contract, as there is no acceptance or consideration. An offer, even if it is accepted, is not a contract where there is a lack of consideration. An offer, even when there is mutual consideration, is not a contract where there is no acceptance. All three elements must exist for there to be a binding contract.

17. Government Contract Law – 2014General Contract Principles Example 1: Nature Excavation Co. states that they will quit early on Friday so that the PE can go to a movie. Is this a contract? What if the PE states: “I accept your offer”? What if the PE stated “I accept your offer” and then buys movie tickets for Friday?

18. Government Contract Law – 2014General Contract Principles Example 2: Nature Excavation Co. states that they will quit early on Friday so that the PE can go to a movie. The PE states “I accept your offer but you also must start late on Saturday.” Is this a contract? The acceptance must be of the offer as made. A conditional acceptance is deemed a counter-offer which in turn must be accepted by the other party.

19. Government Contract Law – 2014General Contract Principles Contracts may be oral or in writing. Contracts may be expressed or implied. Express contracts exist when the parties express to each other (orally or in writing) the offer and acceptance, and there exists consideration. Implied contracts exist when there is no express contract but the actions of the parties indicate that they intended to be bound (implied-in-fact), or the law implies a contractual relationship (implied-in-law).

20. Government Contract Law – 2014General Contract Principles 31 U.S.C. 1501(a)(1) requires Federal contracts to be in writing. However, the Courts have held that where there are sufficient facts from which a court can infer a meeting of the minds, an enforceable contract exists, notwithstanding 31 U.S.C. 1501(a)(1). Implied-in-fact contracts may be enforced against the government. But an implied-in-fact contract cannot exist where an express contract already covers the matter. Implied-in-law contracts may not be enforced against the government.

21. Government Contract Law – 2014Authority Within the Federal government, all agencies have inherent authority to contract within the confines of law. Congress authorized a single, Government-wide procurement regulation known as the Federal Acquisition Regulation (FAR). 41 U.S.C. 1303. The FAR vests the authority to contract in the agency head (the Secretary of Transportation). FAR 1.601(a). This authority may be delegated.

22. Government Contract Law – 2014Authority Only Contracting Officers (COs) may execute contracts on behalf of the Government. FAR 1.601. COs are appointed in writing. FAR 1.603-3(a). --Those who are not COs cannot bind the government to a contract. Exceptions: (1) Purchase Card purchases (2) Government employee travel (not a true exception since such contracts are personal, not governmental)

23. Government Contract Law – 2014Authority Ratifications: When those who lack authority purport to make a commitment, and the other party acts on the purported commitment, the commitment may be ratified by the Executive Director of FHWA when the contract otherwise would be legal. Agencies are required to take action to preclude the need for ratifications. Be forewarned, the process required if one makes an unauthorized commitment is painful.

24. Government Contract Law – 2014Authority Implied Ratifications: Implied ratifications occur when someone without authority makes a purported commitment which is known by a person with authority and the actions of the person with authority are deemed to ratify implicitly the commitment. Thus, a PE’s actions may be implicitly ratified when the PE makes a purported change to the contract that is known to the COE and the COE takes some action that may be seen as implicitly acknowledging the change.

25. Government Contract Law – 2014Authority Questions?

26. Government Contract Law – 2014Government Labor Statutes

27. Government Contract Law – 2014Government Labor Statutes Contract Work Hours and Safety Standards Act—Overtime Compensation (40 U.S.C. 3701-08) --requires pay of at least 1.5 times the basic rate for each hour worked over 40 hours.

28. Government Contract Law – 2014Government Labor Statutes Copeland Act (18 U.S.C. 874 and 40 U.S.C. 3145; 29 CFR Part 3; FAR 22.403-2; FAR Clause 52.222-10) --Prevents employers from exacting “kickbacks” from employees as a condition of employment. --Requires contractors to provide COs with weekly statement of compliance for wages paid to each laborer and mechanic during the preceding week. Remedies Civil and or Criminal Prosecution: Up to 5 years imprisonment and/or $5,000 fine.

29. Government Contract Law – 2014Government Labor Statutes Davis-Bacon Act (40 U.S.C. 3141, et seq; 29 CFR Part 1; FAR Subpart 22.4; FAR Clauses 52.222-5, 52.222-6, 52.222-7, 52.222-8, 52.222-9, 52.222-13, 52.222-15; SCR 108.01A) Requires laborers and mechanics to receive prevailing wages as determined by the Secretary of Labor

30. Government Contract Law – 2014Government Labor Statutes Davis-Bacon Act (cont) Laborers and Mechanics include workers whose duties are manual or physical (including those using tools); apprentices, trainees, and helpers; working foremen who devote more than 20 % of time to performing manual work and do not qualify as management under 29 CFR part 541. Excludes executive, supervisory, administrative, clerical, and professional employees. Outside of the job superintendent and surveyors, almost everyone on a construction site is covered.

31. Government Contract Law – 2014Government Labor Statutes Davis-Bacon Act (cont) --Primary Site of Work: Where the project work is being performed and where the work will remain. --Secondary Site of Work: A site established specifically for the performance of the contract where a significant portion of the work is constructed. --Includes batch plants, borrow sources, staging areas that are dedicated exclusively to the project and are adjacent or virtually adjacent to a primary or secondary site of work (w/in 0.5 miles)

32. Government Contract Law – 2014Government Labor Statutes Davis-Bacon Act (cont) --Travel between a Primary Site of Work; a Secondary Site of Work; and a batch plant, borrow source, disposal site, or staging area (when such are dedicated to the project and virtually adjacent) is covered.

