Verbal Purchase Orders/Contracts

Why are you asking this question?  Is it mere academic curiosity, or do you need help with a real situation?

Are you making the argument that verbal purchase orders are illegal?

Are you making the argument that a verbal purchase order requires ratification before formalization?

If not verbal purchase orders, what are your solutions to the following very real situations that I have faced in my career--

• On a Sunday afternoon, a tree falls on powerlines on a military base (the military owns the power lines).
• On a Friday evening, a landslide covers an important roadway for which a federal civilian agency has jurisdiction.

Please answer practically with real solutions, not theoretically with concepts.

yeah, I hear ya ji20874. I think it very well could be a real situation, and one that I suspect probably happens all the time because, as you suggest, it is necessary from a practical standpoint. But the FAR doesn't seem to provide for these very real and probably more frequent than we know or would like to admit situations - at least not a realistic solution. 

I'm also curious from a theoretical standpoint though. If this happens as frequently as I think it probably does, why hasn't OMB/OFPP provided practical procedures for dealing with it.

I presume that by "verbal" you meant oral.

FAR does not mention oral contracts, including purchase orders. Not even FAR Part 18, Emergency Acquisitions.

FAR does mention oral orders (task orders, delivery orders) against existing contracts.

MileHighAcq said:

If this happens as frequently as I think it probably does, why hasn't OMB/OFPP provided practical procedures for dealing with it.

Maybe it is best to leave well enough alone?  Do you trust OFPP to issue procedures for this?

MileHighAcq said:

I'm also curious from a theoretical standpoint though

Search the internet for this.   Enjoy the read.

"Implied-in-Fact Contracts Under the Federal Acquisition
Regulation: Why Pacord Got It Wrong"

Good questions. Here's how I see it.

Contracting officers have the authority to enter into contracts (FAR 1.602-1(a)).

By definition, contracts are in writing "unless otherwise authorized." (FAR 2.101)

There are two instances that seem to authorize oral contracts:

Purchases under BPAs should be made orally when it is not considered economical or practical to use electronic methods. (FAR 13.303-5(e)(1))

Purchases using imprest funds or third-party drafts should normally be placed orally. (FAR 13.305-4(b))

I don't see a writing requirement as a big deal with the technology we have today. If you can reach someone by phone, you can probably also send an e-mail or text to the same device.

@Don MansfieldBPAs issued pursuant to FAR 13.303 must be in writing. Orders against the BPA ("calls") may be placed orally, but the contractor has agreed to deliver supplies or services in accordance with the terms of the written BPA.

Vern Edwards said:

I presume that by "verbal" you meant oral.

FAR does not mention oral contracts, including purchase orders. Not even FAR Part 18, Emergency Acquisitions.

FAR does mention oral orders (task orders, delivery orders) against existing contracts.

yeah, I guess I meant oral, but really, even if something is in writing (e-mail or text), while it may have more force in case of a dispute, for the purposes of regulatory compliance, it seems like anything short of a written order/contract would not meet the requirements of the regulations, even if it was technically in writing.

ji20874 said:

Maybe it is best to leave well enough alone?  Do you trust OFPP to issue procedures for this?

probably not, but I'm not sure I like the alternative of the status quo (which seems to be that we pretend not to do it and they (the auditors) pretend that they don't know differently) any better.

This discussion hasn’t mentioned use of P-cards either

MileHighAcq,

Think about it -- if you don't trust OFPP to do it right, then isn't it really best to leave well enough alone?  If there is no gross abuse or no scandal, why try to create more rules?  Please do consider the real scenarios I shared earlier -- I faced those real circumstances, and I dealt with them promptly and responsibly -- would you want to take away whatever flexibility I had (or that I imagined that I had)?

ji20874 said:

MileHighAcq,

Think about it -- if you don't trust OFPP to do it right, then isn't it really best to leave well enough alone?  If there is no gross abuse or no scandal, why try to create more rules?  Please do consider the real scenarios I shared earlier -- I faced those real circumstances, and I dealt with them promptly and responsibly -- would you want to take away whatever flexibility I had (or that I imagined that I had)?

I agree, those are definitely real scenarios that COs face every day, and for the most part (I'm guessing, hoping, but have no way of knowing) they handle it responsibly and quickly follow up verbal direction with a formal contract, order, or modification. But I do think that it puts COs at risk and in a vulnerable position, should shit ever hit the fan. Something else to consider is that some COs may be less willing than others to take on such risks and therefore refuse to do verbal contracts/orders, which hurts the customer/mission.

