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Preface i
Introduction iii
Chapter 1. Solicitations
1 You failed to read the entire solicitation, including any 2
clauses incorporated by reference.
Chapter 4. Protests
20 You submitted a protest that did not contain all the 28
required elements, particularly a statement of how you
were prejudiced by the improper agency action.
21 You selected the wrong forum for your bid protest (the 28
procuring agency, the Government Accountability Office,
or the Court of Federal Claims).
25 You did not request the use of the test program for 36
commercial items.
85 You failed to insist that auditors provide you with a letter or 104
entrance briefing explicitly stating the scope of the audit.
88 You failed to insist that the auditors provide you with an 106
exit briefing stating their findings.
Smart contractors print out a copy of all clauses threshold (SAT)—($100,000)—and COs are
and provisions incorporated into a solicitation instructed to solicit quotations verbally to the
by reference and insert them into the master maximum extent practicable.21 Verbal RFPs are
solicitation file so they can be reviewed carefully authorized when a written solicitation would delay
before preparing a bid or proposal. the procurement and notice is not required.22
There is no substitute for a detailed, in-depth An example of the type of problem you can
reading of your solicitation before preparing your encounter when you rely on verbal advice can
offer. Only then are offerors assured that their be found in the case of Spacesaver Storage
offer conforms to the solicitation and that their Systems, Inc.23 This case involved a best-value
prices reflect every obligation contained in the procurement for weapon storage systems,
solicitation’s clauses, terms, and conditions. wherein the solicitation specifically provided
that high-pressure laminate end panels were not
permitted. Spacesaver, however, asserted that the
4 agency had advised it verbally that high-pressure
laminate end panels would be acceptable.
You relied on the verbal
Spacesaver’s offer was deemed not acceptable
representations of a by the government. Again, verbal advice that
government official rather than conflicts with the unambiguous terms of a
on the written solicitation. solicitation is not binding on the government, and
a contractor relies on such advice at its own risk.
Contractors should never rely on the verbal
representations of government officials,
particularly during the bidding stage.19 Verbal 10
advice from an agency that is inconsistent with
You submitted a nonconforming
the unambiguous terms of the solicitation is not
binding on the government, and offerors who rely
bid or noncompliant proposal.
on such advice do so at their own peril.20
It is essential to submit a conforming bid in response
Contractors frequently call government officials to an invitation for bids (IFB), or a compliant
and ask for clarifications in an RFP or IFB. This is a proposal in response to an RFP. In sealed bidding,
bad practice. As previously mentioned, if there are award may be made only to a responsible bidder
patent ambiguities, offerors should address their whose bid conforms to the IFB and is lowest in
questions in writing to the CO. You should get into price (including price-related factors, such as
the habit of doing and demanding everything in transportation).20 Any bid that does not conform
writing. There must be a written amendment for to the essential requirements of the IFB must be
a change to a solicitation to be binding. The CO’s rejected.21
verbal advice alone just won’t do.
Examples of ways bids might not conform to
Verbal solicitations are permitted in some cases, solicitation requirements include the following:
but offerors must recognize that those situations
are carefully circumscribed in the FAR. Verbal ß Failing to conform to the specifications in the
solicitations may be used for micropurchases, IFB;
as well as those under the simplified acquisition
The 100 Worst Mistakes in Government Contracting
ß Failing to state a specific price, or stating a The Truth in Negotiations Act (TINA) requires
qualified price; that contractors furnish cost or pricing data
before an agreement on price for most negotiated
ß Limiting the government’s rights under any procurements of more than $650,000.1 Cost or
clause; or pricing data mean all facts (1) that a prudent
buyer or seller would reasonably expect to
ß Failing to acknowledge a material amendment significantly affect price negotiations and (2) that
to an IFB. were available at the time the contract’s price was
agreed to.2 This data must be certified as “accurate,
In a negotiated procurement, the government current, and complete” by the contractor.3 The
makes an award to the offeror whose proposal government’s purpose in obtaining such data is to
represents the best value after evaluation in determine price reasonableness or cost realism.
