One Mod - Two Authorities

I would not check two boxes in block 13 of the SF-30, but there is nothing wrong with putting two citations inside the checked box.

On a side note, is the "slight reduction in service" really a partial termination for the Government's convenience?

Not only is there nothing wrong with it, I’d say it’s mandatory if you/your agency has determined that citing an authority is warranted in the first place. 

Authority not cited –

Doesn’t change the validity of the mod.

Authority cited –

Doesn’t change the validity of the mod.  But it could help the parties understand what’s going on.  So if you’re going to cite an authority, why wouldn’t you cite all applicable authorities?

jwomack said:

Not only is there nothing wrong with it, I’d say it’s mandatory if you/your agency has determined that citing an authority is warranted in the first place. 

Authority not cited –

Doesn’t change the validity of the mod.

Authority cited –

Doesn’t change the validity of the mod.  But it could help the parties understand what’s going on.  So if you’re going to cite an authority, why wouldn’t you cite all applicable authorities?

 Unless your contracting software system doesn’t permit it, I think it is a good practice to cite each applicable authority for a modification. An example would be a time extension involved with a government suspension of work for the convenience of the government  The Defaults clause authorizes the time extension.

 The contracting software might not allow you to check two separate boxes on the SF 30. In that event, I would also agree that the authorization should be described in the body of the modification.

52.212-4(c) - Changes in the terms and conditions of this contract may be made only by written agreement of the parties.

Full disclosure: I love this paragraph, and use it often.  It may be my favorite sentence in the FAR.  That said, this authority offers no clues about what is changing or why, so you really do need to explain things elsewhere on the modification.   

Putting all the relevant authorities on the SF30 is a good idea.  I'm going to start doing that.

Why do people think that FAR 52.212-4(c) is an "authority" to execute a bilateral contract modification? Do people think that if that paragraph were not in the contract, the contracting parties would not be able to bilaterally modify the contract?

I don’t think 52.212-4(c) is an “authority” but see no harm in citing it as it helps demonstrate the mod was subject to bilateral approval.  If I felt it was necessary to cite a true authority it would be 1.602-1.

Don Mansfield said:

Why do people think that FAR 52.212-4(c) is an "authority" to execute a bilateral contract modification? Do people think that if that paragraph were not in the contract, the contracting parties would not be able to bilaterally modify the contract?

The mod is being executed as a “change” in accordance with .212-4:c).

Don Mansfield said:

Why do people think that FAR 52.212-4(c) is an "authority" to execute a bilateral contract modification? Do people think that if that paragraph were not in the contract, the contracting parties would not be able to bilaterally modify the contract?

Interesting question.

1. What would you cite instead in the situation?

2. What are your thoughts on contracting officers citing FAR 43.103(a) or 42.103(b)? That's related to your question. Those two FAR citations are descriptive. They describe unilateral and bilateral modification. Those two FAR citations should not even be found within the contract, and are usually not found within the contract. Yet PepeTheFrog sees them cited as the "authority" on many modifications. 

3. What do you think about citing "mutual agreement of the parties" as the "authority"? That also seems hollow or superfluous. Aren't the two parties memorializing their mutual agreement by their respective signatures?

Sometimes, mutual agreement of the parties is a good reason.

ji20874 said:

Sometimes, mutual agreement of the parties is a good reason.

Mutual agreement of the parties is a requirement for a supplemental agreement. It isn’t a “reason” or the authority for or justification to provide a price adjustment or equitable adjustment and/or time extension.

PepeTheFrog said:

Interesting question.

1. [ ]

2. What are your thoughts on contracting officers citing FAR 43.103(a) or 42.103(b)? That's related to your question. Those two FAR citations are descriptive. They describe unilateral and bilateral modification. Those two FAR citations should not even be found within the contract, and are usually not found within the contract. Yet PepeTheFrog sees them cited as the "authority" on many modifications. 

3. What do you think about citing "mutual agreement of the parties" as the "authority"? That also seems hollow or superfluous. Aren't the two parties memorializing their mutual agreement by their respective signatures?

2. FAR 43.103(a)  is  merely a description of types of modifications. FAR 42.103(b) concerns audit offices(????). They have nothing to do with justifying why the government is modifying the contract.

3.  See my last post.

Also- Part of of my job as Chief of Contract Administration in several assignments was oversight of Contract Administration in ACO offices for the KO. We wanted to know, for the record, why contracts were being modified.

And, occasionally, KO’s issued mods for the wrong reason. Helped us figure out what happened during the contract performance, when we had to straighten out messes later or close out contracts after everyone else was gone.

It was useful for forensic purposes in resolving claims and other contract problems. 

Merely citing “mutual agreement of the parties” is superfluous to the fact that the mod is bilateral, is a waste of words and doesn’t justify why the mod was appropriate or necessary. 

You might as well say something like “the contractor wanted us to modify the contract and we agreed”. It would be just as meaningless and just as stupid. 

See, for example https://www.acq.osd.mil/dpap/ccap/cc/jcchb/Files/Topical/Modifications/training/mod_training_opscons.pptx

Good contract administration practices provide record information for others not directly involved. When contractor personnel or government personnel retire or are re-assigned others have to be able to pick up the pieces or take over contract admin. 

Those  teaching in the “Defense Acquisition University” should know and understand that.

We are hired to be good stewards of the government and of the taxpayers.  We need to be accountable for our actions. 

Dont tell me you did something because you had the authority to do it or because both parties agreed to do it. Thats not a reason, or justification for doing it and says NOTHING.

jwomack said:

I don’t think 52.212-4(c) is an “authority” but see no harm in citing it as it helps demonstrate the mod was subject to bilateral approval.  If I felt it was necessary to cite a true authority it would be 1.602-1.

Wouldn't the two signatures on the modification and the check in block 13C make that obvious?

joel hoffman said:

The mod is being executed as a “change” in accordance with .212-4:c).

True, but that doesn't answer my question. Why do people think that it's an "authority"?

PepeTheFrog said:

Interesting question.

1. What would you cite instead in the situation?

2. What are your thoughts on contracting officers citing FAR 43.103(a) or 42.103(b)? That's related to your question. Those two FAR citations are descriptive. They describe unilateral and bilateral modification. Those two FAR citations should not even be found within the contract, and are usually not found within the contract. Yet PepeTheFrog sees them cited as the "authority" on many modifications. 

3. What do you think about citing "mutual agreement of the parties" as the "authority"? That also seems hollow or superfluous. Aren't the two parties memorializing their mutual agreement by their respective signatures?

1. Why would I have to cite an authority at all?

2. I think contracting officers who cite FAR 43.103(a) or (b) as an "authority" do so because they are either not thinking about what they are doing or are placating somebody.

3. I think contracting officers who cite "mutual agreement of the parties" as an "authority" do so because they are either not thinking about what they are doing or are placating somebody.

Don Mansfield said:

it helps demonstrate the mod was subject to bilateral approval.

Don Mansfield said:

Wouldn't the two signatures on the modification and the check in block 13C make that obvious?

No.  Two signatures don’t always indicate the mod required bilateral signatures to be binding.  Sometimes contractors sign when they don't need to or weren’t asked to…presumably as a gesture to show they received the mod and don't have a problem with it.  Also, selecting 13C requires completion of a fill-in.  “This supplemental agreement is entered into pursuant to authority of: ________”.  Leaving the fill-in blank wouldn't make sense.

On the other hand, if 13A-D were not selected and 13E "is required to sign" is selected then it would be self-evident that bilateral signatures were required.

The preferred authority citation is a clause in the contract.  But sometimes, there isn’t a specific clause that can be pointed to, and yet the modification is still legal and honorable.  In those cases, agreement of the parties might be the best one can do.  I’ve done it.  I never used a FAR 43 citation, but FAR 1.602-1 might work.

Here’s a question for everyone who objects:

As an example, in a contract for commercial items, the contract calls for 100 EA white items for delivery in 60 days.  Shortly after award, the parties agree to 33 white, 33 red, and 34 blue in 45 days.  That’s legal and honorable, right?  Everyone is happy.  What is the authority for block 13 of the SF-30?

"Other"  and "CO warrant no. ________"

Don Mansfield said:

1. Why would I have to cite an authority at all?

Because the form asks for one and due to poor workforce education programs, some reviewer is going to mark up the organization during an inspection for not citing an authority or citing the wrong authority (in his/her opinion).  That may seem silly, but it's the reality in many organizations which is why someone started this thread in the first place - they don't want to make a mistake.

On 3/7/2019 at 1:25 PM, Don Mansfield said:

Why do people think that FAR 52.212-4(c) is an "authority" to execute a bilateral contract modification? Do people think that if that paragraph were not in the contract, the contracting parties would not be able to bilaterally modify the contract?

Its rather that -4 is a commercial clause, and many contracts I deal with are commercial have no other terms and conditions covering changes/modifications.

Its a simple way of dealing with the authority issue, and moving on to the more important stuff, such as the substance of the modification.

jwomack said:

No.  Two signatures don’t always indicate the mod required bilateral signatures to be binding.  Sometimes contractors sign when they don't need to or weren’t asked to…presumably as a gesture to show they received the mod and don't have a problem with it.  Also, selecting 13C requires completion of a fill-in.  “This supplemental agreement is entered into pursuant to authority of: ________”.  Leaving the fill-in blank wouldn't make sense.

On the other hand, if 13A-D were not selected and 13E "is required to sign" is selected then it would be self-evident that bilateral signatures were required.

Why can't you select block 13C and 13E?

Matthew Fleharty said:

Because the form asks for one and due to poor workforce education programs, some reviewer is going to mark up the organization during an inspection for not citing an authority or citing the wrong authority (in his/her opinion).  That may seem silly, but it's the reality in many organizations which is why someone started this thread in the first place - they don't want to make a mistake.

Probably right. If people like @General.Zhukov do it for that reason, then I don't have a problem. I'm more concerned about the newbies who are being taught that a clause must be cited for a bilateral modification.

On ‎3‎/‎8‎/‎2019 at 5:34 PM, Don Mansfield said:

Why can't you select block 13C and 13E?

You can and probably should if you want to be clear as to what's going on.

For those who think that the contracting officer or an ACO has unfettered authority to make a bilateral modification and/or simply cite as authority for the mod the KO’s warrant number or “bilateral agreement of the parties”: 

What happens if a contract clause or other contract term clearly assigns risk to the contractor for a certain type of cost, the contractor asks for a modification to cover that cost and the contracting officer or ACO agrees,  contrary to the specific contract terms and conditions? The KO states on the SF 30 that the authority for the modification is bilateral agreement of the parties. Does the KO have that authority?

Example:  An excusable but otherwise non-compensable time extension due to unusually severe weather is granted pursuant to the Defaults clause and the contracting officer or ACO decides to pay daily overhead costs and profit, as requested by the Contractor. Does the KO have that the authority to do so and simply state that “bilateral agreement of the parties” is the authority? 

Example: contractor asks for profit on costs due to a directed suspension of work for the convenience of the government and the contracting officer agrees to include profit. Does contracting officer have the authority to change the contract under the authority of bilateral agreement of the parties, again assuming that no other clause or contract term is properly applicable than 52.242-14 Suspension of Work?

Example: Contractor destroys a fence on private property immediately adjacent to a Civil Works project site for flood protection enhancement in a nice neighborhood. The ACO issues a MOD to pay for replacing the fence. The new fence is actually much more elaborate and costly than the original fence. Contractor also destroys concrete sidewalk next to the fence and the ACO pays the contractor to replace the sidewalk. The damage was purely due to negligence by the contractor. In addition to standard clause 52.236-9 “Protection of Existing Vegetation, Strucures, Equipment, Utilities, and Improvements”, the technical specs also assign the responsibility for damage to the Contractor. Does the Contracting Officer have that authority to change the contract, again citing bilateral agreement as the authority?