I also see the issue from OFPP's standpoint and why they don't want to put a less cumbersome process in place for emergency situations - because they know it will likely be abused. 

End result is that we're left with some murky gray areas that isn't ideal for anyone.

formerfed said:

This discussion hasn’t mentioned use of P-cards either

How is it relevant? If you use it under the micro, no contract is necessary - i.e. the purchase card is both the contract and the method of payment.

On the other hand, if you use it only as a method of payment, you still need a written contract in place.

The only issue it gets you around is the ADA/funding issue.

MileHighAcq said:

End result is that we're left with some murky gray areas that isn't ideal for anyone.

I think I might have a higher comfort level with gray than some.  I do not think we could make everything black and white even if we wanted to -- if we did, we wouldn't need professionals and we could all be clerks.

MileHighAcq said:

they handle it responsibly and quickly follow up verbal direction with a formal contract, order, or modification.

Bingo. The risk to a CO who does that in an emergency is minimal. But the contractor who does business based on an oral order takes some risk.

MileHighAcq said:

How is it relevant? If you use it under the micro, no contract is necessary - i.e. the purchase card is both the contract and the method of payment.

It’s similar to giving oral authorization to proceed followed up with a P.O. or contract number.  The P-card is giving authorization to perform.  Isn’t that the same as your original question 

Quote

Is there such a thing as a verbal purchase order? Can a CO issue a verbal order, and later follow up with a written purchase order?

Edit:  I also brought it up as another method of oral agreements besides impress fund actions and BPA calls

We can't answer every question in our profession in black and white. 

I have issued oral orders in the past, normally for emergency situations. Doesn't matter to me if it is a standalone action or a MOD to an existing contracting vehicle.

Example: A construction contract is in place to remove and replace the main sewer line to a large government medical facility. As often, the design did not accurately show where the main water line that supplied the facility was. The water line is hit, damaged and shuts off water to the facility. It is Saturday afternoon, before a government holiday on Monday. The contract writing software this agency uses is down for updates over the long weekend. The facility gets ahold of the CO of the existing contract. They advise the construction contractor has proposed a price to repair the line, it appears fair and reasonable, and the funding is available for the work. 

What is a CO to do?

1. Tell the facility the contract writing system is down and it will have to wait until Tuesday.

2. Confirm the price is fair and reasonable, issue a verbal "go ahead" for the work and handle the paperwork next week. 

Seems like an easy answer to me. I was once that CO getting a PO signed at 1:00 in the morning for an emergency requirement. Not anymore.

The potential issue for the contractor is that without a purchase card number or something in writing it cannot get paid, and may not be able to prove that a government official ordered anything. But if the government official follows up promptly, there should be no problem.

Constricting Officer said:

We can't answer every question in our profession in black and white.

Yes.  Yet I do wonder if we have become slaves to "systems".  I too have been in similar situationsbut who says you cannot grab a blank form and fill it out by hand, pass to a contractor and then later complete via the "system".  I have done this before.   Issues of available monies etc. comes with the relationships that are forged in your role as a CO.   Risk evaluation, etc. the "fun" stuff you get to do as a CO.

I am not advocating for it to be routine but there are times.   

So at this point let me insert FAR 52.103.  So why can't an intentional procurement be done in writing all the time?

Vern Edwards said:

without a purchase card number or something in writing it cannot get paid

I left that out. I always follow up with an email. It'll provide PO number if a one-off or a summary of work and cost agreed to, if under a current contract (MOD). 

C Culham said:

I am not advocating for it to be routine but there are times.

Exactly. I was explaining this to a CS the other day. In some situations it is the best option, but >95% it is not. The line "we'll do the paperwork next week" being used too often would almost certainty lead to a lack of documentation. Whether timely or not at all.

What about the issue of whether a CO is exceeding their authority when they issue a verbal order? I'm thinking most COAs are silent on whether the CO has to issue their orders/contracts in writing or verbally. It is understood that contracts are in writing.

I guess as long as the CO follows up a verbal order with a written order/contract/modification within a reasonable time, it's a non-issue. 

But what is a reasonable time? Maybe it's before someone else (e.g. an auditor, an independent reviewer, supervisor, etc.) discovers it? Or before an REA/claim comes in from the contractor?

If a CO fails to issue a written order/contract/modification before the problem is discovered by someone else, do you then process it as a ratification of an unauthorized commitment pursuant to FAR 1.602-3 because the CO does not have express authority to enter into verbal contracts/agreements? Or, since the COA is silent on orders/contracts having to be in writing, do you consider the CO as having had the authority to enter a contract, and the problem is more of an administrative issue in their failure to follow up with a written order/contract/modification?

