Contracting

Contractor’s email attachment did not bind the government in a work order

Sometimes paperwork is just paper. A contractor submitted three bids for a contract to remove medical waste at facilities operated by the Health and Human Servi...

Tom Temin@tteminWFED

January 31, 2024 12:20 pm

8 min read

Sometimes paperwork is just paper. A contractor submitted three bids for a contract to remove medical waste at facilities operated by the Health and Human Services. Only the middle of the three bids included an attachment. When it won the contract on the third bid, the company figured, the terms in the attachment applied. The government disagreed. For more on what happened, the Federal Drive with Tom Temin spoke with Haynes Boone procurement attorney Dan Ramish.

Interview Transcript:

Tom Temin And the sounds like something totally arcane, but the contractor really went in with some strange expectation. Sounds like.

Dan Ramish Yeah, Tom, you know, during the course of bidding or quoting government contracts, often there are documents that are exchanged both by the contractor and by the government. And a question that comes up and is sometimes important is which of those documents ultimately become part of the binding contract between the government and the contractor? I think the way you described it is correct that this was a civilian board of contract appeals case involving a contract for disposing of pharmaceutical waste, and the contractor included that, as you said in their second quote, this ESA.

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Tom Temin ESA stands for.

Dan Ramish Environmental Services Agreement.

Tom Temin Got it. Okay.

Dan Ramish The reason they thought the environmental services agreement would be part of the contract was because of discussions they had during the quoting process with the government, and they included an email in the record before the civilian board, indicating that they were attaching the ESA and providing it to the contract specialist. And the email mentioned, you know, that they were providing it as discussed. So, this was something that came up in the quoting process, and there was at least an informal understanding that it would be part of the purchase order that resulted from the quote.

Tom Temin All right. And what was in that attachment that became so important here?

Dan Ramish So the requirement specifically in the ESA that became important was that the government was to provide a waste profile describing the waste before the contractor would come and pick it up and dispose of the waste. And ultimately in performance after the purchase order was awarded Clean Harbors, the contractor here received a request to pick up and dispose of waste from the government, and the contractor responded requesting a waste profile, which the government didn’t provide.

Tom Temin So the company expected the government to abide by that ESA it had attached, and the government thought it was just an attachment from an earlier bid that didn’t have anything to do with the task order.

Dan Ramish Well, whether or not the government thought it was part of the contract, they later argued that it wasn’t. There may have been an informal understanding between the contractor and the contract specialists that this requirement would apply through the ESA, but that doesn’t necessarily make it part of the contract, right?

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Tom Temin So the contractor’s expectation the government was going to do such and such per the ESA. The government didn’t consider the ESA part of the contract. And so, it came to kind of a standstill, the whole thing.

Dan Ramish Right. So, the contractor asked for the waste profile. There was no requirement for a waste profile to be provided, except in this ESA, that the government would argue wasn’t part of the contract. And after the government didn’t provide the waste profile, contractor didn’t pick up the waste. Ultimately, the contract was terminated for cause.

Tom Temin In the government’s view then the contractor again, Clean Harbors Environmental Services simply wasn’t performing in the government’s view.

Dan Ramish That’s right. And Clean Harbors said that it didn’t have an obligation to pick up the waste until the government provided the waste profile.

Tom Temin All right. They got to this point where the termination happened. And then what did Clean Harbors Environmental Services do?

Dan Ramish So following the termination, Clean Harbors appealed to the Civilian Board of Contract Appeals, challenging the termination for cause and the thrust of their argument, at least in this initial decision, was that the ESA again was part of the contract and the government was required to provide a waste profile before the contractor was required to pick up the waste.

Tom Temin We’re speaking with Dan Ramish. He’s a procurement attorney with Haynes Boone. And yeah, this gets really crucial then because if that ESA requiring the waste profiles was not in the actual contract, this is something apparently the company overlooked because what you sign is the contract, not the attachments in the bid. And so, if those terms weren’t incorporated, this is something it sounds like the contractor missed.

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Dan Ramish Yes, the contractor apparently didn’t catch that the purchase order didn’t specifically reference the ESA. The purchase order incorporated the third quote, which didn’t attach the environmental services agreement.

Tom Temin All right. And so, what did the contract Appeals board say here?

Dan Ramish So the board first looked at the purchase order itself. There was a section of the purchase order, section D, which listed documents that were part of the contract. And those included the statement of work and Clean Harbors’ third and final quote. But again, the quote itself didn’t attach or reference the ESA. And at least that third quote that was actually incorporated, and the ESA wasn’t otherwise listed in section D or otherwise referenced in the contract. And it wasn’t attached to the purchase order either. Clean Harbors pointed to language in the RFQ that allowed the contractors to submit equal items with supporting descriptive literature, and the contractor argued that it was doing that with the ESA that it was providing an equal service offering with this waste profile requirement. But the board said that language in the RFQ was calling for the contractor to provide descriptive literature to support that the items met the requirements of the RFQ, not to alter the terms and conditions.

Tom Temin Interesting. So, they might as well have attached a Girl Scout cookie order for all the effect it had on the final contract or the final order.

Dan Ramish That. That’s right.

Tom Temin Just to put it bluntly.

Dan Ramish It didn’t really matter what else was attached to their quotation because it wasn’t specifically referenced in the final purchase order. And there’s actually quite a high standard for incorporating documents by reference into a government contract. And the civilian board quoted from the Federal Circuit case law on this point. The language used in the contract to incorporate extrinsic material by reference must explicitly or at least precisely, identify the written material being incorporated, and must clearly communicate that the purpose of the reference is to incorporate the reference material into the contract, rather than merely to acknowledge that the reference material is relevant to the contract, such as background law or negotiating history.

Tom Temin And there you have it. So, it’s got to be explicit and carry over into what is eventually signed by the two parties.

Dan Ramish That’s right. If there’s no mention of it in the contract, unsurprisingly, it doesn’t automatically become part of the contract just because it was part of the discussions during the quoting or bidding process.

Tom Temin Right. And the civilian Board of Contract Appeals also looked at the content of that attachment and found a bunch of other things that the government could not have complied with, even if it wanted to.

Dan Ramish That’s right. So, the ESA didn’t only include this waste profile requirement, but it also specified application of Massachusetts governing law, and it provided for different payment terms than what the purchase order provided. So inconsistent and illegal terms in that attachment also were factors for the board saying, hey, this couldn’t have been part of the contract in any case.

Tom Temin Sounds like the contractor attached a piece of boilerplate that nobody proofread to update for federal versus Massachusetts or wherever else they do business. I’m just guessing.

Dan Ramish I think that’s right. And, you know, in the commercial marketplace, documentation is exchanged all the time in the battle of the forms is a common process, but there is a particularly high standard in government contracts for incorporating documentation by reference to make it part of the contract. And this becomes important in some cases for the contractor, but in other cases for the government. For example, the government sometimes wants to rely on particular material included in the contractor’s proposal. And so, the government also has to be explicit about incorporating a proposal in which parts of the proposal become part of the contract.

Tom Temin Yeah. You can see why there is a high bar. Someone could attach the King James Bible or something and then, you know, say, well, we stone you if you don’t perform this contract or something. And so that’s the reason that there’s a lot of things people could slip in. And so, you have to be careful what you reference.

Dan Ramish Yes. There’s a large volume of information that is exchanged during the proposal process. So, it’s important to be explicit about what’s actually the contract and what’s just other information.