:Example: Contractor  accidentally but negligently floods a utility tunnel under construction by another Contractor. KO pays tunnel contractor for damages. Contract clearly assigns responsibility to the first contractor. KO doesn’t attempt to recover damages from first contractor. 

I could cite other similar examples, all of which were actual mod events. The “Changes” clause was typically cited as the “authority” for the mods.

Joel,

May I ask you to respond to my question?  You (and Don) and telling readers not to use agreement of the parties, but you aren't telling them what they should use instead.

In a contract for commercial items, the contract calls for 100 EA white items for delivery in 60 days.  Shortly after award, the parties agree to 33 white, 33 red, and 34 blue in 45 days.  That’s legal and honorable, right?  Everyone is happy.  What is the authority for block 13 of the SF-30?

ji20874 said:

What is the authority for block 13 of the SF-30?

Not that you asked me, but focusing on the OP’s question (2 citations or not) here’s what I would cite.  This assumes the red/white/blue are severable:

52.212-4(l) (partial termination) for the reduced quantity of white.  This gives me contractual assurance that I’ll get the white items.

And

1.602-1 for the new red and blue items.  This citation helps to illustrate this aspect is outside the scope of the contract and is only an offer.

---

If only 1.602-1 (or similar) is cited and you ask for bilateral signature, it could be implied or interpreted that you’re giving the contractor a choice regarding the white items.

ji20874 said:

Joel,

May I ask you to respond to my question?  You (and Don) and telling readers not to use agreement of the parties, but you aren't telling them what they should use instead.

In a contract for commercial items, the contract calls for 100 EA white items for delivery in 60 days.  Shortly after award, the parties agree to 33 white, 33 red, and 34 blue in 45 days.  That’s legal and honorable, right?  Everyone is happy.  What is the authority for block 13 of the SF-30?

I'm not telling readers not to use agreement of the parties, I just don't see that as an "authority" as that word is used in block 13 of the SF 30. It seems like a superfluous description of the modification. It's of no use. I would say the same of "FAR 1.602-1".

The only value I can see in providing a citation in block 13C is if there were no consideration. Normally, the contracting officer would have to ensure that there was consideration in a bilateral modification (i.e., the CO does not generally have the "authority" to bilaterally modify the contract without obtaining consideration). If, however, the modification was a negotiated adjustment pursuant to a contract clause that only made changes in one party's favor, then citing the clause communicates that the contracting officer is not required to obtain consideration. 

The modification in your scenario is legal, honorable, and brings joy. I would put "Not applicable--consideration required" in block 13C.

ji20874 said:

Joel,

May I ask you to respond to my question?  You (and Don) and telling readers not to use agreement of the parties, but you aren't telling them what they should use instead.

In a contract for commercial items, the contract calls for 100 EA white items for delivery in 60 days.  Shortly after award, the parties agree to 33 white, 33 red, and 34 blue in 45 days.  That’s legal and honorable, right?  Everyone is happy.  What is the authority for block 13 of the SF-30?

It’s a apparently a simple change of colors and the contractor can deliver sooner. The parties have agreed bilaterally to the change per 52.212-4 (c). 

In my opinion, said paragraph authorizes changes, as long as they are bilateral. In other words, the contract specifically permits only mutually agreed changes to the purchase of the commercial item.

Instead of taking multiple sentences and paragraphs to say that, it was packed into one short sentence.

On 3/7/2019 at 7:33 PM, joel hoffman said:

See, for example https://www.acq.osd.mil/dpap/ccap/cc/jcchb/Files/Topical/Modifications/training/mod_training_opscons.pptx

ji, not sure how you deduced that I wasn’t advising what to cite as the authority for a mod. In addition to the above reference, read my several posts.

On 3/5/2019 at 3:23 PM, CountryTime said:

What are your thoughts on a modification to a commercial PO to enact a slight reduction in service for remaining options (52.212-4(c) as the authority) and, in the same mod, exercising the first option period citing 52.217-9 in the verbiage of the mod?  Essentially citing two authorities in the same modification.

Only one authority should be cited on a modification document because it is the part that indicates what allows the modification action in the first place. In your example, commercial changes are a bilateral modification action, requiring both parties to sign (acknowledging agreement) that something of the terms and conditions identified in block 14 has changed. Exercising an option is a unilateral modification, so you wouldn't require the Contractor's acknowledgement with a signature and is contingent on proper advanced notification to the Contractor that the Government intends to exercise the option.

Also consider that when you execute a modification with two different authorities, how are you going to report that action to the Federal Procurement Data System - Next Generation (FPDS), where only one action can be selected? If your modification invokes two different authorities, let alone two different modification types, then how are you reporting accurately to FPDS about your modification? This single-selection FPDS feature implies that there is only one contract authority per one modification action.

And since it was mentioned in the thread, utilizing “mutual agreement of the parties” should only be used as a last resort in which the circumstances aren’t supported by a FAR authority (i.e. Contract Clause). I am attaching a useful guide on utilizing block 13 for contract modifications to share with everyone here. I understand that there are various practices around the workforce, but consider what are the best practices, and understand why it is.  

Contract Modification Authority Guidance Chart (SF30, Block 13).pdf

I agree with your approach to using Mutual Agreement of the Parties.

coolarmydude said:

Only one authority should be cited on a modification document because it is the part that indicates what allows the modification action in the first place.

That's just, like, your opinion, man. You haven't provided any good reason why only one modification authority can or should be cited. Can you provide any valid or persuasive source that states that each modification of a federal contract should cite only one modification for its authority? 

Have you considered the ridiculousness of this position, given that many single contract modifications accomplish several different changes and are therefore based on more than one single reason (authority)?

coolarmydude said:

Also consider that when you execute a modification with two different authorities, how are you going to report that action to the Federal Procurement Data System - Next Generation (FPDS), where only one action can be selected?

It seems like you allow the limitations of FPDS to significantly affect the way you conduct procurement. That is a mistake.

coolarmydude said:

This single-selection FPDS feature implies that there is only one contract authority per one modification action.

The FPDS feature implies that FPDS was designed that way, and not much else. Divining any wisdom or knowledge about contracting from the arbitrary software or user interface design of FPDS is a mistake. FPDS is a reporting and data warehousing system; a system of record. 

Think it through. There are modifications that are clearly based on more than one authority. This isn't a complicated idea or a controversial statement. Your solution is to ignore the other authorities and simply pick one out of a hat? Or pick the authority that provides the most flexibility?

Examples:

(a) exercise an option and also change the SOW

(b) incremental funding and also changes to the security requirements

(c) incremental funding and period of performance extension

(d) incremental funding and period of performance extension and change to the SOW and change to the security requirements

Under your preference, which is not supported by anything convincing, the contracting officer should simply pick one of the authorities and ignore the others. That's not helpful or illuminating to others who review the file.

Coolarmydude piqued my awareness that the proposed mod includes both a unilateral action - incorporating the first option - and a bilateral action to change that option(?) and all remaining options (not sure if the first option is included in the change). 

If the first option is changed as awarded  along with future options, I think the government should first issue the bilateral mod to the options.

Then, unilaterally award  the now changed option. 

Maybe do it in some other order but I wouldnt mix bilateral (two party signatures) and unilateral actions (one party signature) in a single SF30.

FAR 52.217-9 provides the government with authority to extend the term of the contract through the *unilateral* exercise of an option.  It is well settled that the government must exercise an option “in exact accord with the terms of the contract.”  Freightliner Corp. v. Caldera, 225 F.3d 1361, 1366 (Fed.Cir.2000).  Modifying the terms of the contract at the same time that you are exercising that option, means you are not exercising an option in accord with the terms as they exist in the contract.  An attempt to unilaterally exercise an option according to terms different from those set forth in the contract is invalid.  See Alliant Techsystems, Inc., v. United States, 178 F.3d 1260, 1275 (Fed. Cir. 1999).

However, the Court of Federal Claims has held that while an attempted option exercise that differs from the terms of the contract prevents the option from being exercised unilaterally, the parties may agree to the modification bilaterally.  See 4737 Conner Co. v. United States, 65 F. App'x 274, 276–77 (Fed. Cir. 2003) (“[T]he government here attempted to exercise the option and thought it was properly doing so. However, the letter purporting to exercise the option referred to terms outside of those in the option.… This explicit reference to a termination provision that was no longer contained in the option … converted [the government’s] purported acceptance of the option into a counter-offer that [the contractor] was free to either accept or reject.”)

Further, before exercising an option pursuant to 52.217-9, "the contracting officer shall make a written determination for the contract file that exercise is in accordance with the terms of the option, the requirements of this section, and Part 6. To satisfy requirements of Part 6 regarding full and open competition, the option must have been evaluated as part of the initial competition and be exercisable at an amount specified in or reasonably determinable from the terms of the basic contract..."  You cannot do that if you are exercising an option that has terms different than the basic contract.

Therefore, when executing a modification that both changes the terms of the contract and extends the period of performance, you should not cite FAR 52.217-9, because you are not relying on its authority to unilaterally modify the contract.

Instead, your authority is the same as any other bilateral modification, as discussed below.

With regard to that authority, Don is correct.  FAR 1.602-1(a) states “Contracting officers have authority to … administer … contracts….”  Unless you are relying on some other specific and applicable modification authority, then FAR 1.602-1(a) and your warrant are your authority to modify a contract.  The only reason this is an issue is because there is a box on a form that someone has decided must be filled in.  When you award a contract, do you cite your authority to enter into a contract?  If asked would you cite “mutual agreement of the parties”?  Your authority to “enter into” a contract is FAR 1.602-1(a) and your warrant.  This is the same authority to “administer” contracts, which includes modifications. 

FAR clause 52.212-4(c) is not an authority.  It is a limitation on authority.  It requires that all modifications be (1) bilateral, and (2) in writing.  Requiring that a modification be bilateral and in writing does not grant authority where it did not previously exist, it limits the types of modifications that are enforceable.  It prohibits oral modifications or modifications imposed without the consent of one of the parties.

As explained by the Court of Federal Claims, to be enforceable, a bilateral modification must have the same elements as a contract. 

"The question thus devolves to whether plaintiff can enforce a contract modification to which defendant asserts the Air Force never assented. An express contract requires intent to be bound, and such intent must be expressed in a manner capable of understanding. Unconditional acceptance must be established. “It is essential ... that the acceptance of the offer be manifested by conduct that indicates assent to the proposed bargain.” In addition to mutuality of intent to contract and lack of ambiguity in offer and acceptance, consideration is also necessary to bind the Government. Manifestation of mutual assent will not be present “if the parties attach materially different meanings to their manifestations and ... neither party knows or has reason to know the meaning attached by the other ....”

ECC Int'l Corp. v. United States, 43 Fed. Cl. 359, 369 (1999) (citations omitted). In effect, a modification is a contract to change an existing contract. 

Restated, the elements of a contract and/or modification are:

(1) mutuality of intent to contract;

(2) consideration;

(3) an unambiguous offer and acceptance; and

(4) actual authority on the part of the government's representative to bind the government.

Marchena v. United States, 128 Fed. Cl. 326, 331 (2016), aff'd, 702 F. App'x 988 (Fed. Cir. 2017).