accordance with the evaluation factors provided Cost or pricing data are factual and verifiable,
in the solicitation.22 One of the evaluation factors not judgmental. Although it may not indicate the
must be price.23 A proposal that fails to conform accuracy of the prospective contractor’s judgment
to the material terms and conditions of the about estimated future costs or projections, it
solicitation is technically unacceptable and may does include the data forming the basis of the
not form the basis for an award.24 The material contractor’s judgment.4 It is more than mere
terms of a solicitation are those that affect the historical accounting data. It encompasses all facts
price, quantity, quality (specifications), or delivery that can be reasonably expected to contribute
of the goods or services offered.25 Examples of to the soundness of future cost estimates and to
technically unacceptable proposals that fail to the validity of determinations of costs already
conform to the material terms of a solicitation incurred.5 Examples provided in FAR 2.101 include:
include proposals that do the following:
ß Vendor quotations;
ß Alter delivery locations in the RFP, or take
exception to the delivery schedule, ß Nonrecurring costs;
and to promote government policies. Some clauses if and to the extent that the government does so.
explicitly mandate their inclusion in all subcontracts Absent this right, the prime contractor would be
(e.g., the audit clause,1 the cost accounting forced to continue a subcontract even after the
standards clause,2 and the equal opportunity government has indicated it no longer wants the
clauses3), while other clauses implicitly require goods or services. By including the termination
their flow-down (e.g., the Davis-Bacon Act4 and the for convenience clause, the prime contractor
Service Contract Act of 1965 clauses5). Strangely can terminate the subcontractor, subsequently
enough, the government does not require, either obtain a termination settlement proposal from
implicitly or explicitly, the flow-down of the changes the subcontractor, and then incorporate that
clause,6 or the termination for convenience clause.7 subcontractor’s proposal into the overall termination
However, it is essential that these two clauses for convenience settlement proposal, thus
flow down in every subcontract. The concepts protecting both the prime and subcontractors.
of a change or a termination for convenience
are antithetical to the common law governing Changes—The changes clause provides the
commercial contracts, which would otherwise government the necessary flexibility to meet
require mutual agreement by the parties in order to its changing needs. As requirements fluctuate,
change any term of an existing contract.8 Failure to the government will issue a change order, thus
include these clauses in a subcontract will leave the unilaterally modifying a contract, provided the
prime contractor vulnerable. change is within the overall scope of the existing
contract. Of course, contractors are entitled
Termination for Convenience—A termination to an equitable adjustment in time and cost
for convenience typically occurs where funds to resulting from those change orders. But, again, it
continue a contract become unavailable or there is essential that the changes clause be included
is a change in the government’s requirements (e.g., in all subcontracts in the same manner as the
there is an advance in technology or an ongoing termination for convenience clause. Specifically, the
war ends). The clause provides the government prime contractor should reserve the right to “make
with the ability to quickly adjust to changing needs. changes within the general scope of this subcontract
The result is that government contractors must in any one or more of the following: drawings,
also provide themselves with similar flexibility in designs, or specifications…method of shipment…or
their subcontracts. Therefore, it is imperative that place of delivery, to the extent the prime contract is
prime contractors reserve the right to terminate changed by the government and this change affects
their subcontracts in the event of a government the subcontract.” Again, the subcontractor should be
termination for convenience. granted a right to an equitable adjustment. Absent
the right to make a change in the subcontract, the
Subcontracts should state: “In the event that the prime contractor will be forced to accept goods for
prime contract is terminated in whole or in part which specifications have changed or, more likely,
for convenience of the government, the prime goods or services that are of no use whatsoever to
contractor may terminate performance under this the prime contractor or the government because the
subcontract to the same extent as the prime contract government has issued a change order. By including
was terminated.” This arrangement preserves the the changes clause, the prime contractor can flow
fairness and commerciality of the subcontract. The down any changes from the government, obtain the
prime contractor does not enjoy the unfettered right subcontractor’s request for equitable adjustment
to terminate for convenience whenever it wishes, (REA), and then incorporate that REA into the
but it retains the right to terminate for convenience overall REA for the change order.
