All,

"Ask a Professor" came up with an answer, sort of. Since it appears that nobody knows, I would say that we are all equally correct.

http://askaprof.deskbook.wpafb.af.mil/normal/
qdetail2.asp?cgiSubjectAreaID=4&cgiQuestionID=5601

"I agree with you that there appears to be no clear answer to this issue at the current time. It appears to be an open question of law. I have reviewed cases involving the "Christian Doctrine" but none of them appear to address this issue either. Litigation over the issue (before the Board of Contract Appeals or U.S. Court of Federal Claims) may conclusively answer this issue some day. If you deny the equitable adjustment request, then you may give rise to a claim which may ultimately decide the question through litigation. To speculate on the law or how the courts may ultimately resolve this matter goes beyond the scope of this forum."

Eric

By Eric Ottinger on Thursday, March 2, 2000 - 12:44 pm:

I put “Christian” into the search for the Ask A Professor site. I note that one of our number has appealed our controversy to another forum. I predict this will put the good Professors into a “do loop” and it will be a while before we see an answer.

http://askaprof.deskbook.wpafb.af.mil/normal/
qdetail.asp?cgiQuestionID=5601&Search_Text=Christian

I found the following snippet interesting.

“Can a Contractor wonder if the Government's Contracting Officer may use the Christian Doctrine as a means to get a clause into a contract "IF" it was left out? Yes. Could this be overturned in Court? Yes!”

I think this supports my argument that only a judge has the authority to determine whether the Christian Doctrine applies to a contract. The rest of us can allow for some “litigation risk” uncertainty if it suits our purpose.

Eric

By Eric Ottinger on Thursday, March 2, 2000 - 11:30 am:

Going back to an earlier post, Linda asked whether there was any need to do a modification. It did cross my mind that a letter from the Contracting Officer, citing the statute and informing all of the contractors that payment will be henceforth by EFT, would be one option for her to consider.

This would do for the instant case. However, we should keep in mind that ACOs, auditors, payment office personnel, TCOs, etc. will regard the written contract as holy writ. Generally, we should be careful not to give them opportunities for confusion.

Regarding consideration, I can make numerous pragmatic arguments to the effect that (putting aside the clauses where litigation has established that the Christian Doctrine does appy) there will be very few cases where you can’t justify consideration (or an equitable adjustment, if appropriate). Mostly, you don’t know for sure whether the Christian Doctrine applies. That little bit of “litigation risk” should be enough, in most cases, to justify anything that you need to do.

(In the instant case, the statute is pretty forceful but the Treasury Department Regulation leaves plenty of room for a waiver.)

Breaking these into categories suggested by the case law—

Cases where the cost impact is in the area of contingencies. That is: termination costs, anticipated profits.

I think the cases generally support a “no cost” approach.

Cases where the cost impact is “system” impact (i.e. CAS).

Pragmatically, you can assume that even if the clause has been improperly omitted from one contract, you will probably find the clause in another similar contact. This is a good opportunity for benign neglect or nominal consideration.

Cases where the Government makes a determination and the determination is subsequently reversed by whoever (e.g. the wage rate and transportation cost cases cited).

The Christian Doctrine doesn’t really apply.

Cases where there is a significant impact on a “direct cost” cost element.

I didn’t notice any and I’m not sure that I am going to worry about this very much. If it comes to it, I will let my Counsel earn his/her pay.

Eric

John, it depends on the specific situation. Each instance is usually unique. Your example indicated that the Government took a unilateral credit. The Christian Doctrine or "reverse Christian Doctrine" or whatever you want to call it doesn't mean the Government can make automatic, unilateral price adjustments. One must review the facts of the case.

(A price adjustment normally involves a "change" or an action under some other clause or contract term. The Christian Doctrine doesn't involve any
"change" to the contract.) Happy Sails!

By John Ford on Wednesday, March 1, 2000 - 03:09 pm:

Joel, the appeals boards and courts recognize the reverse of the Christian Doctrine. If a clause is prohibited, either by statute or regulation having the force and effect of law, such as the FAR, it is read out of the contract as a matter of law. Adopting Vern's argument, since the clause is not in the legal contract, as contrasted to the written contract, from the beginning, because it was prohibited from the beginning, what is there to adjust and what would you negotiate? Is it your position that the government has an entitlement to a price reduction? If so, on what basis?

By Eric Ottinger on Wednesday, March 1, 2000 - 02:57 pm:

Joel,

I agree, but I didn't intend to express any opinions. I should note that the message cited was mostly verbatim out of Court opinions.

I don't believe that the Christian Doctrine has any application to solicitations.

Eric

By joel hoffman on Wednesday, March 1, 2000 - 12:48 pm:

John- In the case you presented (your Wednesday, 1 March, 9:53AM post), the Government included an extraneous clause. I believe the Government should not unilaterally adjust the contract in attempting to remove the clause. This has nothing to do with "Christian." It is clearly a change to the contract requirements. If it reduces the cost of performance, it is because the Government wants to change the terms of the contract. The Government should negotiate an equitable adjustment under the Changes clause.

Eric - Re: your Tuesday, 29 Feb, 5:04 post. I agree that the Christian Doctrine is not intended to be broadly applied to all missing items from an RFP or IFB. For instance, wage rates are one area in which the FAR specifically provides procedures for including the correct wage rates, classifications and fringe benefits in the RFP/IFB. The FAR also explains what to do in the event they were omitted, superceded or when incorrect rates have been included. Those procedures involve issuing a change to the contract to incorporate the correct rates/classifications, etc. If the corrected rates or labor classification (e.g., Heavy Constructiuon vs. Highway vs. Residential, etc.) affect the Contractor's costs, an equitable adjustment is required. I've often dealt with those situations.