So, “agreement of the parties” is a prerequisite of a bilateral modification and necessary to satisfy elements (1) and (2).  Further, mandating the agreement be in writing, as 52.212-4(c) does, helps ensure that there is an unambiguous offer and acceptance.  But neither of those oft-cited "authorities" confers “actual authority” on anyone signing a contract.  If a government employee, who is not a contracting officer, "mutually agrees” to enter into a “written,” “bilateral” agreement with a contractor, there is still no contract (or modification) because the employee does not have authority.  It’s the whole reason the FAR contains a process to ratify *unauthorized* commitments. 

So, why does the SF-30 require the contracting officer to cite an authority?  I do not know.  But, my guess is that it is intended to account for unilateral modifications authorized by specific clauses, for example, 52.243-1 -- Changes-Fixed-Price, and 52.217-9 -- Option to Extend the Term of the Contract.  These modifications are effected without a new “offer and acceptance” or additional “consideration.”  Those contractual elements of a modification are satisfied at the time of contract award and reflected in the contract clauses authorizing the unilateral modification. 

For example, under FAR 52.217-9, the parties have mutually and unambiguously agreed that the government has authority to unilaterally extend the term of the contract. Consideration exists as part of the price the government is paying under the contract.  Because such a unilateral option exercise would not be possible without the inclusion of FAR 52.217-9, it should be cited as the authority to make such a modification when it applies.

In the end, cite whatever you want.  Writing something in block 13 of the SF-30 does not grant you authority.  Leaving it blank does not or citing something wrong does not divest you of the authority you already have.  Yes, its better to have the correct authority written, but if someone in the government tracks some metric using block 13 and they want you to write something else, it will have little impact on the contract.

My point above was to point out that I generally wouldn’t mix a unilateral action with a bilateral action in the same mod. The unilateral action doesn’t require contractor agreement or (generally) its signature. 

As for the “slight reduction in services”, the OP described it as a change. It might be a severalble service that could be separately terminated for convenience but who knows. 

 Note that the instructions for SF-30 state that the KO “generally” signs supplemental agreement mods after the Contractor signs the mod form. Another reason not to mix mod types ...

joel hoffman said:

My point above was to point out that I generally wouldn’t mix a unilateral action with a bilateral action in the same mod. The unilateral action doesn’t require contractor agreement or (generally) its signature. 

As for the “slight reduction in services”, the OP described it as a change. It might be a severalble service that could be separately terminated for convenience but who knows.

I agree.

Lionel Hutz said:

In the end, cite whatever you want.

Your entire post is well stated, I appreciate it. 

Lionel Hutz said:

With regard to that authority, Don is correct.  FAR 1.602-1(a) states “Contracting officers have authority to … administer … contracts….”

I do have to raise a thought.   The FAR does not place authority upon some one, nor does it have authority upon a contractor.   It is internal guidance to the Government.  This said it would seem to me that FAR 1.602-1(a) is not an authority in an of itself to change a contract either unilaterally or bilaterally.   The warrant is the authority.

The warrant isn’t the “authority” that the Instructions for SF-30 is looking for...

If it were, there’d be a designated place for it on the form. That’s an internal government matter. Hang it on the wall or hallway. Make sure it is in the KO’s framed picture of themself, displayed  prominently.

I think the KO ought to hold up a copy of the FAR in the pic. 🤪

joel hoffman said:

The warrant isn’t the “authority” that the Instructions for SF-30 is looking for...

To paraphrase Lt. James Gordon, the warrant is the authority the contracting officer deserves, but not the one the SF-30 is looking for right now. So we'll hunt the warrant. Because the warrant can take it. Because the warrant is not our hero. The warrant is a silent guardian. A watchful protector. A Dark Knight.  Wait, what?  I mean… Nevermind…

C Culham said:

I do have to raise a thought.   The FAR does not place authority upon some one, nor does it have authority upon a contractor.   It is internal guidance to the Government.  This said it would seem to me that FAR 1.602-1(a) is not an authority in an of itself to change a contract either unilaterally or bilaterally.   The warrant is the authority.

I agree, and later in the paragraph I wrote, "Your authority to 'enter into" a contract is FAR 1.602-1(a) and your warrant."  But to the extent someone feels obliged to cite a FAR section, 1.602-1 probably would be the most relevant.  Although, I could see the argument that FAR 1.603-3 -- Appointment is relevant as well.

Lionel Hutz said:

I agree, and later in the paragraph I wrote, "Your authority to 'enter into" a contract is FAR 1.602-1(a) and your warrant."  But to the extent someone feels obliged to cite a FAR section, 1.602-1 probably would be the most relevant.  Although, I could see the argument that FAR 1.603-3 -- Appointment is relevant as well.

With it noted that a warrant is numbered or at least that is the authority it is looking for!  No picture needed just as I have already stated check "Other" write in "warrant" and the "warrant number"!

C Culham said:

With it noted that a warrant is numbered or at least that is the authority it is looking for!  No picture needed just as I have already stated check "Other" write in "warrant" and the "warrant number"!

Your signature as KO serves as your authority to sign the mod. A warrant number is unnecessary. That’s not what they are looking for. Sheesh.

Additionally- many warranted contracting officers in some organization (e.g., ACO’s) have limited authority to modify contracts - only under specific contract clauses.  

Besides that- if you can’t explain or otherwise justify why you are modifying a contract, you have little business being the the one to sign the mods.

joel hoffman said:

Your signature as KO serves as your authority to sign the mod. A warrant number is unnecessary. That’s not what they are looking for. Sheesh.

Keep up Joel I was referring to the SF 1402 when I said form.

joel hoffman said:

Additionally- many warranted contracting officers in some organization (e.g., ACO’s) have limited authority to modify contracts - only under specific contract clauses.  

Besides that- if you can’t explain or otherwise justify why you are modifying a contract, you have little business being the the one to sign the mods.

Have you read the reverse of the SF 30?

Carry on!

@Lionel Hutz,

I agree with almost everything that you wrote and you wrote very well. However, I don't agree that all bilateral modifications must have consideration. Some bilateral modifications are negotiated adjustments pursuant to contract terms--the consideration is already in the original deal. For example, the contractor experiences an excusable delay and the parties negotiate a schedule extension. The CO need not seek consideration for the schedule extension. For these types of bilateral modifications, I think there is value in citing the clause providing for the adjustment because the CO wouldn't otherwise have the authority to modify the contract without consideration. It tells the reviewing/approving official, who should be looking for the consideration, why consideration isn't necessary. For bilateral modifications that require consideration, I see no value in citing anything for the reasons you explained. I think the request for authority in block 13C has led to some of the dogmatic responses we've seen in this thread (e.g., "mutual agreement of the parties", "FAR 52.212-4(c)", etc.).

PepeTheFrog said:

It seems like you allow the limitations of FPDS to significantly affect the way you conduct procurement. That is a mistake.

You assume that it is an inherent limitation. That is a mistake. 

But I used that as a guide as a hint on how to treat a modification. If I can cite 2 authorities, why not 10? Where does it end? The point I make is to consider what is best practice using all available information.

Q: Why would we need to cite an authority?

A1: So that the Contractor, Ombudsman, GAO, Board, or Court can identify the scope and applicability of any  entitlements, and remedies (e.g., terms and conditions related to or arising from the modification authority).

A2: FAR includes requirements, other than the form itself, that the contracting officer 'shall cite' [insert clause] as the authority (e.g., FAR 17.207(g))

I wonder what a reviewer would think if 'contracting officer [discretion, authority, or decision]' was cited.

Don Mansfield said:

@Lionel Hutz,

I agree with almost everything that you wrote and you wrote very well. However, I don't agree that all bilateral modifications must have consideration. Some bilateral modifications are negotiated adjustments pursuant to contract terms--the consideration is already in the original deal. For example, the contractor experiences an excusable delay and the parties negotiate a schedule extension. The CO need not seek consideration for the schedule extension. For these types of bilateral modifications, I think there is value in citing the clause providing for the adjustment because the CO wouldn't otherwise have the authority to modify the contract without consideration. It tells the reviewing/approving official, who should be looking for the consideration, why consideration isn't necessary. For bilateral modifications that require consideration, I see no value in citing anything for the reasons you explained. I think the request for authority in block 13C has led to some of the dogmatic responses we've seen in this thread (e.g., "mutual agreement of the parties", "FAR 52.212-4(c)", etc.).

Don,

Good points. However, if additional consideration is not needed because it exists in the underlying contract, then the clause almost certainly authorizes, at least in part, a unilateral modification. 

Take for example the Excusable Delays clause, FAR 52.249-14.  It provides, “the Contractor shall not be in default because of any failure to perform this contract under its terms if the failure arises from causes beyond the control and without the fault or negligence of the Contractor.”  In addition, it states, “If the Contracting Officer determines that any failure to perform results from one or more of the causes above, the delivery schedule shall be revised…”

This clause authorizes a unilateral modification to the contract.  If the contracting officer and the contractor cannot agree to a new delivery, the contracting officer would be within her authority to unilaterally determine a new date and modify the contract.

Now, as a practical matter, does it make sense to negotiate the delivery schedule with the contractor?  Absolutely.  Further, by agreeing to a new date, both sides have given up their right to argue that a different date should have been selected.  Not only does this limit litigation risk, but relinquishing legal rights serves as adequate consideration to bind the parties.  Consideration in a bilateral modification does not need to be in the form of money.

Does this mean the contracting officer is no longer issuing a modification under 52.249-14?  Not necessarily.  FAR 52.249-14 directs that the delivery schedule be revised and does not restrict the revision to either a unilateral or bilateral modification.  However, if 52.249-14 simply excused “excusable delays” but did not direct that “the delivery schedule shall be revised,” the contracting officer would still have the authority to modify the contract.

That is exactly the situation with 52.212-4(f), which addresses Excusable Delays in commercial contracts.  It simply notes that “The Contractor shall be liable for default unless nonperformance is caused by an occurrence beyond the reasonable control of the Contractor and without its fault or negligence…”  It limits the contracting officer from determining the contractor is in default when the default is due to an excusable delay.  However, it does not authorize the contracting officer to modify the contract, unilaterally or otherwise.  And that makes sense in this context because 52.212-4(c) has already told us that the contract can only be modified “by written agreement of the parties.”  In that case, a bilateral modification must be executed with consideration coming in the form of a reestablished delivery date enforceable by both parties.  In a FAR Part 12 contract, following an excusable delay, 52.212-4(f) may be the *reason* you want to modify the contract (i.e., the contract delivery date is no longer enforceable), but it is not your *authority* to modify the contract.

Sometimes the government’s reason and authority to modify the contract come from the same clause, but not always.  This is part of the problem with block 13 on the SF 30.  People want it to be a shorthand to tell them why the contract is being modified or modified in a certain way.  But that is not what authority tells you.

Cheers,

Lionel

Jamaal Valentine said:

A1: So that the Contractor, Ombudsman, GAO, Board, or Court can identify the scope and applicability of any  entitlements, and remedies (e.g., terms and conditions related to or arising from the modification authority).

Just for the heck of it I did a very simple search of CBCA and GAO and found no specific reference to "Block 13" in case or protest decision documents.

I did find this which reinforces that some believe it is important to place an authority in the SF 30.  (Search on this wording as could not copy/paste link)

"Contract Modification Authority Decision Help Guide"

But after my own research I have to agree with one two word quote in this thread.  "Dumb form"

@Lionel Hutz,

Great explanation. Thanks.

Had I pondered it a bit more, my answer to the original question would have simply been - don’t mix a bilaterally agreed change to all the options (supplemental agreement), requiring Contractor’s signature with a unilateral mod action to exercise award of an option.(no Contractor signature involved).

coolarmydude said:

why not 10? Where does it end?

It ends when you have adequately described what you're doing and why. Citing only one modification reason ("authority") for several different changes, each of which relies on a different reason ("authority") is not adequate. 