Personally, I'm leaning towards the latter.

MileHighAcq,

Why are you pushing so hard on this issue?

ji20874 said:

MileHighAcq,

Why are you pushing so hard on this issue?

I find gray areas of law, regulations, ethics, etc. fascinating and am curious how other COs handle such issues. Also can be practical advice when/if I encounter such issues.

MileHighAcq said:

I find gray areas of law, regulations, ethics, etc. fascinating and am curious how other COs handle such issues. Also can be practical advice when/if I encounter such issues

Me, too. I'm glad you asked the question.

On 1/19/2023 at 2:58 PM, MileHighAcq said:

Is there such a thing as a verbal [oral] purchase order? Can a CO issue a verbal [an oral] order, and later follow up with a written purchase order?

Do you guys really think you're done with this topic? Is this just a barroom discussion over some beers? Are we pros or amateurs?

Better check out the GAO Red Book, Chapter 7, Obligation of Appropriations.

Don Mansfield said:

Me, too. I'm glad you asked the question.

Thanks! What I find particularly interesting is all the folklores, customs, legends, and just downright myths that have been passed down from CO to CS over the ages that have no foundation in law, regs, or policy, when your come down to it. It's just "the way we've always done it" and no one has ever questioned it or asked why - or if they did, they didn't get very far. I honestly wish I had more time to spend on this forum for those kinds of topics. But alas, the mountains (of paperwork and redtape) are calling, and I must go.

Vern Edwards said:

Do you guys really think you're done with this topic? Is this just a barroom discussion over some beers? Are we pros or amateurs?

Better check out the GAO Red Book, Chapter 7, Obligation of Appropriations.

Now we're talking!

The Red Book seems to confirm that there's a distinction between cases of an oral or implied-in-fact contract for the purposes of a contractor being able to collect monies for services rendered / products delivered, and the validity of such contracts from a regulatory compliance standpoint. I'm still unclear as to whether a CO acting within their authority but for the fact that the contract was not in writing would be considered an unauthorized commitment by the CO, or a mere administrative error, but I did find the following instructive:

Section 1501(a)(1):

Contracts

b. Contract “in Writing”

While there may be some room for interpretation as to what constitutes a “writing” for purposes of 31 U.S.C. § 1501(a)(1), the writing, in some acceptable form, must exist. Under the plain terms of the statute, an oral agreement may not be recorded as an obligation. In United States v. American Renaissance Lines, Inc., 494 F.2d 1059, 1062 (D.C. Cir.), cert. denied, 419 U.S. 1020 (1974), the court found that 31 U.S.C. § 1501(a)(1) “establishes virtually a statute of frauds” for the government9 and held that neither party can judicially enforce an oral contract in violation of the statute.

However, the Court of Claims and its successors, the Claims Court and United States Court of Federal Claims, have taken the position that 31 U.S.C. § 1501(a)(1) does not bar recovery “outside of the contract” where sufficient additional facts exist for the court to infer the necessary “meeting of minds” (contract implied-in-fact).

In Pacord, Inc. v. United States, 139 F.3d 1320 (9th Cir. 1998), the court relied on Narva Harris Construction Corp. in holding that, even though the Federal Acquisition Regulation (FAR) generally requires contracts to be in writing,10 an oral contract may be enforced if the plaintiff “can establish sufficient facts, beyond a mere oral agreement, for the court to infer the existence of an implied-in-fact contract.” Pacord, 139 F.3d at 1323.

d. Invalid Award/Unauthorized Commitment

Claims against the government resulting from unauthorized commitments raise obligation questions in two general situations. If the circumstances surrounding the unauthorized commitment are sufficient to give rise to a contract implied-in-fact, it may be possible for the agency to ratify the unauthorized act.

If ratification is not available for whatever reason, the only remaining possibility for payment is a quantum meruit recovery under a theory of contract implied-in-law. The quantum meruit theory permits payment in limited circumstances even in cases where there was no valid obligation.

@MileHighAcq Is a contracting officer's strictly oral purchase (not a call against a BPA) an unauthorized commitment as defined by FAR 1.602-3(a)?

If so, is it ratifiable in light of FAR 1.602-3(c)(3)?

If not, what then?

MileHighAcq said:

I'm still unclear as to whether a CO acting within their authority but for the fact that the contract was not in writing would be considered an unauthorized commitment by the CO, or a mere administrative error,

I do not believe it would be an unauthorized commitment if both parties agree that a contract exists and that the CO had the authority and by authority I mean all the other stars align for that authority such as funds are available.