Anyway, I find it hard to believe that there is a case where the Government tried to simply include corrected or new wage rates, citing the "Christian Doctrine," then denied a request for an equitable adjustment! This reveals some ignorance in the workings and effect of wage determinations on the bidding process.

Finally... Vern - hey I love you too, man! I wasn't really mad. We apparently were looking at the same solution to your hypothetical situation from different approaches. Hopefully mine doesn't give the Contractor the impression that I'll pay him to "go away" (avoid a claim).
Happy Sails! Joel

By Eric Ottinger on Wednesday, March 1, 2000 - 11:55 am:

Getting back to basics, I understand that a Court has the authority to apply the Christian Doctrine. I’m not sure that a Contracting Officer has that authority. (Which is not to say that the Contracting Officer doesn’t have authority to fix the problem in the contract.)

The Christian Doctrine is punitive. The Contracting Officer gets slapped for ignoring the law and for ignoring the written direction from his superiors. The Contractor gets slapped for being foolish enough to be a party to this improper behavior. At that point the Court can’t and won’t do anybody any favors.

A Contracting Officer, trying to clean up after an error has been made, isn’t a Court and I doubt he is under any particular obligation to punish either himself or the contractor.

My only conclusion from this is, that although the Court is bound to be inflexible and not give either party any more or less than what the contract says, when the Court applies the Christian Doctrine, the Contracting Officer is not required to approach the problem in the same punitive way that the Court would. The Contracting Officer can be more flexible because there is no need to punish either party, yet.

(I guess a Contracting Officer is always free to punish himself, albeit that may get a little strange. I am beginning to doubt that a Contracting Officer should punish the Contractor for the Government’s error.)

(The Court is obliged to put the clause in because (1) the clause implements the law and (2) the Contracting Officer had no authority to ignore the policy direction from his higher authorities. However, the Contracting Officer, acting before the Court gets involved, is mostly concerned with complying with the law and he may choose to do a one-time deviation (with the necessary approvals) and put somewhat different language into the contract.)

We usually assume that the proper thing for the Contracting Officer to do is to the same thing that a Court would do in the same circumstances. It appears to me that this is an exception to that rule.

Noting that no one styled Esquire had been brave (or foolish) enough to jump into this discussion, I remembered that three of them had published an article on the Christian Doctrine, readily available at the Venable web site.

http://www.venable.com/tools/hightech/christndoc.htm

John,

Going back to your February 25 post, the lawyers at Venable distinguished the situation where the Government made a formal determination at time of contract award, which was subsequently reversed; from the situation where the Government failed to make a determination. In the first instance the contractor may be due an equitable adjustment; in the second, probably not.

I think the cases that you cited fit the first model.

Regarding your most recent post, we already know that the Courts apply the Christian Doctrine in a way that tilts toward protecting the Contractor when the Government ignores it’s own policies.

Vern,

I asked for a case where the Court negated something explicitly negotiated between the parties without some consideration for the Contractor. It turns out that the case is “Christian!”

(I wonder if a Court would distinguish a case where the parties both intended to subvert written policy from a case where the parties were simply in error. Would an honest but erroneous interpretation of current policy be similar to the determination which is subsequently reversed.)

Getting back to Linda’s issue, I think I would cite the law but I would not make any reference to Christian. The simple fact is that DoD, by law and Treasury Department Regulation, is no longer allowed to pay by any means other than EFT (with a few common sense opportunities for a waiver.)

Since this should be a Win/Win I would proceed unilaterally on that basis until some contractor hands me a cogent objection.

Eric

By John Ford on Wednesday, March 1, 2000 - 09:53 am:

Let's put the shoe on the other foot for a while. I wonder what everybody thinks the outcome should be in a reverse Christian situation, i.e., where the government has wrongfully incorporated a clause in a contract. Under this hypothetical situation, the clause requires the contractor to do something it would not otherwise be required to do under a proper contract, thus increasing its cost of performance. This increased cost is built into the contract price. The government discovers its mistake post-award, deletes the clause from the contract and unilaterally reduces the contract price to reflect the decreased cost of performance to the contractor. Does the contractor have a meritorious claim for a restoration of the contract price?

By Eric Ottinger on Tuesday, February 29, 2000 - 05:04 pm:

All,

I put "Christian Doctrine" into the CCH and did a word search. There were 80 hits. More than half of these were duplicates or cases where the judge decided that the Christian Doctrine did not apply.

Christian Doctrine cases don't seem to be very numerous.

Herewith a few snippets touching issues we have discussed.

APPLICATION OF CHRISTIAN DOCTRINE:

US-FED-CLAIMS, 43 CCF 77,445, Gold Line Refining, LTD. v. United States, (Mar. 25, 1999)

8“It is well-settled that applicable provisions of the FAR are incorporated into every federal government procurement contract and have the same effect as if they were set forth in the contract itself.” MAPCO, 27 Fed. Cl. at 407-408. Moreover, under the “Christian Doctrine,” set forth in G.L. Christian and Assocs. v. United States, 312 F.2d 418, 160 Ct. Cl. 1, reh’g denied, 320 F.2d 345, 160 Ct. Cl. 58, cert. denied, 375 U.S. 954, 84 S. Ct. 444, 11 L. Ed. 2d 314 (1963), the “court may insert a clause into a government contract by operation of law if that clause is required under the applicable federal administrative regulations.” General Eng’g & Mach. Works v. O’Keefe, 991 F.2d 775, 779 (Fed. Cir. 1993). The Christian Doctrine applies to mandatory contract clauses reflecting “a significant or deeply ingrained strand of public procurement policy.” Id. The doctrine also applies “to incorporate less fundamental or significant mandatory procurement clauses if not written to benefit or protect the party seeking incorporation.” Id. at 780.