The 100 Worst Mistakes in Government Contracting
Aside from the termination for convenience and determinations and findings. [They] may bind the
change clauses, prime contractors should examine [g]overnment only to the extent of the authority
their contracts carefully and, whenever there is delegated to them, [and they] shall receive from the
a doubt, flow down a particular FAR clause to appointing authority clear instructions in writing
the subcontract. For instance, the termination for regarding the limits of their authority. Information on
default clause9 substantially restates the common the limits of the contracting officers’ authority shall be
law remedy of cover in the event of default (i.e., readily available to the public and agency personnel.1
the contractor is liable to the government for the
excess cost of reprocurement). Yet, no harm is Although not clearly stated in the FAR, government
caused by its inclusion in a subcontract, and it personnel and contractors often speak of the
will serve to explicitly state the prime contractor’s officials who possess this authority as “warranted
remedy in the case of a subcontractor’s default. contracting officers.”2
The flow-down of FAR clauses is accomplished Contract specialists (who work for contracting
easily by incorporating the text of the clause by officers, or COs) do not possess this inherent
reference to its FAR number, and by stating in the authority, nor does a contracting officer’s
subcontract that “the clauses are incorporated by representative (COR); a contracting officer’s
reference with the same force and effect as if set technical representative (COTR); or any other
forth in full text.” The subcontract should go on inspector, auditor, or similar person working
to state that whenever the term “government or for the CO. As a default, only the CO can give
contracting officer” appears in the clause, it shall you direction, interpret specifications, demand
be replaced by “prime contractor” and whenever changes, or revise your written contract in any way.
the term “contractor or prime contractor”
appears in the clause, it shall be replaced An administrative contracting officer (ACO)
by “subcontractor.” Subcontracts, like prime refers to a CO who is administering contracts.3
contracts, commonly include pages of FAR clauses Contractors frequently confuse the CO, who
incorporated by reference. Their inclusion will has contracting authority, with the ACO, who
protect you and your subcontractors. normally does not. The most common CO/ACO
split occurs in the Department of Defense (DOD),
where procuring commands employ the CO, but
36 where the contract is administered by the Defense
Contract Management Agency (DCMA) and a
You accepted direction from
group of ACOs. Although a CO may delegate his or
an unauthorized official her authority to an ACO, such delegation is rare.
regarding your obligations
under a contract. It is easy to find out if ACOs, CORs, COTRs, or
inspectors who seek to direct you or make a
Government contract cases are filled with change in your contract have the authority to do
examples of contractors who took direction from so—just ask them for their written delegation
officials who had no authority to direct them. The of authority!4 If it isn’t in writing from a CO (or a
FAR states: delegatee), it isn’t valid direction under the FAR.
If they are reluctant to give you copies of their
Contracting officers have authority to enter into, delegation, you should conclude that they possess
administer, or terminate contracts and make related no such authority and should contact your CO.
The 100 Worst Mistakes in Government Contracting
The case law is filled with contractors who took may be additional review levels above the CO who
direction from someone without authority, and the actually signs the contract, or there may simply be
result is almost always the same: the court or board funding issues that make it impossible for a CO to
finds against the contractor or denies the claim sign a contract. Regardless of the issues involved,
because the contractor did not comply with the no contractor should initiate performance or incur
written contract.5 costs until it receives a signed copy of the contract
award. Starting work prior to formal award of a
Here’s an example: In a contract to design, contract results in significant risk of nonpayment
fabricate, install, and maintain exhibits for the to the contractor.