33. Government Contract Law – 2014Government Labor Statutes Davis-Bacon Act (cont) --Travel between a non-covered site and a covered site does not fall within the Davis Bacon Act. --De minimus travel on a covered site by workers delivering material to the site is not covered, when the travel otherwise is not covered

34. Government Contract Law – 2014Government Labor Statutes Davis-Bacon Act (cont) --De minimus = --In one workday if the trucker is onsite no more than 20% of their 8 hr work day ( 96 min [1.6.hr]) and --In one workweek if the trucker is onsite for no more than20% of their40-hour week.

35. Government Contract Law – 2014Government Labor Statutes Davis-Bacon Act (cont) Example 1: Day 1 - 1 hr; Day 2 - 1 hr; Day 3 - 1 hr; Day 4 - 1 hr; and Day 5 - 2 hr. Because not more than 8 hours worked in the week, but more than 1.6 on Friday, the driver would be paid for 2 hours at D-B wages. Example 2: Day 1 - 1 hr; Day 2 - 1 hr; Day 3 - 1 hr; Day 4 - 1 hr; and Day 5 - 4.5 hours. Because more than 8 hours worked in the week, the driver would be paid for all 8.5 hours at D-B wages.

36. Government Contract Law – 2014Government Labor Statutes Davis-Bacon Act (cont) Zone Pay The calculation of zone pay varies depending on the language in the respective wage determinations. Be aware that where there are multiple sites in a contract, there may be different wages required for the various sites.

37. Government Contract Law – 2014Government Labor Statutes Labor submittals --weekly payroll statements of compliance --copies of weekly payrolls a) name b) identifying number (no SS number on copies but can use last 4 digits) c) classification d) hourly rates paid e) daily and weekly number of hours worked f) deductions made g) actual wages paid

38. Government Contract Law – 2014Government Labor Statutes General Regulations CO is required to withhold appropriate payment when payrolls are not promptly provided. CO is required to examine payrolls. CO should conduct regular compliance checks, include employee interviews. Agency must conduct investigation when a compliance check indicates that substantial or willful violations may have occurred and file a report.

39. Government Contract Law – 2014Government Labor Statutes Davis-Bacon Act (cont) One Final Note: Wage Determinations change all of the time. Do not presume that the wage determination you have on your present project is the same as the wage determination on the last project, even if the projects are in the same area. Not only do the wages change, but other aspects of the wage determination change.

40. Government Contract Law – 2014Government Labor Statutes Questions?

41. Government Contract Law – 2014Changes

42. Government Contract Law – 2014Changes FAR Part 43; FAR Clause 52.243-4 Changes Been called the most important of all the standard clauses. Offer, acceptance, and mutual consideration form the basis of a contract. When contracting, neither party is free to vary or alter the terms of the contract without the consent of the other.

43. Government Contract Law – 2014Changes The Changes clause allows the Contracting Officer to make changes to the contract at any time as long as those changes are within the general scope of the contract. This permits the Government to fit the contract to the situation. The contractor is bound by the changes and must perform them. The contractor is entitled to an equitable adjustment in the contract price for the change.

44. Government Contract Law – 2014Changes Elements of a Change: • The Contracting Officer • By Written Order • Effects a Change to the Terms of the Contract • Within the General Scope of the Contract

45. Government Contract Law – 2014Changes Elements of a Change: A Change also includes any written or oral order including direction, instruction, interpretation, or determination from the CO that causes a change. The Contractor is required to provide written notice to the CO of the date, circumstances, and source of the order and that the Contractor views the order as a change order.

46. Government Contract Law – 2014Changes Elements of a Change: • The Contracting Officer--- Only the CO and those authorized representatives of the CO acting within the limits of their authority can order changes under the contract. PEs and Inspectors may not order changes. (2) Must be in Writing---without a writing the contractor is not bound to follow the orders of the CO.

47. Government Contract Law – 2014Changes “The regulation was issued to avoid precisely the situation in which plaintiff, defendant, and intervener, find themselves—recalling the tea leaves of recalled utterances to ascertain if the contracting officer or her representatives made a statement that would bind the Government.” --Judge Miller with respect to another clause requiring a writing.

48. Government Contract Law – 2014Changes (2) Must be in Writing…But--- As early as 1943, the courts began to reject the harsh results of requiring a writing when the CO orally ordered a change, the contractor performed the change, and no writing was issued. Today, both the courts and the boards routinely apply the changes clause to a wide variety of situations where there are no written orders. Paragraph (b) of the Changes clause allows for this. We may lump these types of changes into the category of “Constructive Changes.”

49. Government Contract Law – 2014Changes For a Construction Change, the Contractor must notify the CO within writing of the date, circumstances and source of the order and that the Contractor treats the order as a change. The Contractor is not entitled to any costs incurred more than 20 days before it provided such written notice, except for defective specifications. For all changes, the Contractor is required to assert its right to an adjustment within 30 days of written order or of furnishing notice that it believes there is a constructive change. Time periods are not strictly enforced in the absence of prejudice to the Government .

50. Government Contract Law – 2014Changes Upon receiving notification of a constructive change, the CO has three options: • Confirm that it is a change and direct performance, • Countermand the alleged change, or • Notify the contractor that no change is considered to have occurred. --FAR 43.104(a)