PRICE ADJUSTMENT FOR ADDING CLAUSE WHEN OMISSION WAS NOT MERE ADMINSITRATIVE OVERSIGHT:

ASBCA, GOV-CONT 85,665 , BellSouth Communications Systems, Inc., (Sep. 27, 1994)
Labor--Price Adjustments for Changes in Wage Determinations--G&A, Overhead, and Profit. As part of a price adjustment for a modification adding Davis-Bacon Act clauses and wage determinations for construction work included in a supply contract, the contractor was entitled to recover indirect costs allocable to the increased direct costs of the modification and a reasonable profit because, under applicable FAR and DFARS provisions, an equitable adjustment for an increase in mandated minimum hourly wages and fringe benefits necessarily makes provision for increased overhead and general and administrative costs and for a reasonable profit, unless these factors are expressly excluded by some pertinent contract provision. The applicability of FAR Part 31, FAR Subpart 15.9, and DFARS Subpart 215.9 made it unnecessary to apply or analogize to Service Contract Act clauses expressly excluding indirect costs and profit from price adjustments for changes in mandated minimum wages under service contracts.

Interpretation of Contracts--Incorporation by Law--Davis-Bacon Act. The Christian doctrine did not require that the Davis-Bacon Act clauses and wage determinations be read into a contract from the time of award, because a determination must be made by the government that a particular contract is covered by the Act before the contract is subject to the Act. Before award, the contracting officer determined in good faith that the contract was not covered by the Act. That determination was concurred in by the Department of Labor and was not reversed until three years later. Thus, this was not a case in which the Act was clearly applicable at the time of award and in which the omission of the required clauses and wage determinations was a mere administrative oversight.

SUBSEQUENT MODIFICATION INCLUDING CLAUSE UNDER CHRISTIAN DOCTRINE:

US-CT-APP-1, GOV-CONT 83,735 , Riggins & Williamson Machine Co., Inc., (Jan. 01, 1979)
Mistake not mutual; Christian doctrine incorporated wage determination.--
A request for extraordinary contractual relief, alleging a mutual mistake of a material fact in the implementation of revised wage determinations, was denied for claims on two contracts because under the Christian doctrine a modification incorporated the determination into the contract. Both contracts were subject to the minimum wage requirements of the Service Contract Act. A required clause relating to fringe benefit changes was incorporated by reference into one contract, but the other neither included nor made reference to that clause. Since the contract without reference or incorporation was executed first, the contractor maintained that it had no notice of the provision. However, a subsequent contract modification reflected the parties’ agreement that the required clause was to be included in the contract from its inception under the Christian doctrine, which holds that required provisions are incorporated into contracts by operation of law even though not expressly included or referenced therein. In addition, the contractor failed to prove that it suffered actual losses under the contract sufficient to permit amendment of the contract without consideration.

CHRISTIAN DOCTRINE DOESN’T APPLY WHERE MATTER IS EXERCISE OF JUDGEMENT:

EBCA, GOV-CONT 93,145 , K.L. Conwell Corporation, (Apr. 06, 1988)
A subcontractor’s motion for reconsideration of his claim that had been dismissed on the ground that he was not in privity of contract with the government (88-2 BCA 20,597 ) was denied because there was no requirement in law that a flow-down Disputes clause be incorporated in the contract. The subcontractor was dealing with a prime contractor who acted as a purchasing agent for the government. If a flow-down Disputes clause had been included in the contract, it would have provided one of the indicia that the subcontractor was in privity of contract with the government, which in turn would have permitted the subcontractor to appeal his claim to the board. However, the decision of whether or not to include a flow-down Disputes clause is an act of discretion. The Christian doctrine, that is, the rule that contract clauses that are required by law are treated as though set out in the contract, does not apply to those clauses whose incorporation is a matter of the exercise of judgment.


DEEMED TO BE PART OF THE CONTRACT EVEN THOUGH OMITTED DELIBERATELY

US-CL-CT, 38 CCF 76,360 , S.J. Amoroso Construction Co., Inc. v. The United States, (July 02, 1992)
Interpretation of Contracts--Incorporation by Law--Intended Omission.
Even if the government and a contractor intentionally included in a construction contract the Buy American clause applicable to supply contracts, the contractor was bound by the terms of the clause designed for construction contracts, because the construction clause was required by regulations that had the effect of law. Under the Christian doctrine, a contract clause required by law is deemed to be part of a contract even though omitted. The doctrine applies even if the omission was deliberate; the parties have no latitude to form a contract contrary to procurement laws.

DELIBERATELY OR NEGLIGENTLY DOESN’T MATTER:

US-CT-APP-FC, 39 CCF 76,603 , S.J. Amoroso Construction Co., Inc. v. The United States, (Dec. 17, 1993)
As an initial matter, Amoroso contends that the Christian case is inapplicable because in that case a clause was inadvertently omitted whereas in this case clause 79 was intentionally substituted for clause 34. 3 This distinction, as the Claims Court held, is irrelevant. Application of the Christian doctrine turns not on whether the clause was intentionally or inadvertently omitted, but on whether procurement policies are being “avoided or evaded (deliberately or negligently) by lesser officials.” G.L. Christian & Assoc., 320 F.2d at 351. The Christian doctrine “guard[s] the dominant legislative policy against ad hoc encroachment or dispensation by the executive” and prevents “hobbl[ing] the very policies which the appointed rule-makers consider significant enough to call for ... mandatory regulation” Id.; see also General Eng’g., 991 F.2d at 779. Moreover, the Christian doctrine echoes Supreme Court law that the United States is neither bound nor estopped by its agents who act beyond their authority or contrary to statute and regulations. See Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384 (1947); see also Yosemite Park & Curry Co. v United States [25 CCF 82,500], 582 F.2d 552, 558 (Ct. Cl. 1978); Porter v. United States [20 CCF 83,041], 496 F.2d 583, 590 (Ct. Cl. 1974).