You might cite 10 authorities if you have an especially complicated modification that draws on the processes or rights or procedures outlined in 10 different FAR clauses. That would be an extreme example, but in such a case, wouldn't it be helpful to explain how those 10 different FAR clauses relate to each of the 10 changes in the modification?

coolarmydude said:

You assume that it is an inherent limitation. That is a mistake. 

But I used that as a guide as a hint on how to treat a modification.

Like PepeTheFrog said before, using the (inherent, systemic, design) limitations of FPDS (e.g. forcing you to input only one modification authority) as a "guide" or a "hint" on how to document or explain the modification is not a good idea. Do you understand why?

Here is another translation: 

FPDS is not as important as the contract or modification itself. FPDS does not (cannot) record all aspects of the contract or modification. It has limitations. It asks for certain data, and does not ask for other data. It asks for certain data in a predefined format, in many cases.

By all means, continue to use a poorly designed system that is considered to be absolute garbage in terms of user interface and accuracy of data. Just don't expect intelligent colleagues to criticize you for it. This kind of thing is why some people view contracting professionals as administrative assistants, clerical flunkies, paper-pushers, and glorified secretaries. 

PepeTheFrog encourages you to think this through, again. 

Sure, follow FPDS procedure. Pick one modification for FPDS. Who cares? FPDS is "garbage in, garbage out." But forget about FPDS. What about the contract modification itself?

PepeTheFrog finds it difficult to understand how someone could prefer "picking one" explanation ("authority") for a multi-prong modification with several different changes from several different clauses. It saves some typing time. It saves you the trouble of thinking. Best of all, it complies with FPDS! 

@coolarmydude and anyone else who thinks you should only cite one modification reason ("authority"), please tell PepeTheFrog which single authority to cite for this modification (forget about FPDS, forget about even Block 13, just tell PepeTheFrog how you would explain this modification in the document itself, or in an accompanying memo using a single authority):

Incrementally fund $500,000. Exercise option period 3. Change the security classification form. Change the statement of work.

Hint: There are four changes. Each of the four changes corresponds to a well-known FAR clause. Each of the four changes can be accomplished unilaterally. 

(PepeTheFrog would cite FAR 52.232-22 (Limitation of Funds), FAR 52.217-9 (Option to Extend the Term of the Contract), FAR 52.204-2 (Security Requirements), FAR 52.243-X (Changes), respectively.)

@Lionel Hutz Well-stated. You are someone who has the capability to think and understand contracts. Some things cannot be taught.

Lionel said, "relinquishing legal rights serves as adequate consideration."  Legal rights are a property interest vested in the government.  Do contracting officers have the authority to divest the government of its property rights without such authority being granted in a contract clause?

Retreadfed said:

Lionel said, "relinquishing legal rights serves as adequate consideration."  Legal rights are a property interest vested in the government.  Do contracting officers have the authority to divest the government of its property rights without such authority being granted in a contract clause?

As I said earlier, generally  - not without some specific authority to waive all or partial rights.

Retreadfed said:

Lionel said, "relinquishing legal rights serves as adequate consideration."  Legal rights are a property interest vested in the government.  Do contracting officers have the authority to divest the government of its property rights without such authority being granted in a contract clause?

Yes, provided they obtain consideration.

Don Mansfield said:

Yes, provided they obtain consideration.

For example...? Me thinks you speak too generally.

joel hoffman said:

For example...? Me thinks you speak too generally.

Take ji's example from earlier in the thread:

Quote

As an example, in a contract for commercial items, the contract calls for 100 EA white items for delivery in 60 days.  Shortly after award, the parties agree to 33 white, 33 red, and 34 blue in 45 days.

The Government has given up its right to the delivery of 100 white items delivered in 60 days in exchange for 33 white, 33 red and 34 blue delivered in 45 days.

Don Mansfield said:

Take ji's example from earlier in the thread:

The Government has given up its right to the delivery of 100 white items delivered in 60 days in exchange for 33 white, 33 red and 34 blue delivered in 45 days.

Don - Ok, that’s a simple “change”. 

Im thinking of other risks or responsibilities allocated to the parties by various contract clauses or by operation of law. 

For example, can the KO wave their magic wand to assume the otherwise contractor allocated risk, responsibility or liability “if they obtain consideration”? 

Can a KO turn a known,  underground condition into a “differing site condition” for consideration, then pay for the additional costs to perform the work on a fixed price contract?

Can a KO indemnify a contractor for possible public health risks or future employee illnesses due to possible release of toxic chemicals for an environmental remediation of RCRA site if they obtain consideration?  

Can the KO relieve the contractor of any liability for injury to the contractor’s employees or to the public due to unsafe practices if they obtain consideration? 

Can the KO make the government responsible for the impact of future corporate income tax increases on a fixed price contract if they obtain consideration? 

Those are some examples of many, many responsibilities or risks typically allocated to contractors by law, public policy and/or by standard contract clauses.

Don - By the way, it wasn’t established or explained  that the color and delivery changes were for no cost or that the government “received consideration”.  May have been a credit change or a change involving increased cost. Might have paid for a shorter delivery schedule.

ji simply described the change...

joel hoffman said:

For example, can the KO wave their magic wand to assume the otherwise contractor allocated risk, responsibility or liability “if they obtain consideration”?

Yes. For example, FAR 46.407(f) permits this:

Quote

When supplies or services are accepted with critical or major nonconformances as authorized in paragraph (c) of this section, the contracting officer must modify the contract to provide for an equitable price reduction or other consideration.

joel hoffman said:

Can a KO turn a known,  underground condition into a “differing site condition” for consideration, then pay for the additional costs to perform the work on a fixed price contract?

I don't understand what the consideration would be in this scenario.

joel hoffman said:

Can a KO indemnify a contractor for possible public health risks or future employee illnesses due to possible release of toxic chemicals for an environmental remediation of RCRA site if they obtain consideration?  

Can the KO relieve the contractor of any liability for injury to the contractor’s employees or to the public due to unsafe practices if they obtain consideration? 

Can the KO make the government responsible for the impact of future corporate income tax increases on a fixed price contract if they obtain consideration?

In the absence of some specific limitation on the contracting officer's authority in these circumstances, then yes. They would still have to comply with FAR 1.602-1(b) before exercising their authority.

BTW, FAR 1.102(d) places the burden on the naysayer when it comes to the exercise of authority. As such, please cite the law, executive order, or regulation that would prohibit the types of modifications that you described.

On 3/15/2019 at 5:43 PM, Don Mansfield said:

I don't understand what the consideration would be in this scenario.

So, apparently , no. [contractor offers consideration if government will reimburse extra expense for a known site condition].

On 3/15/2019 at 5:43 PM, Don Mansfield said:

In the absence of some specific limitation on the contracting officer's authority in these circumstances, then yes. They would still have to comply with FAR 1.602-1(b) before exercising their authority.

I would advise you not to speak so broadly. That’s a dangerous answer. It implies that if a KO isn’t aware of a specific limitation of their authority they are free to modify any contract requirement. 

KO’s can not idemnify contractor’s from certain legal liabilities or responsibilities per various laws, including those examples that I cited.

For example, it ought to be obvious that  income taxes aren’t allowable expenses for reimbursement. If not obvious, read 31.205-41 (b) (1).

FAR 2.101 Definitions: “Unallowable cost means any cost that, under the provisions of any pertinent law, regulation, or contract, cannot be included in prices, cost-reimbursements, or settlements under a Government contract to which it is allocable.”

FAR 31.201-6   Accounting for unallowable costs.

“(a) Costs that are expressly unallowable or mutually agreed to be unallowable, including mutually agreed to be unallowable directly associated costs, shall be identified and excluded from any billing, claim, or proposal applicable to a Government contract. A directly associated cost is any cost that is generated solely as a result of incurring another cost, and that would not have been incurred had the other cost not been incurred. When an unallowable cost is incurred, its directly associated costs are also unallowable.”

Thats why a KO better damned well be able to cite their legal authority and justify why they are modifying a contract.

On 3/15/2019 at 5:43 PM, Don Mansfield said:

BTW, FAR 1.102(d) places the burden on the naysayer when it comes to the exercise of authority. As such, please cite the law, executive order, or regulation that would prohibit the types of modifications that you described.

Your added edit is incorrect.

FAR 1.102 (d) places the burden upon the KO and the government members of the acquisition team to determine “if a specific strategy, practice, policy or procedure is in the best interests of the Government and is not addressed in the FAR nor prohibited by law (statute or case law), Executive order or other regulation”  before assuming that the strategy, practice, policy or procedure is permissible.

I mentioned examples of standard contractually established allocations of responsibilities or liabilities and asked if a KO could reverse those if, as you say, the KO “obtains consideration”. 

It is B.S. to say that the burden is on someone questioning the KO’s authority. It is the K.O.’s responsibility to determine if they are not prohibited from waiving or reversing contractually established roles, responsibilities or liabilities. The KO and their advisory team must be able to justify why they are modifying a contract.

See, for instance 1.602-2 (c) and agency supplements thereto.  I would also certainly hope that DAU teaches on the topic of legal sufficiency reviews - especially if a KO decides to modify the terms of FAR Clauses or other contractually defined. allocations of liability or risks. 

Perhaps you are a David Drabkin fan. I remember some of the differing opinions of Deidre Lee and Drabkin in one of our DAU Contracting classes in D.C. in the 1990’s.

joel hoffman said:

It is B.S. to say that the burden is on someone questioning the KO’s authority. It is the K.O.’s responsibility to determine if they are not prohibited from waiving or reversing contractually established roles, responsibilities or liabilities.

How would a KO prove a negative? The burden of proof, in law and logic, is well established.

How would they prove a positive? First, check to see if it is specifically allowed or required.

The burden is on the one proposing to modify the contract to determine whether or not it is prohibited if it isn’t specifically allowed. 

By the way:

“Generally, GAO and courts have ruled that ?open-ended?indemnification provisions in contracts violate 31 U.S.C. ? 1341. See e.g., Union Pacific Railroad Corp. v. United States, 52 Fed. Cl. 730 (2002); United States Park Police Indemnification Agreement, B-242146, 1991 US Comp. Gen. LEXIS 1070, Aug. 16, 1991 (stating that absent specific statutory authority, indemnification provisions which subject the government to indefinite or potentially unlimited liability violate the ADA); Project Stormfury, B-198206, 59 Comp. Gen. 369 (1980). To Howard Metzenbaum, B-174839.2, 63 Comp. Gen. 145 (1984); Assumption by Gov?t of Contractor Liability to Third Persons, B-201072, 62 Comp. Gen. 361 (1983); Reimbursement of the State of New York Under Support Contract, B-202518, Jan. 8, 1982, 82-2 CPD ? 2; cf. E.I. DuPont De Nemours v. United States, 365 F.3d 1367 (2004) (holding that the Contract Settlement Act of 1944 exempted certain contracts with indemnification provisions from operation of the Antideficiency Act).”

/threads/106-federal-government-indemnification-of-contractors

On 3/17/2019 at 2:19 AM, joel hoffman said:

How would they prove a positive? First, check to see if it is specifically allowed or required.

The burden is on the one proposing to modify the contract to determine whether or not it is prohibited if it isn’t specifically allowed.

That doesn't answer my question.

Let's say a KO is drafting a modification for your review and you believe it's prohibit. The KO couldn't find such a prohibition and politely asks you to prove it while also reminding you of this FAR statement:

"If a policy or procedure, or a particular strategy or practice, is in the best interest of the Government and is not specifically addressed in the FAR, nor prohibited by law (statute or case law), Executive order or other regulation, Government members of the Team should not assume it is prohibited. Rather, absence of direction should be interpreted as permitting the Team to innovate and use sound business judgment that is otherwise consistent with law and within the limits of their authority."