If a company is approached by a person with a government ID who says, "I'm a contracting officer and I want to buy $30,000 worth of X. Let's agree on terms, and I'll send the paperwork later. I'll give you a hand-written note confirming the order." What should the company say?

Vern Edwards said:

If not, what then?

Formalize the informal commitment under FAR 50.103-2(c)?

Don Mansfield said:

Formalize the informal commitment under FAR 50.103-2(c)?

That's a thought. I'm sure it's been used.

Vern Edwards said:

If a company is approached by a person with a government ID who says, "I'm a contracting officer and I want to buy $30,000 worth of X. Let's agree on terms, and I'll send the paperwork later. I'll give you a hand-written note confirming the order." What should the company say?

"Ok, but I need to confirm that you have the requisite authority to bind the Government." 

According to FAR 1.602-1(b), this information should be "readily available to the public".

Bingo!

I once worked for an agency that established emergency purchase teams. Each member was given a small briefcase in which they were to keep a copy of their CO warrant (certificate of appointment), some SF 44s, Purchase order, invoice, voucher, and some other items that I don't recall. The idea was that in case of nuclear war we would be able to go out and buy stuff that our agency would need. (I would say that it was crazy, but given our apparent determination to start a nuclear conflict with Russia it might not be so crazy after all. Why worry about small arm "assault" weapons when you can have mass killing on a nuclear scale?)

Once a month the duty officer would call me at home in the middle of the night to verify that my phone number was valid and ask for confirmation that I had my satchel and my government ID at home.

I think some FEMA teams carry something like that.

In short, I cannot think of a justification for strictly oral purchase orders. But if I had to try to do it for a good reason, I wouldn't worry about getting into trouble. But the seller should worry about getting paid.

Vern Edwards said:

@MileHighAcq Is a contracting officer's strictly oral purchase (not a call against a BPA) an unauthorized commitment as defined by FAR 1.602-3(a)?

If so, is it ratifiable in light of FAR 1.602-3(c)(3)?

If not, what then?

I would say it hinges on whether we think there is such a thing as an oral contract - from the standpoint of does any officer of the government have the authority to bind the government orally, not from the standpoint of the contractor getting reimbursed later on - i.e. from the Government's vs. the contractor's perspective. Maybe that's not much of a distinction, but in my mind it's important to this particular questions. 

The FAR defines an unauthorized commitment as follows: Unauthorized commitment, as used in this subsection, means an agreement that is not binding solely because the Government representative who made it lacked the authority to enter into that agreement on behalf of the Government.

Does any representative of the Government have the authority to bind the government orally? If the answer is no, then I would say it's an unauthorized commitment that needs to be ratified. But again, with the COA being silent on written or oral contracts, I think it gives the CO sufficient wiggle room to issue an oral contract in cases of emergency, and the problem if they don't follow up with an oral written contract is more of an administrative failure from the Government's perspective.

FAR 50.103-2(c) is the closest thing I've seen in the FAR that addresses the situation. Thanks for the reference @Don Mansfield!

C Culham said:

I do not believe it would be an unauthorized commitment if both parties agree that a contract exists and that the CO had the authority and by authority I mean all the other stars align for that authority such as funds are available.

See above. Does any representative of the Government have the authority to enter into an oral contract?

Just now, MileHighAcq said:

Does any representative of the Government have the authority to enter into an oral contract?

In the context of this entire discussion NO.   FAR 1.6.

See Weeks v. U.S., 144 Fed. Cl. 34, July 24, 2019 (a decision of the Court of Federal Claims):

Quote

Indeed, it is well settled that “agency procedures must be followed before a binding contract can be formed.” Harbert/Lummus Agrifuels Projects v. United States, 142 F.3d 1429, 1433 (Fed. Cir. 1998) (citing New Am. Shipbuilders, Inc. v. United States, 871 F.2d 1077, 1080 (Fed. Cir. 1989); Am. Gen. Leasing, Inc. v. United States, 587 F.2d 54, 57-58 (Ct. Cl. 1978)). In American General Leasing, for instance, the parties allegedly reached an oral agreement that was confirmed in writing but never became a binding contract. 587 F.2d at 57. The United States Court of Claims (“Court of Claims”), the predecessor to the United States Court of Appeals for the Federal Circuit (“Federal Circuit”), observed that (1) a letter confirming the oral agreement included a notation that additional prerequisites needed to be met before the parties could “sign a contract in accordance with the proposal” and (2) applicable regulations required any contracts to be in writing. Id. at 57-58. The Court of Claims explained that “[t]he parties may have completed the negotiations that would have led to a contract, but they had not taken the final and essential step of executing an agreement,” and found that no valid contract existed. Id. at 58.