Eric

By John Ford on Tuesday, February 29, 2000 - 12:59 pm:

To All: For an interesting recent case on the Christian Doctrine and how things can get snarled up when trying to apply it, see Empresa de Viacao Terceirense, ASBCA No. 49824 decided on 23 Feb. Interestingly enough, no T4C clause was incorporated in the contract. The government later incorporated a T4C clause and terminated the contract for convenience. The contractor appealed. Without going into great detail, the government incorporated the wrong clause and the Christian Doctrine did not apply to the clause incorporated by the government.
As regards Vern and Joel's latest discourse, how about a DoD contracting office without a copy of the DAR? That actually happened years ago. Another observation, small inexperienced contractors are frequently more difficult to deal with than large experienced contractors who know the rules.

By Vern Edwards on Tuesday, February 29, 2000 - 10:23 am:

Joel:

Think of me as a compassionate conservative.

Vern

(Sorry, I couldn't help myself. I love ya, Man!)

By Vern Edwards on Tuesday, February 29, 2000 - 10:15 am:

Joel:

I don't think you are a foolish, heartless idealist. I think you're tough, but that's okay. I have taken the same stance that you have on occasion. In short, I don't have a problem with what you've said, but I wouldn't share that opinion in every case. Hard-won and bitter experience has taught me that sometimes it's better to settle than to litigate on principle.

I hope you realize that my example was just that--designed to illustrate a point. I wouldn't give an FPI(F) contract to such an inexperienced firm. But agencies have and do, and I can provide you with specific examples.

I do what I call "charity" work for my state government, advising small businesses who have or want government contracts. I wonder if you would be shocked to know how many small (and large) businesses that I have encountered who have contracts above the simplified acquisition threshhold with the Department of Defense, and who don't own a current copy of the FAR and who have never heard of the DFARS, much less the service-level FAR supplement.

In any event, if I were actually standing in front of your soapbox, I would applaud and offer to buy you a beer, even if I wouldn't always stick to my guns.

Vern

Before I get a lecture from anybody about FPI-FT contract types, I don't have a fundamental problem in increasing the firm target cost by $5,000. That is - if it was because both parties realize that applying the missing clause in question will cost the Contractor more than they both originally bargained for when they negotiated target price and firm ceiling. If so, this is a reasonable solution.

But that isn't the reason Vern cited in the example below for the "price increase".

According to the example, the decision was simply based on avoiding the hassle and expense of making a decision and defending the POSSIBLE consequences from an ignorant contractor. THAT reason makes my stomach turn, because it is short sighted, thus "penny wise and pound foolish."
Happy Sails!

Ok, Vern. This example struck a RAW nerve. This is one reason the Government routinely ignores existing performance requirements and pays extra taxpayer money to obtain compliance. I don't have any sympathy for the Contractor in the example.

The Contractor sought out Government work, in a program which offers essentially non-competitive opportunities to participants. The Government didn't twist its arm to accept this million dollar plus business opportunity.

No body in their right mind should offer a contract of the more complex contract type (FPI-FT) in your example, if they are dealing with a firm "that doesn't even own a copy of the FAR." There is a huge difference between this and a typical FFP supply contract! No contractor should accept such a contract type without fully understanding the nuances and contract requirements. Participating in large, complex contracts isn't a game. It isn't something to be taken lightly. Don't get into the business if you "don't even have a copy of the FAR!"

To base a decision to pay the dear firm $5000 of my money out of fear or apprehension of any claim and appeal, especially by such a firm on that issue is penny wise and pound foolish. I've called bluffs of much bigger contractors on MUCH more contensious issues than whether or not they have to certify "cost or pricing" of subcontractors. "Cost or pricing" data is really little more than a breakdown of how the firm developed its costs, to provide some accountability and truthfulness during negotiations. Please quit overblowing the intent of TINA.

Everyone seems to think there is zero cost or risk to a firm to pursue an appeal and litigation! Once they hire an attorney, at their expense, they should realize the fultility of fighting this particular example. In my experience (I was responsible for negotiating ALL 8(a) and sole source JOC and construction contracts for one of the largest Corps Districts for 8 years) a firm, such as described here, will rarely expend the legal cost and effort to appeal a decision of the type described here. Sometimes I wonder who y'all are trying to really save the money and effort involved in standing up for what is right.

Avoiding claims by shoveling out money ultimately results in more claims. The firm learns that the
Government has no resolve, even in matters of small dollar amount or in which the Government thinks it is right. Other firms quickly pick up on this. Standing up for your rights - when you are right - sends a signal that the contractor must know what it is getting into before signing a contract or look elsewhere.

By the way, the "big, bad Government" is vastly more fair to contractors than the commercial world, States and Municipalities, if you take any time to review and compare the litigated issues in the various court and board decisions.

I'm sorry I got on this soap box but people have no idea what Pandora's boxes they open by not standing up for their contract rights. The repercussions extend way beyond the "cost of the instant defense". Throwing in the towel should be the last resort.

Ther are many other ways to achieve MUTUAL (Win-Win) success in controversial matters than simply paying the Contractor to go away, then not realize he'll be right back on the next issue, expecting the same reaction. Careful, deliberate communication with the Contractor to resolve disputes or disagreements is essential and is the key to long term mutual success, not dropping an issue to avoid a possible claim.

OK, let me have it for being a foolish, "heartless" idealist! Happy Sails!

By Vern Edwards on Monday, February 28, 2000 - 08:27 pm:

John:

I'm afraid that you have not convinced me that a contracting officer may reform a contract on the grounds that an agency insists on interpreting a contract to include a mandatory clause that was inadvertently omitted.

I'm not sure that a board or court can or would do so. If they could or would, then do you know of an instance in which a board or court reformed a contract when invoking the Christian Doctrine?
That would convince me.