Who has the burden of proof in this scenario (you are a reviewer, but not a clearance approval authority)?

If the KO is correct and the rules are silent (e.g., absent) how could they prove a negative?

Jamaal, please lay out an example  for me.

@joel hoffman

I provided the scenario. Please answer the two questions as you see fit based on the info provided. (I am trying to find out how you prove a negative - the rules are silent on the matter)

*I think most everyone agrees what to do when the rules are not silent

I  proved the negative on the very simple examples in my earlier posts that I asked about.  That was in response to the simplitistic idea that the KO can do whatever they want to if “they obtain consideration” and the burden is on any objectors to prove that something isnt allowable.

The KO needs to obtain legal or other team member advice when they want to do something out of the ordinary and they don’t know if it is allowed or prohibited.  Note that the FAR specifically mentions the government acquisition team members. The KO should not operate in a vacuum in their own little “kingdom”.

Im not talking about changes in the work description or means and methods, e.g., changing colors and delivery time or accepting non-conforming work at a reduced price. Every KO ought to know those routine things.

joel hoffman said:

I  proved the negative on the very simple examples in my earlier posts that I asked about.

I believe we have different opinions on what proving a negative, as used here, means.

In my mind, where the burden of proof isn't defined, it rest with the party who's argument will lose by default absent compelling evidence. For example, a KO relying on a negative claim (e.g., the rules are silent) and a reviewer making a positive claim (e.g., the rules prohibit) do not share the same burden. In this case, the reviewers claims should be backed by evidence (i.e., cite a rule), otherwise the KO is free to execute their delegated authority.

Thanks for the dialogue.

You’re going to have to give me an example of something that a KO would modify and the rules are silent on the matter and where it is in the governments best interest. 

My point has been that the Acquisition team needs to determine if something out of the  ordinary that somebody wants to be modified is 1) in the government’s best interest 2) allowed or 3) not allowed. 

If the action is being pursuant to a contract clause or other guidance that provides for an adjustment, then it ought to be easy to cite that “authority” on the Mod. 

I didn’t mention a modification action that has no guidance,  policy, rules, Statutes or case law, etc. in that event, the KO needs to document, for the record, why they are modifying the contract, not simply state that the parties agreed and “Here’s my warrant. “ If one is spending the taxpayers’ money (borrowed by the way and adding to the National Debt) to modify a contract, then they should be able to justify why. 

Thanks for the dialog and have a good week. 

Edit: Say there is some situation where the acquisition team knows of no guidance, policy, FAR or other regulations, no law, no case law, etc.  and/or the action is not in the government’s interest or do not use sound business direction.

 If the reviewer or subsequent examination provides the information concerning guidance, policy, FAR or other regulations, law, case law, etc., or can otherwise justify why the action is not in the government’s interest, then it would seem that the acquisition team doesn’t have the backing of the FAR at 1.6 to rely upon.

I don’t remember any contract admin situations regarding  contract modifications where there was nothing to guide the contract admin team (including the KO) . We’ve had to dig to find some guidance or precedent, occasionally. 

As for the “FAR statement”,  I’ve used it for acquisition planning and formulating acquisition  approaches and for developing contract clauses for design-build contracts, where there is no FAR or statutory coverage of the revised and unique roles and responsibilities of the parties.

Never mind...

This is like that religious story where the rabbi argues with God and supposedly wins the argument.

On ‎3‎/‎15‎/‎2019 at 3:51 PM, joel hoffman said:

For example, it ought to be obvious that  income taxes aren’t allowable expenses for reimbursement. If not obvious, read 31.205-41 (b) (1).

Are you claiming that the CO would be prohibited from deviating from the cost principles, even if they complied with FAR 1.602-1(b)?

“1.602-1 (b) No contract shall be entered into unless the contracting officer ensures that all requirements of law, executive orders, regulations, and all other applicable procedures, including clearances and approvals, have been met.”

Are you referring to the original contract or to the modification?

 The KO and it’s acquisition team would not be complying with 1.602-1(b), if they decide to reimburse a contractor for paid income taxes in a contract mod.

Income taxes are not an allowable expense and are to be excluded from proposal and contract prices, if specifically identified. 

We both are wasting our time here with constant circular references.

joel hoffman said:

“1.602-1 (b) No contract shall be entered into unless the contracting officer ensures that all requirements of law, executive orders, regulations, and all other applicable procedures, including clearances and approvals, have been met.”

Are you referring to the original contract or to the modification?

 The KO and it’s acquisition team would not be complying with 1.602-1(b), if they decide to reimburse a contractor for paid income taxes in a contract mod.

Income taxes are not an allowable expense and are to be excluded from proposal and contract prices, if specifically identified. 

We both are wasting our time here with constant circular references.

I'm asking if the CO would be prohibited from deviating from the cost principles, provided they complied with FAR 1.602-1(b). Yes or no?

Don Mansfield said:

I'm asking if the CO would be prohibited from deviating from the cost principles, provided they complied with FAR 1.602-1(b). Yes or no?

I answered you.  You keep asking a circular question. 

Tell me how they comply with 1.602-1(b) if they reimburse a company for the unallowable cost of income tax.

joel hoffman said:

I answered you.  You keep asking a circular question. 

Tell me how they comply with 1.602-1(b) if they reimburse a company for the unallowable cost of income tax.

Actually, you didn't answer me. I specifically asked whether a contracting officer was prohibited from deviating from the cost principles, provided they complied with FAR 1.602-1(b).

Are you saying that a contracting officer cannot deviate from the cost principles AND comply with FAR 1.602-1(b)?

Don, I will let you and Joel continue your discussion as an interested by stander.  However, for my benefit, could you explain what you mean by the cost principles?  Are you referring to FAR 31.205; FAR subpart 3.2, FAR subparts 31.1 and 2 or something else?  Also, are you asking how a contracting officer should resolve a conflict between FAR Part 31 and another FAR section?

Don Mansfield said:

Actually, you didn't answer me. I specifically asked whether a contracting officer was prohibited from deviating from the cost principles, provided they complied with FAR 1.602-1(b).

Are you saying that a contracting officer cannot deviate from the cost principles AND comply with FAR 1.602-1(b)?

I am not going to answer you with a one answer fits every circumstance, when you won’t answer any question. 

I provided a specific example. I will clarify that the purpose of the mod in said example was to specifically reimburse a contractor for state or federal income tax expense. It was not a cost among many other types in a proposal.

On ‎3‎/‎14‎/‎2019 at 5:21 PM, Jamaal Valentine said:

Q: Why would we need to cite an authority?

A2: FAR includes requirements, other than the form itself, that the contracting officer 'shall cite' [insert clause] as the authority (e.g., FAR 17.207(g))

A2:  If it was required for every mod it would be so stated in Part 43.

joel hoffman said:

I am not going to answer you with a one answer fits every circumstance, when you won’t answer any question.

Just to review the order of events, you made the following claim:

Quote

For example, it ought to be obvious that  income taxes aren’t allowable expenses for reimbursement. If not obvious, read 31.205-41 (b) (1).

I then asked:

Quote

Are you claiming that the CO would be prohibited from deviating from the cost principles, even if they complied with FAR 1.602-1(b)?

You said you answered that question, but you didn't. So, I asked:

Quote

Are you saying that a contracting officer cannot deviate from the cost principles AND comply with FAR 1.602-1(b)?

The ball is in your court.

joel hoffman said:

I am not going to answer you with a one answer fits every circumstance, when you won’t answer any question. 

I provided a specific example.

joel hoffman, the bystanders are patiently and eagerly waiting for your answer about the specific question. The answer might tease out a rule or principle-- the guiding light to "[fit] every circumstance." 

That's how someone can learn. Your specific example is not helpful for learning, it's just a guarded example for you to dodge a reasonable question that might lead to a learning moment.

Can a contracting officer comply with FAR 1.602-1(b) and also deviate from the cost principles? What do you think and why?

PepeTheFrog was not asked the question, but is willing to answer Don Mansfield.

Don Mansfield said:

whether a contracting officer was prohibited from deviating from the cost principles, provided they complied with FAR 1.602-1(b).

No, a contracting officer is not prohibited from deviating from the cost principles, provided they complied with FAR 1.602-1(b).

PepeTheFrog said:

Can a contracting officer comply with FAR 1.602-1(b) and also deviate from the cost principles?

Yes, it is possible for a contracting officer to deviate from the cost principles while also complying with FAR 1.602-1(b).

PepeTheFrog said:

PepeTheFrog was not asked the question, but is willing to answer Don Mansfield.

No, a contracting officer is not prohibited from deviating from the cost principles, provided they complied with FAR 1.602-1(b).

Yes, it is possible for a contracting officer to deviate from the cost principles while also complying with FAR 1.602-1(b).

Thank you, @PepeTheFrog. I agree.

Now, do you know of anything specifically prohibiting the contracting officer from deviating from FAR 31.205-41(b)(1), assuming they complied with FAR 1.602-1(b)?

Don Mansfield said:

do you know of anything specifically prohibiting the contracting officer from deviating from FAR 31.205-41(b)(1), assuming they complied with FAR 1.602-1(b)?

No. PepeTheFrog's understanding is that the contracting officer can seek an individual or class deviation from the cost principles, including those at FAR 31.205-41(b)(1). That's one reason why PepeTheFrog is curious to hear any else's opinion or analysis, like joel hoffman's.

FAR 31.101, Objectives, states:

"In recognition of differing organizational characteristics, the cost principles and procedures in the succeeding subparts are grouped basically by organizational type; e.g., commercial concerns and educational institutions. The overall objective is to provide that, to the extent practicable, all organizations of similar types doing similar work will follow the same cost principles and procedures. To achieve this uniformity, individual deviations concerning cost principles require advance approval of the agency head or designee. Class deviations for the civilian agencies require advance approval of the Civilian Agency Acquisition Council. Class deviations for the National Aeronautics and Space Administration require advance approval of the Deputy Chief Acquisition Officer. Class deviations for the Department of Defense require advance approval of the Director of Defense Procurement, Office of the Under Secretary of Defense for Acquisition, Technology, and Logistics."

jwomack said:

A2:  If it was required for every mod it would be so stated in Part 43.

I don't necessarily disagree, but the question was 'Why would one need to cite an authority?‘; I simply provided an answer to the specific question. 

Nonetheless, you raise an interesting point. What arguments can you provide to support your assertion?

The SF 30, which is referenced in FAR, directs contracting officers to "Insert in the corresponding blank the authority under which the modification is issued."

Perhaps your assertion is true when the SF 30 is not used since its use is only required as stated in FAR 43.301(a).

My answer to the question is that it would take a class A idiot to grant a deviation to allow a KO to reimburse a contractor for otherwise expressly unallowable federal or state income taxes. Income taxes theoretically are paid by a firm on net,  after expense (costs) income. How is that in the Government’s interest?  Who would be dumber- the KO requesting such a deviation or the idiot(s) who would approve it?  Certainly a deviation is possible in theory, but let’s deal with reality in this example. 

Thus, I’m betting that the KO wouldn’t be able to satisfy FAR 1.602-1(b) in that instance. 

I had expected that Don was going to play the old hand that one doesn’t have to agree with every aspect of a proposal as long as the bottom line is fair and reasonable. If necessary,  the team might jack up (“adjust”) the government estimate or objective elsewhere to cover their tracks. 