United States Pavilion at the 1984 Louisiana World
Exhibition in New Orleans, the contractor asserted A contractor may receive a written letter outlining
that it had been directed to perform additional the government’s intent to award the contract, but
work outside the scope of the contract on theaters that letter is not a contract award. Only an actual
and acoustical ceilings. However, the direction award of a contract on the requisite government
had been given by the contract specialist and the form or a letter contract constitutes an award. The
COTR. The contract clearly indicated that only government frequently awards unfunded contracts,
the CO had the authority to make changes in the which contain a clause stating that the government
requirements of the contract. Accordingly, the has no legal liability for any payment until funds
court denied the contractor’s claim of constructive are available, and the contractor is so notified
change because the directing officials lacked the in writing.42 An unfunded contract is, simply
authority to make such a change. However, where stated, not a contract at all because there is no
the CO ordered a change involving the installation consideration. A contractor should never succumb
of drywall, the court found that a constructive to government requests to begin work without
change had occurred and that the contractor was a signed contract. Contractor costs and liability
entitled to an equitable adjustment.6 are far too great; without a signed contract, the
government’s liabilities are generally zero.
Similarly, a solicitation’s contracting officer is
the only person to whom you should direct your The lack of a signed contract can pose extreme
questions about the solicitation. While you may problems when the contractor is the incumbent
communicate with a contracts specialist, a COTR, for a follow-on contract, either in the form of a
or a COR, these individuals have no authority to new contract or the exercise of an option. There is
advise you about the solicitation or to issue an a very serious question surrounding whether the
amendment to the solicitation. contractor should suspend work while waiting for
a new contract, the signed exercise of an option,
or new funding. Would such a suspension be
49 disruptive to the government and the contractor’s
workforce? The answer to both questions is,
On the promise of award, you
of course, yes, but that should not sway the
started to work and incurred contractor. Even if suspension of performance
costs before your contract was would be disruptive, the contractor should never
actually signed. place itself in the position of providing goods and
services to the government when no mutuality of
In government contracting, there can be numerous obligation exists between the parties. This is just
snags before a contract is actually signed. There plain good business sense.
The 100 Worst Mistakes in Government Contracting
i. Deliver the supplies or to perform the contractor may be terminated immediately upon
services within the time specified in this written notice.
contract or any extension;
The FAR indicates that if termination for
ii. Make progress, so as to endanger default appears appropriate, the CO should,
performance of this contract…; or if practicable, notify the contractor in writing
of the possibility of the termination through
iii. Perform any of the other provisions of this the issuance of a show-cause notice. However,
contract… a show-cause notice is not mandatory. FAR
49.402-3(e)(1) describes a show-cause notice as
7. The [g]overnment’s right to terminate this follows:
contract under subdivisions (1)(ii) and (1)(iii)
above, may be exercised if the [c]ontractor does This notice shall call the contractor’s attention
not cure such failure within 10 days (or more if to the contractual liabilities if the contract is
authorized in writing by the [c]ontracting terminated for default, and request the contractor
[o]fficer) after receipt of the notice from the to show cause why the contract should not be
[c]ontracting [o]fficer specifying the failure.1 terminated for default. The notice may further
state that failure of the contractor to present an
The form of a cure notice is given in the FAR: explanation may be taken as an admission that
no valid explanation exists. When appropriate,
Cure Notice: You are notified that the [g]overnment the notice may invite the contractor to discuss the
considers your…[specify the contractor’s failure matter at a conference.
or failures] a condition that is endangering
performance of the contract. Therefore, unless this The FAR specifies the following format for a show-
condition is cured within 10 days after receipt of this cause notice:
notice [or insert any longer time that the contracting
officer may consider reasonably necessary], the Show-Cause Notice: Since you have failed to…[insert
[g]overnment may terminate for default under the “perform Contract No…within the time required
terms and conditions of the…[insert clause title] by its terms,” or “cure the conditions endangering
clause of this contract.2 performance under Contract No…as described to
you in the [g]overnment’s letter of…(date)”], the
As you can see, a cure notice indicates that [g]overnment is considering terminating the contract
the contracting officer (CO) believes a default under the provisions for default of this contract.
termination is appropriate and imminent, Pending a final decision in this matter, it will be
unless the contractor corrects the deficiency or necessary to determine whether your failure to
furnishes clear and convincing evidence that the perform arose from causes beyond your control and
deficiency is through no fault of the contractor. without fault or negligence on your part. Accordingly,
In those circumstances, assistance of legal you are given the opportunity to present, in writing,
counsel should be considered. More important, any facts bearing on the question to…[insert the
the contractor must respond to the cure notice name and complete address of the contracting
immediately. officer], within 10 days after receipt of this notice.