I am not an expert on the Disputes Act. I rely primarily on two books for my understanding of the Act: Contract Disputes Act Annotated, by Robert T. Peacock and Peter D. Ting (Washington, DC: Federal Publications, Inc., 1998), and Government Contract Disputes, by Peter S. Latham (Washington, DC: Federal Publications, Inc., 1980). Nothing in those books indicates to me that contracting officers have the authority that you claim for them under the Disputes Act.

So I guess we'll will have to disagree. But I'd be grateful to you if you could produce some authority that expressly supports your position, because then I would learn that I am wrong, which is the best education.

I have enjoyed communicating with you on this topic and look forward to more such discussions.

Vern

Vern and John's interest in avoiding litigation have another benefit. The government has limited its options by being a difficult and often high handed customer. The taxpayer's money should not be handed out casually, but neither should their business agent be too joyful about being able to force some relatively obscure legally required clause they forgot to mention down the throat of that inexperienced small business firm Vern mentions.

Doing so will insure the government has fewer options, particularly in the technology areas where the best really do not care to deviate from their purely commercial ventures. I'm not sure "reform" and such has really altered the picture drawn in the early 1990s showing government was simply not getting the benefits of that market due to its unique practices and conditions.

There are issues so important that use of the Christian Doctrine must be used, but like another government power, war, it should be reserved for truly important things. While I agree most companies would love faster payments and cooperate on EFT, somehow it does not seem to rise to the level of importance to invoke this thechnique that will indeed seem unfair and leave a lasting aftertaste. The company will quite likely say "It ain't American" and tell the government to get lost next time it comes around looking for goods and services.

By Vern Edwards on Monday, February 28, 2000 - 06:02 pm:

Steve:

Suppose that I am a KO and my agency has awarded a $13,000,000 sole source fixed-price-incentive (firm target) contract for military supplies to an inexperienced small business firm that doesn't even own a copy of the FAR, much less understands all of the nuances of government contracting. (That's not as unrealistic as it may sound.) The contractor submitted and certified cost or pricing data, and the contract includes the clause at FAR 52.215-10, Price Reduction for Defective Cost or Pricing Data.

A few weeks after award the contractor requests a approval of a $900,000 sole source subcontract and it is then that I realize that the prime contract does not include the clause at FAR 52.215-12, Subcontractor Cost or Pricing Data, a required clause.

I tell the contractor that he must obtain cost or pricing data from the subcontractor. He tells me to show him where the contract says that. I tell him about the missing clause and he tells me that I'm right, the clause is missing, and it's not part of the deal. He tells me that the clause will cost him money and he doesn't want to accept it.

I tell him about the Christian Doctrine, and give him some cases and some pages from all the right textbooks. He tells me that he can't believe that the government can insert a clause after the handshake and that he doesn't understand all the mumbo-jumbo in the cases and the textbook. "It ain't American," he says, and tells me to get lost.

I know that I can win this in court, but I worry about the effect that a dispute like this will have on contract performance and about the cost of an appeal. So I give the contractor a choice-- agree to a bilateral modification to include the clause in exchange for a $5,000 price increase (I've verified that we've got the money), or face the prospect of a dispute and costly appeal which he's likely to lose and which will result in his having to accept the clause for nothing. I tell him to consult with a government contracts attorney before answering me.

He comes back and says that he'll agree. I fill out Standard Form 30, block 13C, and insert FAR 15.408(d) as my authority and a reference to see my memorandum for record. (Why not? I've never known what to put in that stupid block anyway. I wish I had a nickel for every lunch table debate I've listened to about what to put in that block.)

I prepare a memorandum for record that tells the whole sad story, complete with my mea culpa, act of contrition, and a concluding statement to the effect that I think it's better to pay $5,000 than to suffer through the almost certainly more costly process of final decision, dispute, and appeal, not to mention the possible effect on contract performance.

I take the whole package to my lawyer, tell him the story, and ask him to give it his blessing, in return for which I'll let him suggest a better entry for SF 30 block 13. Assuming that I get the lawyer's blessing, I then go to my boss, confess my failure, and ask her to back me up or come up with a better idea.

That's it. The whole thing is jury-rigged to let the contractor feel like he's gotten something for his trouble, keep performance on track, and keep us out of court, where we would probably win, but only after spending a lot more than $5,000. I have no other justification for what I've done. I confess that it's not by the book.

This may not be an entirely realistic scenario, but it serves to explain my thinking.

By John Ford on Monday, February 28, 2000 - 04:51 pm:

We are either winding down on this or starting to take off on another tangent which is common for bull sessions. Before responding to Vern's questions and comments over the weekend, I would like to reiterate somethings I said earlier. I do not think there is a universal answer to this question. Each situation will have to be judged on its own merits. Also, as is the nature of these sessions, we sometimes are not the most careful with the words we use, which results in a point being missed by others or our positions not fully understood. That leads me to some of Vern's questions and comments.
As regards KOs being able to grant equitable relief, that is somewhat of an overstatment. Certainly KOs cannot grant or mandate equitable relief such as injunctions, declaratory relief or specific performance. However, over time, the written law and common law of government contracts have adopted equitable principles as a part of that body of law. Through application of these principles, it is permissible to amend contracts without regard to the specific terms of the contracts. In other words, grant relief external to the contract. Examples are reformation or recission due to mutual or unilateral mistakes, refusal to enforce contracts because of unconscionability, or relief for impracticability. KOs have authority to grant much of this relief although it may be characterized as some other form of relief, such as a T4C when the action is taken. Another equitable concept that has been adopted by the common law is allocation of risk based on fault. Thus, if a wrongful government act or omission causes a contractor to incur additional costs, the risk of such increased cost is generally assigned to the government. This is totally consistent with your discussion of equitable adjustments in your Sunday message. This is central to my argument that, in some circumstances, a contractor may receive compensation for increased costs caused by incorporation of an omitted clause into a contract.
The rationale for this has been alluded to by others in this thread. The omission may be the result of a mutual mistake by both parties in not recognizing the mandatory nature of the clause to the particular contract, or a unilateral mistake on the part of the government in not assuring that all requirements of law have been met before awarding the contract. (The contractor would only have an obligation to raise a question concerning an obvious or glaring omission. However, it could only raise the question, the final decision rests with the contracting officer. If the contracting officer disagrees, the contractor must follow the directions of the KO.) In either event, reformation would appear to be the appropriate remedy. The contract should be reformed to reflect the bargain the parties would have reached had they known the true facts. This includes the price of performing the work. Consideration is not required in either event. This is not giving away money when there is no entitlement. It is a well know and accepted (equitable) practice in government contracts.
A couple of other points. A contract is not void merely because a clause has been omitted. Contracting officers make mistakes when acting within the scope of their authority. As long as the contract was awarded using proper procedures and the KO otherwise acted within the scope of his/her warrant, the contract would be valid and not void or even voidable merely because of the omission of a required clause.
Questions relating to whether a clause is incorporated into a contract through the Christian Doctrine are disputes relating to a contract. Such disputes are disputes for which there is no remedy granting clause in the contract. Because there is no clause captioned Christian Doctrine, or Mistakes, the appeals boards and courts have jurisdiction to hear these disputes under that jurisdictional prong. If these were not disputes relating to a contract, the boards and courts would have no CDA jurisdiction and could not hear the case.
Whether I convince you or others, I believe I have a sound foundation for my situational argument. There is quite a bit of agreement on this issue, despite the extensive debate over it. As we all know, government procurment still has many unanswered questions after all these years and we are all voicing our opinions without any authority on point to support our "educated" guesses.

By Linda Koone on Monday, February 28, 2000 - 03:51 pm:

First, my apologies for asking a question and then being unable to contribute to the resultant discussion, especially since I could have saved Vern some of his effort in researching the origins of the EFT clauses.

What an interesting discussion, though!

When I posted the initial question, my opinion was that the EFT clauses could be subject to the Christian doctrine. The ensuing discussion served to strenthen my opinion. But I'm still just weighing all of the options.

In any event, the discussion on modifications was interesting. I agree with the position that the modification would be unilateral and should cite the authority for the clause (i.e., PL 104-134 or 33 USC 3222). I wouldn't entertain any discussion on consideration on behalf of the contractor for incorporating the clause if indeed, the clause was part of the contract by operation of law. That, to me, would be analogous to having the contractor request consideration for complying to a clause that was clearly called out in the contract but that he/she had overlooked. Again, this is my opinion if we are talking about a clause for which the Christian doctrine applies. I don't disagree with Vern's approach of discussing it first before issuing the modification. Staying out of the courts, once you've had the experience, tends to be good advice.

My only question about modifying contracts would be is it necessary? I can't tell from the cases that I've looked at whether the CO actually modified the contract, since in essence, under the Christian doctrine principle, the clause is already there. A modification signifies a change, which isn't really the case under this principle.

An interesting thing about the EFT clause (for those of us in DoD) is that the CCR collects the information necessary to make EFT payments. As such, contractors should be aware that EFT payments are a distinct possibility.

I also believe that most contractors would be happy to receive (dare I say timely) payment from the Government, regardless of the form (check or electronic). I can't imagine a contractor screaming about an absent EFT clause when the same contractor has provided the information that would permit EFT payment and has been paid via an EFT.

Linda

(Vern: Thanks for the kind words.)

By Steve Aronson on Monday, February 28, 2000 - 03:33 pm:

Vern,

I have followed and understand your arguments and why you would do otherwise in a real situation as a preferred course to litigating. what I do not understand, and what appears to be echoed in your earlier submissions to this thread, is upon what basis would you provide consideration for the contractor agreeing to insert the text of the clause into the contract document.

If it is stipulated, consistent with prior discussion, that by operation of law the force and effect of the clause is already part of the contract, then inclusion of the text in the contract document is merely a nicety that does not impact the obligations of the parties. If the obligation of the parties is not impacted, upon what basis can the KO provide consideration? Perhaps, foregoing a claim provides adequate consideration from the contractor so that the bilateral modification becomes a quid pro quo...?

By Eric Ottinger on Monday, February 28, 2000 - 03:08 pm:

Ramon,

It should be noted that this thread started out with an issue regarding the transition from traditional payment to electronic funds transfer. I doubt this is going to discourage many contractors from doing business with the Government.

(I think we have wandered a long way from that initial question. Maybe Vern can ask Linda what this was all about.)

I doubt that, in the big picture, many contractors have been significantly harmed by the process of correcting Section I to reflect the law at the date the contract was signed.

Usually, when a firm does itself significant harm dealing with the Government, it is because the firm made the mistake of underestimating the cost or intentionally low-balled, hoping to get well in some fashion.

As Vern points out, there isn't much we can do for self-inflicted pain, because we don't have authority to give the taxpayer's money away, merely because we feel sorry for the contractor.

Eric

Any creep away from limitation to "significant government interests" would seem to be a clear disincentive to participate in government contracts. Even commercial contracts cannot ignore the law, but in government contracts we have law of a clearly different flavor.

Commercial and government contractors should be responsible for knowing law on clearly public rules, ie., equal opportunity. It is something entirely different to expect a business to be fully up on the arcane government uses of law in its own contracting for social or other purposes. I keep thinking of a "required" clause dealing with use of U.S. vessels for shipping -- on a software contract requiring electronic delivery.

Extension of the doctrine beyond the most compelling situations, as may have been suggested, would seem to be a very clear signal to the contracting community that government contracts are potential poison. As government becomes less of a driving force in business, extension of the doctrine to less compelling cases would seem to be a foolish move on its part.

By Eric Ottinger on Monday, February 28, 2000 - 11:56 am:

All,

I apologize for giving John a somewhat flippant reply.