In my opinion, that’s a “safety valve” for poor, ineffective negotiators. Especially when FAR 31.201-6 directs that “(c)osts that are expressly unallowable...[as well as costs associated with the expressly unallowable costs] ...shall be identified and excluded from any billing, claim, or proposal applicable to a Government contract.”  The negotiators for the biggest, and the most contentious  engineering firms and construction contractors didn’t even get away with that in my personal experience.

One shouldn’t have to resort to that sleight of hand trick when expressly unallowable costs are prominent and distinguishable. 

At any rate, I wanted to clarify that that negotiating option isn’t available in my example. It would be glaringly clear what the KO would be agreeing to pay for in such a mod, not buried within other costs.

Such a contract action might make it to what I call the “Shameful Acts” status in the upper right hand corner of the WIFCON Home Page.

joel hoffman said:

My answer to the question

joel hoffman, is this all some elaborate hoax? You still have not answered the question! 

It's almost like you're dodging the question because your answer will cause you some discomfort. Could that be the reason?

PepeTheFrog said:

Can a contracting officer comply with FAR 1.602-1(b) and also deviate from the cost principles? What do you think and why?

Don Mansfield said:

Are you saying that a contracting officer cannot deviate from the cost principles AND comply with FAR 1.602-1(b)?

Pepe, you’re not  reading between the lines. 

Not for income taxes - waiver to cost principles won’t be granted by any sane authority - in my opinion. 

Also: Not for safety responsibility - waiver shouldn’t be granted. It is a legal responsibility of the contractor. The safety clauses in (construction) contracts are mandatory and well established by public policy and enforced in the courts and boards. Government is not in the business of assuming direct safety liability for the actions of its contractors on jobsites. Could also be a Anti-Deficiency Act problem due to funding for unknown possible liability costs for health related injuries which might not surface until much later. 

Also: There is a possibility  for indemnification - in rare cases, indemnification can be approved. Very rare. Won’t go into detail here. The Chemical Weapons Disposal Program couldn’t get approval to indemnify its contractors for possible injuries or death due to accidental or negligent releases of Mustard, Sarin or VX, for example. 

However, if a waiver is approved, there will be a specific authority for the modification. It WONT be mutual agreement of the parties - here’s my Warrant number. 

Bottom line is - there is no one answer fits all.  That’s why I would not just say “yes” or “no” to the generic question. 

If an acquisition team obtained a waiver to the cost allowability rules for something - I think that would be the authority to cite  - again, its not “we mutually agreed- read my warrant”.

On 3/18/2019 at 11:32 AM, joel hoffman said:

The KO and it’s acquisition team would not be complying with 1.602-1(b), if they decide to reimburse a contractor for paid income taxes in a contract mod.

Income taxes are not an allowable expense and are to be excluded from proposal and contract prices, if specifically identified.

On 3/15/2019 at 6:51 PM, joel hoffman said:

KO’s can not idemnify contractor’s from certain legal liabilities or responsibilities per various laws, including those examples that I cited.

For example, it ought to be obvious that  income taxes aren’t allowable expenses for reimbursement. If not obvious, read 31.205-41 (b) (1).

joel hoffman, please provide PepeTheFrog the same patience and respect PepeTheFrog has afforded you. This is an important topic and is relevant to anyone who deals with cost-reimbursement contracts. Inquiring minds need to know!

You made these assertions, quoted above.

Don Mansfield and others asked you a specific question whose answer potentially falsifies your assertions. That question is:

On 3/18/2019 at 11:14 AM, Don Mansfield said:

Are you claiming that the CO would be prohibited from deviating from the cost principles, even if they complied with FAR 1.602-1(b)?

You refused to answer the question, several times, in several different ways.

One potential explanation is that, if you answer accurately and honestly, it shows that you did not consider a key section of the FAR on this topic, namely FAR 31.101, which allows contracting officers to deviate from the cost principles with advance approval of the agency head or designee. PepeTheFrog does not know of a special exception to this rule (that you can deviate from cost principles) pertaining to your income taxes example at FAR 31.205-41(b)(1).

You seem to think there is a special exception to this rule. If so, where is this special exception to FAR 31.101 (deviating from cost principles) regarding FAR 31.205-41(b)(1) (income taxes)? 

Alternatively, you seem to think that your personal opinion outweighs the plain language of the Federal Acquisition Regulation, when properly read "as a whole" and harmonized with FAR 1.602-1(b) and FAR 31.101. If so, why do you think that your personal opinion outweighs the plain language of the FAR?

Alternatively, maybe you are just not capable of acknowledging when you have a "learning moment." But those "learning moments" help both you and the entire Wifcon forum.

If there is some other explanation, PepeTheFrog is waiting to hear it. This is directly relevant to the award and administration of cost-reimbursement contracts, and you are a valued source of knowledge in this forum. PepeTheFrog thanks you in advance for your reciprocal patience.

Don Mansfield said:

Are you saying that a contracting officer cannot deviate from the cost principles AND comply with FAR 1.602-1(b)?

Don, this leads to my favorite answer in government contracting, "it depends."  In some instances, a contracting officer can deviate from the cost principles and comply with FAR 1.602-1 as Pepe has indicated.  However, in some instances the contracting officer cannot.  For example, if a cost is made unallowable by statute such as 10 U.S.C. 2324, I don't see how a contracting officer could agree to make such a cost allowable.  In this regard, taxes of any sort are not listed as an unallowable cost in section 2324.

Let me pose a slightly different scenario than Joel did in regard to taxes.  State income taxes are generally an allowable cost for C corps.  However, an S corp. can elect not to pay Federal taxes on its income but to have the owner(s) pay taxes on the income of the corp. as part of their personal income tax liability.  Many state follow this pattern.  Since C corps. can claim state income taxes they pay as an allowable cost, would it be permissible and maybe not so far fetched for a contracting officer to seek a deviation to allow an S corp to claim state taxes paid by the owner on income of the S corp as an allowable cost?

On ‎3‎/‎5‎/‎2019 at 3:23 PM, CountryTime said:

What are your thoughts on a modification to a commercial PO to enact a slight reduction in service for remaining options (52.212-4(c) as the authority) and, in the same mod, exercising the first option period citing 52.217-9 in the verbiage of the mod?  Essentially citing two authorities in the same modification.

If you a getting a signature from the contractor, why would you need to cite multiple authorities, doesn't their signature cover both the reduction in services, as well as the exercising of the option period at that point?

If you just checked 13 E, "required to sign this document..." and obtained their signature, then you really don't need an authority.  Your authority becomes the mutual agreement of the parties presumably acting in good faith.  That said, the form does instruct the user to "CHECK ONE" and appears to refer to blocks 13 A - D, some of which are fill-ins.  No judge is going to ding you if you have signatures from both contracting parties, with or without cited authority or checking any of those other boxes.  I know that many COs I worked under asserted that it was always a good idea to cite something incorporated into the contract.  Hence, they typically cited the commercial items changes clause.  I do not think citing one of these clauses means the specialist did not think about it.  To the contrary, maybe they overthought it.  Perhaps in most cases it's just the user of the form trying to fill it out per its exact instructions.

PepeTheFrog said:

One potential explanation is that, if you answer accurately and honestly, it shows that you did not consider a key section of the FAR on this topic, namely FAR 31.101, which allows contracting officers to deviate from the cost principles with advance approval of the agency head or designee. PepeTheFrog does not know of a special exception to this rule (that you can deviate from cost principles) pertaining to your income taxes example at FAR 31.205-41(b)(1).

You seem to think there is a special exception to this rule. If so, where is this special exception to FAR 31.101 (deviating from cost principles) regarding FAR 31.205-41(b)(1) (income taxes)? 

Alternatively, you seem to think that your personal opinion outweighs the plain language of the Federal Acquisition Regulation, when properly read "as a whole" and harmonized with FAR 1.602-1(b) and FAR 31.101. If so, why do you think that your personal opinion outweighs the plain language of the FAR?

Alternatively, maybe you are just not capable of acknowledging when you have a "learning moment." But those "learning moments" help both you and the entire Wifcon forum.

If there is some other explanation, PepeTheFrog is waiting to hear it. This is directly relevant to the award and administration of cost-reimbursement contracts, and you are a valued source of knowledge in this forum. PepeTheFrog thanks you in advance for your reciprocal patience.

Pepe, I already acknowledged that the acquisition team can request advanced approval to deviate from the Part 31.2 cost principles, which apply to the expressly unallowable income tax example. I said that I don’t think that it would be approved. There would have to be some extremely  good justification to request approval to deviate from what is the intent stated in 31.101 : “To the extent practicable, all organizations of similar types doing similar work will follow the same cost principles and procedures..” It will take more than “both sides agree, so give us approval to deviate” from a a cost principle which expressly disallows paying the cost of income taxes.

So- the KO cannot deviate from the cost principle concerning income taxes and comply with 1.602-1(b) if it can’t get approval via 31.101 to deviate. 

The safety example would be directly deviating from public policy, expressed in various regulations and mandatory FAR clauses and/or specifications. It’s not a cost principle in 31.2. Who do you think would allow a KO to contradict that?  

Indemnification isn’t a cost principle in 31.2. It is a legal matter. A Contracting Officer cannot, under their own authority or by mutual agreement of the parties, indemnify a contractor from any liability due to hazardous wastes or other legal responsibilities. And there might well be unfunded, indeterminate liabilities associated with indemnification issues, as I previously quoted that could lead to ADA violations. 

If a KO can obtain approval to deviate from a cost principle or any other legal or regulatory requirement - AND if they comply with 1.602-2 AND if they  are exercising sound business judgement in the best interest of the government, they can modify a contract, accordingly.  

There will be an applicable authority that can be cited. It won’t be “by mutual agreement of the parties; see my Warrant No. XXXXX.”

EDIT:  see also: 

“1.602-2   Responsibilities.

Contracting officers are responsible for ensuring performance of all necessary actions for effective contracting, ensuring compliance with the terms of the contract, and safeguarding the interests of the United States in its contractual relationships. In order to perform these responsibilities, contracting officers should be allowed wide latitude to exercise business judgment. Contracting officers shall—

(a) Ensure that the requirements of 1.602-1(b) have been met, and that sufficient funds are available for obligation;

(b) Ensure that contractors receive impartial, fair, and equitable treatment; 

(c) Request and consider the advice of specialists in audit, law, engineering, information security, transportation, and other fields, as appropriate; and

(d) Designate...”

joel hoffman said:

If an acquisition team obtained a waiver to the cost allowability rules for something - I think that would be the authority to cite  - again, its not “we mutually agreed- read my warrant”.

Joel,

You're being provoked by stolid antagonists, and you've fallen into the trap.  You are seasoned practitioner.  Heck, you were taking DAU classes in the 1990s when some of these guys were still playing beer pong or worse yet, getting/giving wedgies.  There are a lot of unnecessary details in this debate, much like in Congress.  But here's the bottom line and these things you actually already know.  There is a rather short list of conditions that need to be met to have a legally-binding contract; this is Contracts 101, which I had the distinct pleasure of learning about from a beautiful blonde prosecutor in a night class.  Included in that list is competency/clarity of mind/sobriety, i.e., I cannot draft the contract out on a bar on a cocktail napkin after imbibing several Tom Collins with the other guy, albeit I can have a binding contract scribed onto a cocktail napkin in the absence of wide-ruled paper [and] this is the big one, the terms of the contract must be entirely legal, which is to say, not contravening any statute.  For instance, I cannot contract to sell you two large shipping containers full of illegal narcotics, nor can we contract with one another to go into partnership to offer a service that aids people in evading state or federal tax law.  You get the point.  I hope this served as a reminder of the rudimentary, as well as offering some degree of entertainment.