In Harbert/Lummus, another decision that bears on the instant dispute, the Federal Circuit held that a purported oral contract was invalid because it was not authorized under applicable regulations:

"It appears evident that, if [the plaintiff] had examined the [contracting officer's] delegation of authority, it could not have reasonably believed it had entered into a binding contract with the government in the absence of the required written approval by the [contracting officer]. Because there is no evidence of such prior, written approval by the [contracting officer] ..., we hold that the [contracting officer] lacked the authority to enter into the oral contract and it is therefore not binding upon the government."

142 F.3d at 1433.

In Doe v. United States, another judge of this court relied on Harbert/Lummus when examining whether a valid oral contract existed. See 58 Fed. Cl. 479, 488-89 (2003), aff'd per curiam, 112 F. App'x 54 (Fed. Cir. 2004) (unpublished decision). Under the plaintiff's theory of the case, certain government officials entered into an oral contract with him in violation of agency regulations forbidding such contracts. Id. at 489. Accordingly, the court found that “no contract [could] exist” because those officials “lacked the requisite authority” since “agency procedures were not followed.” Id.

In American General Leasing, Harbert/Lummus, and Doe, the government officials involved all lacked the authority to enter into oral contracts because agency guidelines proscribed such contracts; thus, the purported oral contracts were held invalid. Here, the HUD officials involved in the June 24, 2011 negotiations similarly lacked the authority to enter into a binding oral agreement based on the HUD Litigation Handbook's requirements that HUD approval must be in writing, and include the regional counsel's concurrence, following receipt of a written proposal containing justifications for its adoption. Failure to satisfy any of these three requirements was sufficient to deprive the June 24, 2011 meeting participants of the necessary authority to enter into such an agreement. See Flexfab, LLC v. United States, 424 F.3d 1254, 1263 (Fed. Cir. 2005) (“[A]ssurances from a government agent, having no authority to give them, cannot expose the government to risk of suit for nonperformance of an obligation that it did not intentionally accept.”). Therefore, as in American General Leasing, Harbert/Lummus, and Doe, the purported oral agreement at issue in the instant case is not a valid contract.

Footnote omitted.

Vern Edwards said:

See Weeks v. U.S., 144 Fed. Cl. 34, July 24, 2019 (a decision of the Court of Federal Claims):

Footnote omitted.

🤦‍♂️

C Culham said:

In the context of this entire discussion NO.   FAR 1.6.

so technically it's an unauthorized commitment...

In my opinion, a contracting officer's oral purchase order is not an unauthorized commitment, as that term is defined in FAR Part 1, and his formalizing it on paper the next day does not require a ratification.  

MileHighAcq said:

The FAR defines an unauthorized commitment as follows: Unauthorized commitment, as used in this subsection, means an agreement that is not binding solely because the Government representative who made it lacked the authority to enter into that agreement on behalf of the Government.

Generally, a contracting officer has the authority to enter into an agreement with the contractor to get some work done.  A minor error in form is far different than authority to enter into the agreement.  A ratification is not needed for a minor error in form.

MileHighAcq said:

so technically it's an unauthorized commitment...

I love acquisition.   It probably just depends... https://www.cbca.gov/files/decisions/2016/KULLBERG_08-11-16_4947__ACADEMY_PARTNERS_INC_DBA_ACADEMY_TECHNOLOGY.pdf

"In its claim and complaint, API describes its contract with DOL for continued services after the base period ended as either an “oral contract,” “implied-in-fact contract,” or an “oral, implied-in-fact contract.” It is well established that “[t]he general requirements for a binding contract with the United States are identical for both express and implied contracts.” CBCA 4947 4 Trauma Service Group v. United States, 104 F.3d 1321, 1325 (Fed. Cir. 1997). “An implied-in-fact contract is founded upon a meeting of the minds and is ‘inferred, as a fact, from the conduct of the parties showing, in light of the surrounding circumstances, their tacit understanding.’” Southwestern Security Services, Inc. v. Department of Homeland Security, CBCA 1264, 09-2 BCA ¶ 34,139, at 168,778 (quoting Hercules, Inc. v. United States, 516 U.S. 417, 424 (1996) (quoting Baltimore & Ohio Railroad Co. v. United States, 261 U.S. 592, 597 (1923)). An enforceable oral contract requires “documentary evidence show[ing] that ‘a final agreement was reached and what its terms were.’” Guilltone Properties, Inc., HUD BCA 02-C-103-C4, 06-1 BCA ¶ 33,249, at 164,787 (quoting Essex Electro Engineers, Inc., ASBCA 30118, et al., 88-1 BCA ¶ 20,440, at 103,369). An enforceable oral contract is an oral express contract. See Kinzley v. United States, 661 F.2d 187, 190 n.2 (Ct. Cl. 1981).

