Commentary by Timothy Sullivan
Partner, Thompson Coburn, LLP
This column was originally published on the Public Contracting Institute’s website and was republished here with permission from the organization. This post is the tenth in a 10-part series, “Ten Myths of Government Contracting” that has been published weekly on FederalNewsRadio.com.
Webster’s Dictionary defines “boilerplate” as “the detailed standard wording of a contract.” In the world of government contracting, “boilerplate” usually refers to those standard provisions that are plucked from the Federal Acquisition Regulation (“FAR”) and dropped into the government’s solicitations and contracts. It is true that the solicitations and contracts issued by the government are filled with boilerplate, but it is also true that countless contractors have been burned by that very boilerplate.
Government contracts are contracts of adhesion, i.e., they aren’t deals that are negotiated from the ground up, created from scratch by the parties. If a company wants to do business with the U.S. government, it must be willing to accept the government’s demanding requirements, many of which are encapsulated in the boilerplate.
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Let’s start at the top: The FAR is the senior regulation for contracts with Executive Branch agencies, and in its paperback format it is almost two inches thick. Of course, the provisions and clauses that end up in solicitations and contracts are in just one part of the FAR — Part 52 — but in order to understand those clauses and the context in which they are supposed to be used, a contractor must consult the other 51 sections of the FAR.
It is difficult to sympathize with a contractor that gets upended by a standard FAR clause. There really is no excuse for not being aware of it or for not understanding it. The same can be said of the agencies’ supplements to the FAR. FAR clauses and agency supplemental clauses are all subject to a period of public comment required by the Administrative Procedure Act (“APA”).
This rulemaking process is carried out by publication in a document called the Federal Register, which is published every working day the federal government is open. The public — meaning you — is charged with knowledge of everything published in the Federal Register, even if you have not actually read it. And yet, contractors get tripped up by the FAR on a daily basis.
It is very likely that, pressed to answer under oath, a company official would admit that he or she had not actually read every clause in his company’s contract. This would not be a huge shock to anyone who has been in this business for a while. But most people would also tell you that they are aware of the clause because of their experience in the business. For example, it is difficult to imagine someone with five years or more of government contracting experience saying she had never heard of the “Termination for Convenience” clause. In addition, senior executives rely on their staffs to review and negotiate contracts, and they expect their personnel to understand the requirements inside and out. So the fact that the boss has not read a particular clause does not mean that no one else in the company has read it.
The real danger with contract clauses stems from what I will call “local clauses.” These are clauses drafted by a particular buying activity (i.e., an agency component) to address problems or concerns its contracting personnel have encountered. These clauses normally are not a product of the APA process, they have not been subjected to public comment, and they can be troublesome. Oftentimes the buying activity will put the title of such a clause in the solicitation (usually, but not always, in Section H, “Special Contract Requirements”) but leave it to the offeror to do the work necessary to find out what the clause actually says. The buying activity is betting that most offerors will either not notice it or will not do the work to determine what it means — and the buying activity would be right in most cases.
Here is an example. From time to time over the past 40 years, I have seen buying activities use a risk-shifting clause whose very title suggests mischief: “Contract Interpretation: Notice of Ambiguities.” The clause reads as follows:
This written contract and any and all identified writings or documents incorporated by reference herein or physically attached hereto constitute the parties’ complete agreement and no other prior or contemporaneous agreements either written or oral shall be considered to change, modify, or contradict it. Any ambiguity in the contract will not be strictly construed against the drafter of the contract language but shall be resolved by applying the most reasonable interpretation under the circumstances, giving full consideration to the intentions of the parties at the time of contracting.
It shall be the obligation of the contractor to exercise due diligence to discover and to bring to the attention of the Contracting Officer at the earliest possible time any ambiguities, discrepancies, inconsistencies, or conflicts in or between the specifications and the applicable drawings or other documents incorporated or referenced herein. Failure to comply with such obligation shall be deemed a waiver and release of any and all claims for extra costs or delays arising out of such ambiguities, discrepancies, inconsistencies and conflicts.
Without going into too much detail, the effect of this clause is to shift the risk of writing a poor specification from the buyer to the seller. Legend has it that this clause was hatched during the Vietnam conflict at the Oakland Naval Supply Center, a very busy buying activity, and it was so effective that it migrated across the country as contracting personnel were transferred.
There are a number of reasons why this clause is objectionable. Among other things, it eliminates the pesky contract interpretation rule known as contra proferentem by shifting the risk of latently ambiguous language from the government drafter to the contractor. I once heard a judge at the Armed Services Board of Contract Appeals tell an Army lawyer that this clause was unenforceable because it was unconscionable, and I agree with that. But what happens if, for whatever reason, a contractor fails to get this clause knocked out of a solicitation and now faces a contract interpretation battle with its federal customer? Well, if you draw the right judge, you might be in good shape, but if you get a judge who is not ready to make such a statement, you might find yourself on the witness stand being cross-examined by the government lawyer:
Lawyer: Mr. Johnson, before you prepared the proposal, did you read the entire solicitation, including this clause? There are two possible answers. Let’s try the first one:
Mr. Johnson: “Yes.”
There are judges who would then conclude that you were aware of this risk- shifting clause and priced your proposal with those risks in mind. So you will lose. Now let’s try the second answer:
Mr. Johnson: “No.”
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If that is your answer, a judge will have no sympathy for you. If you were reckless enough to submit a proposal without reading the solicitation, you will pay the price. After all, no competent judge is going to issue a decision saying that a clause can’t apply to your company because you didn’t read it before bidding.
So what is an offeror to do when reviewing a solicitation? First, understand the difference between standard FAR clauses and local clauses. Even with the standard FAR clauses, of course, you might come across one that is unfamiliar. If that happens, you have to review it to ensure that it is properly in the solicitation and that you understand it. If you don’t understand it, you need to do what it takes to fix that. Second, check to see if there are any local clauses in the solicitation, and pay careful attention to them. If you spot a problem, consult your management and your counsel about what to do. Your options are to (1) price the proposal to address the risk; (2) ask the agency to delete the clause and be prepared to protest if the agency refuses; or (3) pass on the procurement.
If you decide that a protest is necessary, file it before offers are due; otherwise, it will be dismissed as untimely because the problematic clause was clear from the face of the solicitation. Don’t wait until the last minute to challenge an offensive provision; do it as early as possible in the procurement cycle, and phrase your challenge in a way that explains your concerns and tries to persuade the agency to see it your way. If you can argue persuasively that the clause is detrimental to competition, that may be your best shot.
Benjamin Franklin once said that “an ounce of prevention is worth a pound of cure.” That wisdom applies to the world of government contracting: What you do up front can make a huge difference — and save a lot of angst and money — down the road. Yes, there is a lot of boilerplate in a government contract, but not all boilerplate is created equal.