SPOILER ALERT

On ‎3‎/‎19‎/‎2019 at 12:14 AM, Don Mansfield said:

Are you claiming that the CO would be prohibited from deviating from the cost principles, even if they complied with FAR 1.602-1(b)?

No ... @joel hoffman just has caveats (as many would), but the answer is NO.

Thank you, @joel hoffman. PepeTheFrog appreciates it, and has learned a great deal from your full response.

Retreadfed said:

However, in some instances the contracting officer cannot.  For example, if a cost is made unallowable by statute such as 10 U.S.C. 2324, I don't see how a contracting officer could agree to make such a cost allowable.

I suppose that's true, but I can't find any stated limits on an agency's authority to deviate from the FAR. FAR 1.402 begins with "Unless precluded by law, executive order, or regulation..." So would a statute have to expressly say that deviations are precluded?

Retreadfed said:

Since C corps. can claim state income taxes they pay as an allowable cost, would it be permissible and maybe not so far fetched for a contracting officer to seek a deviation to allow an S corp to claim state taxes paid by the owner on income of the S corp as an allowable cost?

 Good question. I know that I don't know the answer.

Guardian said:

Joel,

You're being provoked by stolid antagonists, and you've fallen into the trap.  You are seasoned practitioner.  Heck, you were taking DAU classes in the 1990s when some of these guys were still playing beer pong or worse yet, getting/giving wedgies.  There are a lot of unnecessary details in this debate, much like in Congress.  But here's the bottom line and these things you actually already know.  There is a rather short list of conditions that need to be met to have a legally-binding contract; this is Contracts 101, which I had the distinct pleasure of learning about from a beautiful blonde prosecutor in a night class.  Included in that list is competency/clarity of mind/sobriety, i.e., I cannot draft the contract out on a bar on a cocktail napkin after imbibing several Tom Collins with the other guy, albeit I can have a binding contract scribed onto a cocktail napkin in the absence of wide-ruled paper [and] this is the big one, the terms of the contract must be entirely legal, which is to say, not contravening any statute.  For instance, I cannot contract to sell you two large shipping containers full of illegal narcotics, nor can we contract with one another to go into partnership to offer a service that aids people in evading state or federal tax law.  You get the point.  I hope this served as a reminder of the rudimentary, as well as offering some degree of entertainment.

Thanks, Guardian and thanks for reminding me.

Retreadfed said:

Let me pose a slightly different scenario than Joel did in regard to taxes.  State income taxes are generally an allowable cost for C corps.  However, an S corp. can elect not to pay Federal taxes on its income but to have the owner(s) pay taxes on the income of the corp. as part of their personal income tax liability.  Many state follow this pattern.  Since C corps. can claim state income taxes they pay as an allowable cost, would it be permissible and maybe not so far fetched for a contracting officer to seek a deviation to allow an S corp to claim state taxes paid by the owner on income of the S corp as an allowable cost?

https://caselaw.findlaw.com/us-federal-circuit/1468581.html

here_2_help said:

https://caselaw.findlaw.com/us-federal-circuit/1468581.html

Thanks Help. I did read 31.205-41(b) incorrectly. It only mentions Federal income taxes and excess profit taxes, not state income taxes being expressly unallowable.

I stand partly corrected!!  Yes Pepe, I will admit it when I discover that I am incorrect. 

31.215-41 (b)(3) does state that taxes for which an exemption from are available to the contractor directly are unallowable, as determined in the referenced case law. Thus, if a prime or subcontractor pays taxes that an exemption is available for, it would be an unallowable cost for reimbursement.

Don Mansfield said:

I suppose that's true, but I can't find any stated limits on an agency's authority to deviate from the FAR. FAR 1.402 begins with "Unless precluded by law, executive order, or regulation..." So would a statute have to expressly say that deviations are precluded?

Disclosure: I am not a lawyer. A lawyer(s) is encouraged to respond to the question. 

×

stat·ute

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   synonyms:

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   ordinance;

   ukase; 

   pronunciamento

   "the statute in question gave rise to an action for damages"

   • a rule of an organization or institution.

Don, Do you think that an individual statute would have to expressly say that deviations are precluded?  Is this another generalized test question without any explanation or context?

I am only guessing here. It would seem that an individual statute,  would state the requirement, rule, etc.

Thus, without specific language allowing for deviations, the law - when looked at by itself - would seem to preclude deviations from the stated requirement(s).

However, individual contracting statutes are generally incorporated into the US Code, which may have to be read in full context and which may  or may not provide for the possibility of deviations.

Then there are often implementing regulations, which might or might not provide for approved deviations.

Then there may be case law, which may interpret the law and/or regulations.

Like many questions, there usually has to be some context provided to properly or fully answer- especially if the topic is to be instructional for readers looking for guidance, advice, application to their situation, etc.

The FAR gives us authority to deviate from the FAR, right?  I don't think the FAR gives us authority to deviate from statute.

I'm also not a lawyer.

ji20874 said:

The FAR gives us authority to deviate from the FAR, right?  I don't think the FAR gives us authority to deviate from statute.

I'm also not a lawyer.

I agree with your second point, unless the US Code which contains specific statutes in context with others, provided for an implementing regulation that would allow a deviation from the individual statute.

I understand your first point,  and agree to the extent that FAR provides some authority to deviate from some but not all FAR requirements. 

By the way, if a KO doesn’t know whether a statute must expressly preclude deviations or “isn’t aware of” or “doesn’t know” if any law or regulation precludes a deviation or allows another course of action, then the KO “shall”  “[r]equest and consider the advice of specialists in audit, law, engineering, information security, transportation, and other fields, as appropriate...” (**FAR 1.602-2(c)).

I’d say specialists in law would be appropriate for an answer to that specific question. Perhaps specialists in the relevant field might be aware of regulations or other reasons why not to deviate, thus it may be appropriate to contact  and consider them, too. 

Don Mansfield said:

So would a statute have to expressly say that deviations are precluded?

Don, I think the question is posed in reverse.  If an agency can waive (deviate from) a statute, I think the statute has to give the agency explicit authority to do so.  In the contracting arena, we have such delegations of waiver authority in regard to certified cost or pricing data in 10 U.S.C. 2306a and in regard to the CAS in 41 U.S.C. 1502.  In the absence of authority to waive or deviate from a statutory requirement, we wind up with regulatory nullification of a statute.

joel hoffman said:

By the way, if a KO doesn’t know whether a statute must expressly preclude deviations or “isn’t aware of” or “doesn’t know” if any law or regulation precludes a deviation or allows another course of action, then the KO “shall”  “[r]equest and consider the advice of specialists in audit, law, engineering, information security, transportation, and other fields, as appropriate...” (**FAR 1.602-2(c)). (emphasis added)

This may be misleading. Compare it with what the FAR Paragraph actually says without edits or omissions. 

"Contracting officers are responsible for ensuring performance of all necessary actions for effective contracting, ensuring compliance with the terms of the contract, and safeguarding the interests of the United States in its contractual relationships. In order to perform these responsibilities, contracting officers should be allowed wide latitude to exercise business judgment. Contracting officers shall --

(c) Request and consider the advice of specialists in audit, law, engineering, information security, transportation, and other fields, as appropriate;"

Well, what is ‘as appropriate‘? Agencies have established business and contract clearance requirements that include legal and other reviews. Contracting officers are required to follow the clearance process, but even that only offers a semblance of reasonable assurance. It would take a small army to ensure that "all requirements of law, executive orders, regulations, and all other applicable procedures, including clearances and approvals, have been met."

Jamaal Valentine said:

This may be misleading. Compare it with what the FAR Paragraph actually says without edits or omissions. 

"Contracting officers are responsible for ensuring performance of all necessary actions for effective contracting, ensuring compliance with the terms of the contract, and safeguarding the interests of the United States in its contractual relationships. In order to perform these responsibilities, contracting officers should be allowed wide latitude to exercise business judgment. Contracting officers shall --

(c) Request and consider the advice of specialists in audit, law, engineering, information security, transportation, and other fields, as appropriate;"

Well, what is ‘as appropriate‘? Agencies have established business and contract clearance requirements that include legal and other reviews. Contracting officers are required to follow the clearance process, but even that only offers a semblance of reasonable assurance. It would take a small army to ensure that "all requirements of law, executive orders, regulations, and all other applicable procedures, including clearances and approvals, have been met."

Quote

1.602-2 Responsibilities.

Contracting officers are responsible for ensuring performance of all necessary actions for effective contracting, ensuring compliance with the terms of the contract, and safeguarding the interests of the United States in its contractual relationships. In order to perform these responsibilities, contracting officers should be allowed wide latitude to exercise business judgment. Contracting officers shall-

(a) Ensure that the requirements of 1.602-1(b) have been met, and that sufficient funds are available for obligation;

(b) Ensure that contractors receive impartial, fair, and equitable treatment;

(c) Request and consider the advice of specialists in audit, law, engineering, information security, transportation, and other fields, as appropriate;

I don't think that what I wrote is misleading. I was referring to when a KO doesn’t know whether a statute must expressly preclude deviations or “isn’t aware of” or “doesn’t know” if any law or regulation precludes a deviation or allows another course of action. It would be necessary to request and consider the advice of specialists, if they are considering deviating from established laws and regulations or taking some action other than a routine change to the requirements. 

You omitted paragraph 1.602-2 (a), which refers to 1.602-1 (b). 

Said paragraph 1.602-1 (b) requires the KO to ensure that "all requirements of law, executive orders, regulations, and all other applicable procedures, including clearances and approvals, have been met."  

Whether or not it takes a small army is debatable.  I think that you and I would agree that it probably takes more than the KO acting on their own, then simply stating:  "Authority for the action is by mutual agreement of the parties - here's my Warrant No.".

joel hoffman said:

I don't think that what I wrote is misleading at all. As for "What is appropriate" with respect to requesting and considering the advice of specialists,    you omitted paragraph 1.602-2 (a), which refers to 1.602-1 (b). 

That paragraph  does require the KO to ensure that "all requirements of law, executive orders, regulations, and all other applicable procedures, including clearances and approvals, have been met." 

Whether or not it takes a small army is debatable.  Apparently you agree that it takes more than the KO acting on their own, then stating:  "Authority for the action is by mutual agreement of the parties - here's my Warrant No.".

Saying that there is an imperative (authoritative command) to request and consider the advice of specialists when (1) a KO doesn't know or (2) isn't aware if any law or regulation precludes a deviations seems misleading. The plain language says as appropriate.

What is appropriate will vary from KO to KO, Team to Team, and is driven by the deviation at-hand. I don't think it is accurate to make a blanket assertion that if a KO doesn't know or isn't aware of a preclusion that they shall request and consider advice of specialists. (at least affirmatively outside of the normal deviation and clearance approval process, for example)

Maybe I should have said your assertion was unclear or ambiguous, to me, rather than misleading. If all you meant is that whenever a KO deviates they need express authority (e.g., approvals and clearances from others), then I agree. After all, we don't always know what we don't know with regards to awareness.

As appropriate requires harmony with FAR 1.602-2(a):

"Ensure that the requirements of 1.602-1(b) have been met, and that sufficient funds are available for obligation;"

FAR 1.102-4(e):

"If a policy or procedure, or a particular strategy or practice, is in the best interest of the Government and is not specifically addressed in the FAR, nor prohibited by law (statute or case law), Executive order or other regulation, Government members of the Team should not assume that is prohibited. Rather, absence of direction should be interpreted as permitting the Team to innovate and use sound business judgment that is otherwise consistent with law and within the limits of their authority. Contracting officers should take the lead in encouraging business process innovations ensuring that business decisions are sound."