The documentary evidence necessary to prove the existence of an oral express contract need not include a formal contract. Id. at 191. At issue is whether API has sufficiently alleged the existence of a contract with DOL for continued service under the order after the base period had ended. In Engage Learning, Inc. v. Salazar, 660 F.3d 1346 (Fed. Cir. 2011), the Court of Appeals for the Federal Circuit (CAFC) held that “a plaintiff need only allege the existence of a contract to establish the Board’s jurisdiction under the CDA ‘relative to’ an express or implied contract with an executive agency.” Id. at 1353. “[T]he determination of whether or not a contract in fact exists is not jurisdictional; it is a decision on the merits.” Id. at 1355. The CAFC held that there was subject matter jurisdiction to hear an appeal in which the appellant alleged that it performed additional work under amendments to a requisition and the question of whether the requisition had been properly amended to pay appellant for that additional work was not jurisdictional, but rather, an issue to be decided on the merits. Id."

Just now, ji20874 said:

In my opinion, a contracting officer's oral purchase order is not an unauthorized commitment, as that term is defined in FAR Part 1, and his formalizing it on paper the next day does not require a ratification.

Pursuant to FAR 1.602-3, if a contracting officer places an oral order without authorization to place oral orders, and the contractor ships immediately, has the CO made an unauthorized commitment?

If so, would the CO's written formalization of the oral order the next day constitute a ratification of his oral order?

If so, would the ratification be within the CO's authority?

ji20874 said:

In my opinion, a contracting officer's oral purchase order is not an unauthorized commitment, as that term is defined in FAR Part 1, and his formalizing it on paper the next day does not require a ratification.  

Generally, a contracting officer has the authority to enter into an agreement with the contractor to get some work done.  A minor error in form is far different than authority to enter into the agreement.  A ratification is not needed for a minor error in form.

Yes, that's what I'm leaning toward. That a reviewer can write a CO up for not following procedures in issuing a written order, but the CO still had the authority to enter the binding agreement. The failure was in not following the proper procedures.

Vern Edwards said:

Pursuant to FAR 1.602-3, if a contracting officer places an oral order without authorization to place oral orders, and the contractor ships immediately, has the CO made an unauthorized commitment?

If so, would the CO's written formalization of the oral order the next day constitute a ratification of his oral order?

If so, would the ratification be within the CO's authority?

In my mind, a CO following up an oral order with a written order is more the CO correcting/remedying a procedural failure (not following procedures) than an unauthorized commitment.

Just now, MileHighAcq said:

In my mind, a CO following up an oral order with a written order is more the CO correcting/remedying a procedural failure (not following procedures) than an unauthorized commitment.

😆 You must be a lawyer! Good comeback! So procedure doesn't matter.

Vern Edwards said:

😆 You must be a lawyer! Good comeback! So procedure doesn't matter.

I try  

As a reviewer (I'm a PA), I'm not going invalidate an entire contract just because the CO missed a step or two in the process (e.g., failed to synopsize, did not document market research, missed a required D&F, etc.). Those become findings on the file, and while some are more serious than others, they're all procedural in nature. There are few things in our world that are "fatal flaws". It's a good reminder for acquisition staff.

😊

MileHighAcq said:

As a reviewer (I'm a PA), I'm not going invalidate an entire contract just because the CO missed a step or two in the process (e.g., failed to synopsize, did not document market research, missed a required D&F, etc.).

@MileHighAcqYou "youngsters" crack me up. I'm an old (you're all youngsters to me) and battered contracts warrior, and I've learned many things at my own foolish expense. One of the things I've learned is that the contracting bureaucracy doesn't always have as much say as they think they do.

Who says that you, a procurement analyst, as a reviewer, has the final say? All it takes is one higher staff review, legal review, or (God forbid) IG report to put you off your feed.