However, when the contract is complete and the price has been changed up and down several times, I don’t think anyone will have much interest in distinguishing what part of the price is consideration and what part is equitable adjustment.

Vern, I am glad to see that you are capable of pragmatism.

I prefer Joel’s strictly unilateral approach for pragmatic reasons. The worst that can happen is that the contractor might object and it might be necessary to do a subsequent bilateral mod to bring things to closure. As Joel observes, the unilateral approach works well almost 100% of the time (assuming that there is not a significant cost impact).

Joel raised a cogent point. It is impossible to know for sure whether the Christian Doctrine applies until the issue is litigated. This uncertainty (however small) should be enough to justify some consideration.

Eric

By Vern Edwards on Monday, February 28, 2000 - 11:24 am:

Joel:

I certainly respect your feelings and opinion in this matter. I don't think you're wrong at all in what you're saying. But I will admit that I hate board and court proceedings and will do almost anything within reason to avoid them.

Ramon:

To the best of my knowledge, there is no rule quite like the Christian Doctrine in the commercial sector. In general, I doubt that commercial firms focus on contract texts quite as much as we do in the government sector.

I don't know to what extent, if any, the Christian Doctrine has been a disincentive to doing business with the government. I do know that the government's complex rule system is unattractive to many fully commercial firms.

Despite all the talk about commercial practices, government contracting is a world apart from the commercial sector.

By Ramon on Monday, February 28, 2000 - 11:10 am:

Awareness of outside influences, in the sense of those outside the actual written agreement, must be a part of any contract, but is there comparable risk for the contractor in the commercial world? Is anyone aware of any data or research into this being a cost driver or a significant disincentive to participate in government contracts?

Vern, I would certainly agree that whether or not the "Christian Doctrine" applies in a situation is not always a simple determination - usually when a clause has been updated or when new clauses are added to the existing myriad.

I do believe, however, that (at least some of) the Government's attorneys can analyze the statute and/or implementing directives for a clause and make a determination whether the clause is effective. I don't believe we have to make a "case" to insert a clause.

Although I only remember a couple of instances we had to deal with, neither resulted in a claim. The instance I mentioned concerning the "Prompt Payment Act Amendments of 1988", affected about 10 new contracts in Mobile District, back in 1994. The Payments (construction) clause was revised and a totally new clause with different conditions for progress payments was added. Since the directive to issue the admin mods to insert these two clauses into existing contracts awarded after April 30, 1994 came from our Washington Headquarters COE Counsel (around June or July 1994), it must have affected dozens of contracts throughout the Corps. Construction contractors were (are still?) notorious for using payments due their subcontractors to improve cash flow and reduce their financing costs. When we explained that they "now" had to identify any funds they weren't going to promptly pass on to the subs - and the Government would "hold" those funds "for them", there was a lot of wailing and gnashing of teeth! However, nobody submitted a claim in our District or anywhere else, I'm aware of.

Vern, I guess I'm just tired of the Government administering contracts without demanding contractually required performance. Since that's another topic, I won't elaborate here. But it forms the basis of my opinion that we shouldn't "negotiate" whether or not the Contractor will comply with an existing contract term.

I do have empathy for contractors who don't know they are supposed to be contract law experts and have time to read the Federal Register each day! So I listen and try to work with them to find a way, WITHIN the contract, to minimize or eliminate the pain of discovering a "new" clause is being added to the contract. I don't have much empathy for a contractor, doing repeat business, when a traditional, established clause is inadvertantly omitted from a contract document, sloppy as that may be.
Happy Sails!

By Vern Edwards on Monday, February 28, 2000 - 08:53 am:

Joel:

I understand that no consideration or bilateral modification is necessary! That was my whole point!

I am saying that in order to be practical, I would abandon my own legal theory in in order to settle the matter without going to court, if my bosses and lawyer would go along with me. I am saying that I would prefer to do that than go to court under those circumstances, even if I thought that I would win. That is what I meant when I said that I would act like a business pragmatist.

Only the boards or courts can apply the Christian Doctrine. Agencies have lost cases in which they've tried to get a board or court to apply the Christian Doctrine. I don't have a problem with talking about the Christian Doctrine and the theoretical limits of KO authority, but then doing something different in a real life situation in order to stay out of court, as long as my superiors and lawyer don't have a problem with it. But I wouldn't blame any KO who would not agree to do what I would do.

If the contractor would go along with letting me insert the clause into the contract document by administrative modification, then I would do that.

Vern, I agreed with you all the way up untill
I(E). After "having said all of the above...", you ignore the fact that the missing clause is already a contract term. You then decide to negotiate for Contractor performance of a term already requiring performance. I disagree. No consideration or bilateral mod is necessary.

We write a mod to "add" the clause because my agency includes full text clauses in construction contracts. I don't know whether we always include full text (Section I) or list the references in our service and supply contracts, using the Uniform Contract Format. I've seen it done both ways. i would still write a mod to add the correct reference to the list.

We prepare an admin mod, because we aren't affecting the rights of either party, merely correcting the text of the contract document. Yes, we usually first discuss what we are going to do with the Contractor. No, it doesn't have to be bilateral. No, consideration is unnecessary for the mod, as the clause is effective, as a matter of right.

Happy Sails! Joel

By Vern Edwards on Sunday, February 27, 2000 - 02:10 pm:

Eric:

This thread has gotten long and we have covered a lot of ground, and the nature of these kinds of websites makes it a little difficult to follow the discussion. Let me try to sort things out. I warn the casual reader that this is going to be long, since I am going to try to recap much of the thread.

I. Consideration and equitable adjustment in Christian Doctrine cases.

I.(A) The Christian Doctrine provides that if (a) a clause is required by law and addresses a significant procurement issue, and if (b) an agency leaves the clause out of a contract without legal authorization, then (c) a board or court will consider the clause to be in the contract anyway, "by operation of law."