And FAR 1.402 (when deviating from FAR).

Jamaal, I want to emphasize that the KO should****** work with “the government members of the team” and not to skip from “I don’t know of any...” or “I am not aware of any...” to “I may assume...”. That’s all. 

This thread went from a simple “can I cite two authorities on a mod?” to debates over ideas such as:  “why cite anything?”,  just “say mutual agreement of the parties” ,  “here’s my warrant number” , “the KO can pretty much do anything if they obtain consideration” , “test questions” , “its not necessary to justify my actions”,   “if you don’t agree with me it’s your responsibility to prove it” and beyond. 

I suggest a reading of one of the editions of “Formation of Government Contracts” for a good discussion of the authorities for contracting and authorities and responsibilities of government personnel, etc. 

** EDIT: To clarify that I paraphrased earlier above that FAR directs the KO to (the KO shall ) consult with specialists "as appropriate"    Thus - I think that it is appropriate under those circumstances. Hope that makes my earlier post clearer or unambiguous. 

https://nortonsafe.search.ask.com/web?q=paraphrase definition&guid=symc-empty-guid-01d9-d5ff-6c29-513f-52cf-6042-9d1d-8846&installSource=compliancePopup&chn=1000&prt=LegacyExtension&ver=1.1.6&doi=2018-12-18&o=APN11910&geo=en_US&ctype=&tpr=121

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par·a·phrase

[ par- uh-freyz]

NOUN

1. a restatement of a text or passage giving the meaning in another form, as for clearness; rewording.

2. the act or process of restating or rewording.

@joel hoffman

Most threads take several turns.

Since this thread is about modifications, the Administration of Government Contracts series is another great resource. It contains information regarding deviating from regulations and waiving statutory requirements; and offers a section on authority.

Steven Feldman's Government Contract Guidebook, 4th ed., states that unless an agreement is palpably illegal, the government is bound by the commitments of its agrnts acting within their authority,  even when they make a unilateral error of law or fact; and cites this case:

https://casetext.com/case/broad-ave-laundry-and-tailoring-v-us

Thanks for the discussion. The exercise prompted some learning.

Jamaal Valentine said:

@joel hoffman

Most threads take several turns.

Since this thread is about modifications, the Administration of Government Contracts series is another great resource. It contains information regarding deviating from regulations and waiving statutory requirements; and offers a section on authority.

Steven Feldman's Government Contract Guidebook, 4th ed., states that unless an agreement is palpably illegal, the government is bound by the commitments of its agrnts acting within their authority,  even when they make a unilateral error of law or fact; and cites this case:

https://casetext.com/case/broad-ave-laundry-and-tailoring-v-us

Thanks for the discussion. The exercise prompted some learning.

Yep. That's what we want to avoid.  Thank you, too.  Are you still "over there"?

@joel hoffman 

Yes, sir. I plan on being back in the states soon though!

On ‎3‎/‎15‎/‎2019 at 1:07 PM, Retreadfed said:

Lionel said, "relinquishing legal rights serves as adequate consideration."  Legal rights are a property interest vested in the government.  Do contracting officers have the authority to divest the government of its property rights without such authority being granted in a contract clause?

In Whittaker Corp., ASBCA 18422, 81-1 BCA ¶ 15,055, the contracting officer did just that. The contracting officer granted an appeal right that a mandatory contract clause precluded. The Board found that the CO's action was "well within the ambit of the contracting officer's authority to administer the contract."

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IN ANY EVENT, WE THINK THE CONTRACTING OFFICER’S AGREEMENT, AS EVIDENCED BY CONTRACT MODIFICATION NO. 16, TO GRANT AN APPEAL RIGHT UNDER THE DISPUTES CLAUSE FOR CONSIDERATION CONSTITUTED A WAIVER OF THE RIGHT CONFERRED ON THE GOVERNMENT BY THE CLAUSE IN QUESTION. ADEQUATE CONSIDERATION FOR THIS WAIVER WAS GIVEN AND THE GRANTING OF SUCH A WAIVER WAS WELL WITHIN THE AMBIT OF THE CONTRACTING OFFICER’S AUTHORITY TO ADMINISTER THE CONTRACT. WE PERCEIVE NO DISTINCTION BETWEEN THIS WAIVER AND OTHERS A CONTRACTING OFFICER MAY CONFER FOR CONSIDERATION SUCH AS DELIVERY FAILURES, TERMINATIONS FOR DEFAULT AND THE ACCEPTANCE OF LESS THAN A SPECIFIED PERFORMANCE. ACCORDINGLY, WE DO NOT CONSIDER THE GOVERNMENT’S ARGUMENT THAT THE CONTRACTING OFFICER ACTED ULTRA VIRES IN VIEW OF ASPR 1-109 AND THE CHRISTIAN DOCTRINE APPLICABLE THERETO TO BE MATERIAL TO THE QUESTION OF THE BOARD’S JURISDICTION IN THIS CASE. IT IS THE GOVERNMENT’S CONTENTION THAT SINCE THE REFERENCED ASPR SECTION WAS A PART OF THE CONTRACT PURSUANT TO THE CHRISTIAN DOCTRINE THE CONTRACTING OFFICER HAD NO AUTHORITY TO DEVIATE THEREFROM WITHOUT FOLLOWING THE PRESCRIBED PROCEDURE. THIS CONTENTION IS IMMATERIAL SINCE WE DO NOT CONSIDER THE ACT OF THE CONTRACTING OFFICER TO BE A DEVIATION FROM ASPR.

A contracting officer does not need authority from a contract clause to relinquish a legal right.

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If an agency can waive (deviate from) a statute, I think the statute has to give the agency explicit authority to do so.

I agree in general. However, from Formation of Government Contracts:

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A judicially forged exception to the requirement for specific statutory authority for a government official to waive a statute has been applied to the Assignment of Claims Act, 41 U.S.C. § 6305(b). This statute states that any prohibited assignment "shall cause the annulment of the contract." In Tuftco Corp. v. United States, 222 Ct. Cl. 277, 614 F.2d 740 (1980), the court held that a contracting officer possessed the necessary authority to waive the statute. This seemingly controverts not only conventional concepts of sources of authority, but also the specific policies inherent in the Act.

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If an agency can waive (deviate from) a statute, I think the statute has to give the agency explicit authority to do so.

   I [Don] agree in general. However, from Formation of Government Contracts:

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A judicially forged exception to the requirement for specific statutory authority for a government official to waive a statute has been applied to the Assignment of Claims Act, 41 U.S.C. § 6305(b). This statute states that any prohibited assignment "shall cause the annulment of the contract." In Tuftco Corp. v. United States, 222 Ct. Cl. 277, 614 F.2d 740 (1980), the court held that a contracting officer possessed the necessary authority to waive the statute. This seemingly controverts not only conventional concepts of sources of authority, but also the specific policies inherent in the Act.

Yes, I read that, too. Here is a link to the Case: 

 https://casetext.com/case/tuftco-corp-v-united-states

Some Highlights:

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This case, involving the assignment to plaintiff of contracts for the purchase of mobile homes by the Department of Housing and Urban Development (HUD), is before the court on cross motions for summary judgment. Plaintiff complains that the Government, though it was aware of and recognized assignment of the contracts from the original contractor to plaintiff, nevertheless wrongfully forwarded some of the payments due under the contracts to the original contractor, resulting in plaintiff's loss. The Government, relying on the Anti-Assignment Act, 41 U.S.C. § 15 (1976) (hereinafter, "Act" or "Anti-Assignment Act"), contends the contracting officer lacked authority to recognize the assignments; therefore the payments to the original contractor were proper. We find the contracting officer possessed the requisite authority to waive the Act's requirements and that the actions of defendant constituted a valid recognition of the assignments. Accordingly, we award judgment in favor of plaintiff.

 The original contractor arranged to have the plaintiff manufacture and deliver mobile homes directly to HUD and assigned the payments (contract?)to the Plaintiff.  The Government  recognized the assignment and initially made payments to the plaintiff but later wrongly made payments to the original contractor -  

On a second contract, the same contractor arranged to split the order for mobile homes with the plaintiff and assigned that part of the payments to the plaintiff.  I think that the government mishandled the payments the same way on that contract.

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It is appropriate to emphasize that before each assignment was effected both [Plaintiff] and [original contractor] contacted Scroggs, the contracting officer, to inform him of their proposed arrangements. [The KO] advised them that, despite the Anti-Assignment Act, if [Plaintiff] would assume [original contractor's] obligations HUD would make all payments directly to [Plaintiff] on the first contract and to the law firm for the second contract, instead of directly to [original contractor].   [Plaintiff's agreement to the assignment with [original contractor]  was conditioned upon its belief HUD payments would be made to it rather than [original contractor]

The original contractor sent some of the wrongful payments to the plaintiff but kept $94,827 of the wrongful payments.

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Whether through mistake, inadvertence or by intentional decision, HUD made total payments of approximately $260,000 to [original contractor] under contract H-3154 and approximately $504,800 to [original contractor] under H-3341. [Original contractor's] Vice-President, turned over a portion of the payments to [Plaintiff] but fraudulently disposed of the balance and failed to account to [Plaintiff] or to the law firm on behalf of [Plaintiff].

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In March 1973 [Plaintiff] filed suit against Grant and Gradsky in the United States District Court for the Eastern District of Tennessee, Southern Division, Civil Action No. 6710, seeking recovery of [Plaintiff's] share of the payments made by HUD directly to [original contractor] On December 4, 1974, the court entered judgment for Winchester in the amount of $111,895.86, including interest, against [original contractor]. Despite [Plaintiff's] diligent efforts to collect the judgment it has been unable to recover any of it. On September 18, 1978, plaintiff filed its petition in this court to recover from the Government the $111,895.86 judgment it cannot collect from [original contractor] under contract H-3154 and approximately $504,800 to [original contractor] under H-3341.

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Though the Anti-Assignment Act would normally prohibit assignments of this nature, plaintiff contends the contracting officer acted within his authority by waiving the Act's requirements and recognizing the assignments. Defendant was therefore bound by the terms of the assignments and must be held liable for its failure to fulfill its obligations under them.

The Court went on to explain that waivers of the Anti-Assignment Acts had been held valid under certain circumstances, including circumstances similar to this case.

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Consistent with the situations in which the Anti-Assignment Act has been deemed inapplicable stands the long-recognized principle that "Despite the bar of the Anti-Assignment statute ( 41 U.S.C. § 15), the Government, if it chooses to do so, may recognize an assignment."

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In summary, the court holds that because [The Government] had knowledge of, assented to, and recognized the assignment of contracts H-3154 and H-3341 from [original contractor] to [Plaintiff] it is liable for the losses sustained by plaintiff resulting from the payments made to [original contractor] in contravention of the terms of the assignments. 
...Judgment is entered for plaintiff in the sum of $94,827.00.

***SO -  there was longstanding case law supporting the waiver of the Anti-Assignments Act by the government, under appropriate circumstances.

The KO screwed up by making some payments to the wrong party... The scew-up (not the waiver of the Statute) cost the taxpayers almost $95,000.

Don, was Whittaker a CDA case or was it brought under the previous regulatory authority that governed disputes prior to the CDA?

As for the Tuftco decision, I learned a long time ago that statutes, regulations and contracts mean and say what the courts say they mean.  We should note that the principle sated in Tuftco and the decisions upon which it was based is now stated in FAR Subpart 12.4.

Retreadfed said:

Don, was Whittaker a CDA case or was it brought under the previous regulatory authority that governed disputes prior to the CDA?

It was pre-CDA--contract was awarded in 1968.