See the decision of the Federal Circuit Court of Appeals, one step below the Supreme Court, in HARBERT/LUMMUS AGRIFUELS PROJECTS, Harbert International, Inc., Abb Lummus Crest, Inc. and Lummus Crest, Inc., 142 F. 3d 1429, April 21, 1998:

Quote

As we have held before, agency procedures must be followed before a binding contract can be formed. See American Gen. Leasing, Inc. v. United States, 218 Ct.Cl. 367, 587 F.2d 54, 57–58 (1978) (holding that express oral agreement with government agent was not binding because, among other factors, applicable regulations required contract to be in writing); New Am. Shipbuilders, Inc. v. United States, 871 F.2d 1077, 1080 (Fed.Cir.1989) (“Oral assurances do not produce a contract implied-in-fact until all the steps have been taken that the agency procedure requires; until then, there is no intent to be bound. Thus, it is irrelevant if the oral assurances emanate from the very official who will have authority at the proper time, to sign the contract or grant.”).

Emphasis added. Now, there are contrary decisions. But my advice is: Don't be too sure of yourself. 

Look, I think that 999/1,000 times CO's oral agreements will stand, especially if they make sense and the agency wants them to stand. But the notion that such an agreement will always stand, or that you can blithely waive the rules, is not supported by experience.

I would make an oral deal if I thought that it was essential and unavoidable. But I would be ready for trouble if the deal were questioned.

Also see Cibinic, Nash & Yukins, Formation of Government Contracts, 4th ed., Contracts Varying from Statutory and Regulatory Requirements, pp. 69 - 81.

There is a notable difference between an oral agreement that is left oral, and one that is formalized into paper the following day.  In all of my postings in this thread, I have been thinking of the latter.

I know that there is a difference between compliance with specified procedures and what is sometimes done for the sake of expediency. I've taken the expedient course myself, several times.

I also know that while the expedient course is sometimes, perhaps usually, approved, it is sometimes not. Everyone reading this thread should know that, keep it in mind, and make good decisions.

Contractors should be especially wary. Government personnel who would break their own rules might not be reliable promisors. It's one thing to ship based on an oral order from someone with whom you've done business many times and found to be reliable; it may be another thing entirely to do that for someone you do not know, who works for a boss you do not know, who works in an agency office you do not know.

Weeks v. U.S., 144 Fed. Cl. 34 at 48 July 24, 2019:

Quote

Indeed, it is well settled that “agency procedures must be followed before a binding contract can be formed.” Harbert/Lummus Agrifuels Projects v. United States, 142 F.3d 1429, 1433 (Fed. Cir. 1998) (citing New Am. Shipbuilders, Inc. v. United States, 871 F.2d 1077, 1080 (Fed. Cir. 1989); Am. Gen. Leasing, Inc. v. United States, 587 F.2d 54, 57-58 (Ct. Cl. 1978)). In American General Leasing, for instance, the parties allegedly reached an oral agreement that was confirmed in writing but never became a binding contract. 587 F.2d at 57. The United States Court of Claims (“Court of Claims”), the predecessor to the United States Court of Appeals for the Federal Circuit (“Federal Circuit”), observed that (1) a letter confirming the oral agreement included a notation that additional prerequisites needed to be met before the parties could “sign a contract in accordance with the proposal” and (2) applicable regulations required any contracts to be in writing. Id. at 57-58. The Court of Claims explained that “[t]he parties may have completed the negotiations that would have led to a contract, but they had not taken the final and essential step of executing an agreement,” and found that no valid contract existed. Id. at 58.

***

In Doe v. United States, another judge of this court relied on Harbert/Lummus when examining whether a valid oral contract existed. See 58 Fed. Cl. 479, 488-89 (2003), aff'd per curiam, 112 F. App'x 54 (Fed. Cir. 2004) (unpublished decision). Under the plaintiff's theory of the case, certain government officials entered into an oral contract with him in violation of agency regulations forbidding such contracts. Id. at 489. Accordingly, the court found that “no contract [could] exist” because those officials “lacked the requisite authority” since “agency procedures were not followed.” Id.

In American General Leasing, Harbert/Lummus, and Doe, the government officials involved all lacked the authority to enter into oral contracts because agency guidelines proscribed such contracts; thus, the purported oral contracts were held invalid. Here, the HUD officials involved in the June 24, 2011 negotiations similarly lacked the authority to enter into a binding oral agreement based on the HUD Litigation Handbook's requirements that HUD approval must be in writing, and include the regional counsel's concurrence, following receipt of a written proposal containing justifications for its adoption. Failure to satisfy any of these three requirements was sufficient to deprive the June 24, 2011 meeting participants of the necessary authority to enter into such an agreement. See Flexfab, LLC v. United States, 424 F.3d 1254, 1263 (Fed. Cir. 2005) (“[A]ssurances from a government agent, having no authority to give them, cannot expose the government to risk of suit for nonperformance of an obligation that it did not intentionally accept.”). Therefore, as in American General Leasing, Harbert/Lummus, and Doe, the purported oral agreement at issue in the instant case is not a valid contract.