Your failure to present any excuses within this time
Note that no cure notice is required where the may be considered as an admission that none exist.
contractor fails to deliver supplies on time. The Your attention is invited to the respective rights
The 100 Worst Mistakes in Government Contracting
of the [c]ontractor and the [g]overnment and the ß Failing to disclose all of a company’s
liabilities that may be invoked if a decision is made to commercial sales practices and discounts
terminate for default.3 when forming multiple award schedule (MAS)
contracts;
Any contractor who receives a show-cause notice
should again make a substantial and convincing ß Failing to implement the required price
written argument to the CO as to why the default is reductions associated with most-favored-
inappropriate. The response should also request customer pricing on MAS contracts;
a meeting with the CO to see if the matter can be
resolved without a default. ß Defectively pricing a contract proposal
(i.e., submitting cost or pricing data to the
government that is not current, accurate, and
90 complete);
ß Be scrupulously honest in all dealings with the ß Failing to comply with equal opportunity and
government, written or oral; and affirmative action requirements;
ß Provide only accurate statements, written ß Failing to comply with the rules on
or oral, to the government. In the event you government furnished property; or
discover that you’ve made an inaccurate
statement, correct it immediately by informing ß Failing to comply with quality control or
the government of the error. quality assurance provisions of a contract.
In addition to helping a contractor avoid criminal Compliance programs are a prophylactic measure,
liability, compliance programs will also help informing employees as to what they can and
prevent a contractor from making other costly cannot do and sensitizing the entire company to
mistakes such as: the need for integrity and ethics in government
The 100 Worst Mistakes in Government Contracting
contracting. The nine essential elements in an should not let this prevent them from obtaining a
effective government contracts compliance resolution of their important claims.
program include:
Frequently, COs either fail to make a final decision
8. A responsible individual to manage the on a claim in a timely manner or ignore the claim
program; altogether. Fortunately, the CDA provides an escape
hatch for the contractor. Under the CDA, a CO must
9. An ethics code; issue a decision on any claim of $100,000 or less
within 60 days. For claims of more than $100,000,
10. Regular training and communication to the CO must either issue a decision within 60 days
employees; of receipt or notify the contractor of the time within
which a decision will be issued (which has been
11. A hotline; interpreted to mean an exact number of days or an
exact date18). Most importantly, the CDA provides
12. Internal reviews; that “[a]ny failure by the contracting officer to
issue a decision…within the period required will
13. Timely corrective actions; be deemed to be a decision by the contracting
officer denying the claim and will authorize the
14. A disciplinary mechanism or other means of commencement of the appeal or suit on the claim
enforcement; [in the COFC or a board].”19
15. Good discretion in delegation of authority; and This deemed denied provision gives contractors
a simple remedy for recalcitrant COs who fail to
16. Self-reporting, cooperation, and acceptance of comply with the CDA’s final decision requirements.
responsibility.1 Contractors can immediately file an appeal of their
claim at the board or the COFC, and either will
acknowledge jurisdiction. The court or board may
98 either commence the appeal or stay proceedings
and order the CO to make a final decision.20 The
When the contracting officer
only reason for not proceeding with a deemed
failed to issue a final decision denial on a claim would be if the contractor was
on your claim within 60 days engaged in delicate negotiations with a CO that
of its submission (or failed to would be upset by the initiation of an appeal.
schedule a date certain for
issuance of a final decision),
you failed to deem your claim 100
denied and to immediately You failed to perform as a
appeal to a board of contract world-class contractor.
appeals or the U.S. Court of
Federal Claims. In today’s government contracting environment,
satisfactory performance will not ensure current
It is human nature to delay difficult decisions, or future success. For the contractor to grow as
and COs are human beings. However, contractors a business, the performance of a government
The 100 Worst Mistakes in Government Contracting