Basic Principles of Government Contract Law

1. Basic Principles of Government Contract Law

2. Introduction General Incorporation of safety into Government Contracts - the Regulatory framework

3. Basic Elements of a Contract • 4 basic requirements for an enforceable contract • Agreement • Offer • acceptance • Consideration • Often gift promises and moral obligations not considered supported by valid consideration • Contractual capacity • Lawful object • Void contracts

4. Basic Elements of a Contract • Offer • The 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

5. Example While 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?

6. Basic Elements of a Contract • Acceptance • A 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 contracts • Mirror image rule • For acceptance to exist, the offeree must accept the terms as stated in the offer • What happens if you change the terms in the acceptance?

7. Basic Elements of a Contract • Consideration • Something of legal value given in exchange for a promise • Legal value = the promisee suffers a legal detriment or the promisor receives a legal benefit • Bargained-for exchange • Gift promises lack the bargained-for exchange

8. Example – Legal Value Suppose 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?

9. Example – Bargained-for Exchange • Suppose Mrs. Langham promised to give her son $10k and then rescinded the promise… • Enforceable contract?

10. Example – Bargained-for Exchange • Suppose Mrs. Langham promised to give her son $10k and then rescinded the promise… • Enforceable contract? • Suppose Mrs. Langham promised her son $10k for getting an “A” in his math class and the son performed as required • Enforceable contract?

11. Basic Elements of a Contract • Contractual capacity • Minors (The Infancy Doctrine) • Mental incompetence • intoxication • Lawful object • A contract to perform an illegal act is void • Unenforceable by either party

12. Example James Strickland paid an unsolicited $2500 bribe to Judge Woods so that the judge would be lenient on a friend of Strickland’s, 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 state’s 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?

13. Basic Rules Governing Contracts • Statute of Frauds • Certain contracts must be in writing • Real estates; contracts over a certain dollar amount • Parole Evidence Rule • Written contract • No oral evidence of agreements prior to written contract • Breach Damages • Damages attempting to restore injured party • Benefit of the bargain

14. Application of Basic Rules to Government Contracting • Complex matrix of statutes and regulations modify the basic principles • Unilateral changes • Administrative claims for disputes • Injured contractor must attempt settlement with contracting agency before going to court • U.S. Court of Claims • Has jurisdiction for claims arising under contract

15. Contracting Power • Government Power to Contract • Inherent power • Power of the purse • The Authority of Contracting Officers to bind the United States • Unauthorized acts of agents • Ratification

16. Waiver of Sovereign Immunity Can’t sue the US unless we let you! Tucker Act Tort law

17. The Requirement for Competition • Objective • Competition in Contracting Act • Full and Open Competition • Exceptions • One source • Unusual and compelling • Mobilization • Required by Statute • National security • Not in public interest

18. Contracting Methods • Sealed Bidding • Step 1: Preparation of the IFB • Step 2: Publicizing the IFB • Step 3: Submission of bids • Step 4: Evaluation of award • Contract by Negotiation • Formal procedures • Price not primary factor • Evaluation • Competitive range • Discussions

19. Changes Within the Scope of the Contract Cannot expand contracts Permissive vs. cardinal change

20. Termination for Default • Discretionary right • Factors to consider • Written notice • Basis • Timeliness • Failure to make progress • Repurchase rights

21. Termination for Convenience of the Government Partial or complete No common law damages

22. Inspection and Acceptance • Inspection • Rejection • Substantial compliance prevents T4D • Government remedies for nonconforming goods • Reject • Require replacement • Acceptance • Absent fraud, acceptance is final • Cannot later reject or terminate

23. Procurement Fraud Product substitution Criminal and Administrative remedies 18 USC 1001

24. Safety Aspects of Public Contract Law • OSHA • EPA • FAR • Safety personnel involvement • Inspections during procurement • Defining responsibilities • Assisting in drafting contract

25. Standards of Conduct Relating to Procurement and the Release of Procurement Information • General • Receipt of gratuities • bribes • Release of information • Proprietary information • Insider information

26. Safety and the Contractor Responsibilities for safety compliance Oversight Government furnished property

27. Military uses many different contractors Contractors may be performing work alongside military personnel Contractor safety can influence the safety of all installation personnel Contractors must implement an occupational injury prevention program Coordination of safety efforts is key to protecting all workers at military workplaces Contractor Safety – Why is it an Issue?

28. DoD Contractor Safety Policy DoDI 6055.1 (Aug. 1998)DoD Safety and Occupational Health Program • “DoD 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 Policy

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

30. OPNAVINST 5100.23G Navy Safety and Occupational Health Program ManualDefinitions • Contractor 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.

31. Navy Contractor Safety ResponsibilitiesOPNAVINST 5100.23G, Chapter 1, section 0105 • Contractors 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.

32. Application of Hazard Control PrinciplesOPNAVINST 5100.23G, Chapter 5 • The 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.

33. Role of Navy Safety & Occupational Health Personnel OPNAVINST 5100.23G, Chapter 5 • Administrative 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 contracts • Participate in pre-performance or pre-construction conferences • Participate in review of safety and health issues/concerns with the Contracting Officer regarding all contractors working on the facility • Review and provide comments to the Contracting Officer on issues concerning occupational safety and health.

34. Hazardous Material Control and Management OPNAVINST 5100.23G, Chapter 7 • Provide a mechanism for informing: • Informing contractors of Navy-owned hazardous materials to which their personnel may be exposed • Informing Navy personnel of contractor-owned HM to which they may be potentially exposed • Providing Navy personnel with MSDS’s for contractor-owned HM

35. Federal and State Occupational Safety and Health Inspections at Contractor Workplaces on Navy Shore Installations OPNAVINST 5100.23G, Chapter 11 • DOD 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.

36. Questions