Why make an oral "agreement" today that is not binding, if you are going to issue a written contract tomorrow? Talk it over with a prospective contractor, yes. And let the contractor proceed at its own risk if they choose to do so. But wait until tomorrow to call it and think of it a contract.

I was confronted with that question, and I made up some answers. They were likely a lot of hooey.

On 1/25/2023 at 6:39 PM, Vern Edwards said:

😊

@MileHighAcqYou "youngsters" crack me up. I'm an old (you're all youngsters to me) and battered contracts warrior, and I've learned many things at my own foolish expense. One of the things I've learned is that the contracting bureaucracy doesn't always have as much say as they think they do.

Who says that you, a procurement analyst, as a reviewer, has the final say? All it takes is one higher staff review, legal review, or (God forbid) IG report to put you off your feed.

See the decision of the Federal Circuit Court of Appeals, one step below the Supreme Court, in HARBERT/LUMMUS AGRIFUELS PROJECTS, Harbert International, Inc., Abb Lummus Crest, Inc. and Lummus Crest, Inc., 142 F. 3d 1429, April 21, 1998:

Emphasis added. Now, there are contrary decisions. But my advice is: Don't be too sure of yourself. 

Look, I think that 999/1,000 times CO's oral agreements will stand, especially if they make sense and the agency wants them to stand. But the notion that such an agreement will always stand, or that you can blithely waive the rules, is not supported by experience.

I would make an oral deal if I thought that it was essential and unavoidable. But I would be ready for trouble if the deal were questioned.

Also see Cibinic, Nash & Yukins, Formation of Government Contracts, 4th ed., Contracts Varying from Statutory and Regulatory Requirements, pp. 69 - 81.

This is true, and sound advice. Though about legal review, all of us COs and PAs are fond of saying they're advisory. lol 

At least until someone higher up reminds us that those advisory personnel are who will be defending our asses when things get serious, so we better take their advice.

On 1/25/2023 at 10:42 PM, Vern Edwards said:

I know that there is a difference between compliance with specified procedures and what is sometimes done for the sake of expediency. I've taken the expedient course myself, several times.

I also know that while the expedient course is sometimes, perhaps usually, approved, it is sometimes not. Everyone reading this thread should know that, keep it in mind, and make good decisions.

Contractors should be especially wary. Government personnel who would break their own rules might not be reliable promisors. It's one thing to ship based on an oral order from someone with whom you've done business many times and found to be reliable; it may be another thing entirely to do that for someone you do not know, who works for a boss you do not know, who works in an agency office you do not know.

Weeks v. U.S., 144 Fed. Cl. 34 at 48 July 24, 2019:

It's why they sell professional liability insurance for COs - that whole personally and legally liable thing...

I've never seen an unauthorized commitment not ratified, but the possibility of it not being ratified and being personally financially liable, plus the detrimental impacts to one's career, are generally sufficient to keep most people on the straight and narrow and not abuse their authority. If a CO uses their authority sparingly and appropriately (i.e. significant harm to the agency and/or the public but for their immediate action) and follows up oral orders as soon as practicable with a written contract, things will generally turn out alright.

MileHighAcq said:

I've never seen an unauthorized commitment not ratified, but the possibility of it not being ratified and being personally financially liable, plus the detrimental impacts to one's career, are generally sufficient to keep most people on the straight and narrow and not abuse their authority.

Here you go...

b-262168.pdf

Quote

The basis for assessing the debt against Mr. Martino was the lack of evidence that he conducted or relied upon any kind of market survey in signing the contract extension as required by regulation.

I remember that case! I taught about it for the GWU program in Panama! And John was one of the students! He was a GS-15 as I recall.

Procedure matters.

On 1/27/2023 at 1:54 PM, Don Mansfield said:

Here you go...

b-262168.pdf 92.01 kB · 12 downloads

Yikes!! I wonder how many COs are aware of this decision. I certainly wasn't before today.

While in this case the CO’s failure was pretty egregious and resulted in the government paying a substantial price premium because of the CO's failure to follow procedures (seems like this was an option exercise and the CO failed to do a market survey before exercising the option), the general principle seems to be that failure to follow proper procedures could constitute an unauthorized commitment, even if the CO has the authority to otherwise make the commitment  - i.e. enter a binding contract, and the precedent seems to be that if the damage is substantial enough, the agency is within their right to hold the CO personally and financially liable.

Again, I say YIKES!!!