I.(B) The issue has been raised whether a KO should agree to increase the contract price if inserting a clause by virtue of the Christian Doctrine would increase the contractor's cost of performance. Participants in this thread have referred to such an increase variously as "consideration" and as "equitable adjustment."

I.(C) I have taken the position that if (a) the omitted clause is already actually in the contract by operation of law, then (b) inserting the clause by virtue of the Christian Doctrine does not change the contract, but merely acknowledges the fact that the clause is actually there.

I.(D) I then argue that if (a) inserting the clause by virtue of the Christian Doctrine does not change the contract, then (b) it would not be appropriate for the KO to agree to consideration, to an equitable adjustment, or to any other compensation for the following reasons:

I.(D)(1) Consideration is needed to make an agreement binding. However, the contractor is already bound to abide by the clause by virtue of the Christian Doctrine, so no further consideration is needed or appropriate.

I.(D)(2) "Equitable adjustment" is a term of art that has long referred to compensation based on a remedy granting contract clause. An "equitable adjustment" compensates one party for an act or omission by the other which a clause states is a basis for compenstation.

I.(D)(2)(a) No FAR clause authorizes an equitable adjustment for inserting a clause by virtue of the Christian Doctrine.

I.(D)(2)(b) Inserting a clause by virtue of the Christian Doctrine has never been considered a constructive change that would entitle a contractor to compensation under a changes clause, because it does not change the contract but merely acknowledges what the contract really says.

I.(D)(2)(c) Since entitlement is a prerequisite to an equitable adjustment, if the KO agreed to increase the contractor's price because of a Christian Doctrine clause insertion, then he or she would giving the contractor more money without justification in law or contract. He or she would be changing the government's promise to the contractor without obtaining consideration, something which KOs may not do except as authorized in FAR Part 50, Extraordinary Contractual Action. (I disagree with John that KOs can grant "equitable relief" and give the contractor more money out of a sense of fairness without a basis in contract or law.)

I.(D)(2)(d) The boards and courts have never treated the insertion of a clause by virtue of the Christian Doctrine to be an act that would entitle a contractor to compensation as a matter "relating to a contract" under the Disputes clause. They have taken the position that firms wishing to do business with the government either know or should know the laws and regulations and assume the risk that an omitted clause will be read into the contract by operation of law.

I.(E) Having said all of the above, on Feb. 26 I explained what I would do in real life: I would explain to the contractor that I had inadvertently left out a required clause and ask the contractor to agree to let me insert the clause in the contract document in exchange for consideration. I would try to minimize that consideration by confronting the contractor with the possibility that if she wasn't reasonable I would let the board or court declare the contract void ab initio or insert the clause by virtue of the Christian Doctrine without giving her a nickel. I would do this only if my superiors and lawyer agreed that it was preferable to a dispute and appeal. In short, I would be a business pragmatist, and try to find a reasonable solution to the problem. If I can get the bosses to go along with me, then why not?

II. The distinction between consideration and equitable adjustment.

II.(A) On Feb. 24, you told John that he was "slicing the distinction between consideration and equitable adjustment finer than necessary." You also said, "both terms describe what we pay, to get what we want. And, because we are the Government, we should always be equitable."

II.(B) I disagree that John was slicing the distinction too thinly. The two concepts are very different. To say that both "describe what we pay, to get what we want" obscures both the nature and the magnitude of that difference. I also disagree that we should be "equitable" when it comes to consideration.

II(B)(1) Consideration is what we do, promise, or agree to give up in order to induce someone to enter into a contract with us. It only need be "adequate"; it need not be "equitable." Equitability is always measured on the basis of the impact of an act or omission; adequacy is not.

See Contracts, 3rd ed., by Calamari and Perillo, pp. 192-195; Formation of Government Contracts, 3rd ed., by Cibinic and Nash, pp. 247-258. See, too, Restatement of the Law, Second, Contracts, 2d, §§ 71 - 81, especially § 79, Adequacy of Consideration; Mutuality of Obligation, which says:

"If the requirement of consideration is met, there is no additional requirement of

(a) a gain, advantage, or benefit to the promisor or a loss, disadvantage, or detriment to the promissee;

(b) equivalence in the values exchanged; or

(c) "mutuality of obligation."

(As a business pragmatist, I would give a contractor consideration to induce it to promise to abide by a clause that I had inadvertently omitted, even if I believed I could get a board or court to insert the clause without giving the contractor anything.)

II(B)(2) Equitable adjustment is what one party gives to the other party to compensate it for the impact of an act or omission. It is a term of art used in government contracting. It is well-established that an equitable adjustment must, by definition, be equitable to the impact that the act or omission has had on the other party. See The Government Contracts Reference Book, 2nd ed., by Nash, Schooner, and O'Brien, p. 215. ("The basic formula for an equitable adjustment is an estimate of the difference between (1) what it would have reasonably cost to perform the work as originally required and (2) what it will reasonably cost to perform the work as changed.") In this way, equitable adjustment is similar to damages rather than to consideration. Your quote from the contract law class merely points out that what is equitable depends on the facts and circumstances of each case, and cannot be determined on the basis of a regulatory formula.

II.(b)(3) In your Feb. 27 post you said, "I haven’t actually used (or misused) the phrase 'equitable adjustment' in this thread. The careful reader will note that I never equated 'consideration' and 'equitable adjustment.' However, I did note that in practice they both equate to price."

This careful reader notes that, in fact, you did use the term "equitable adjustment" in this thread, on Feb. 24, as I quoted above. I agree that you neither misused it nor "equated" it with consideration. However, you did understate the difference between consideration and equitable adjustment. Moreover, equitable adjustment does not "equate" to price. An equitable adjustment may have the effect of increasing or decreasing a price, but price need not be related to cost (it may reflect market supply and demand), while an equitable adjustment to a price must always reflect the impact of an act or omission on cost.

Having said all of this, I'm sorry if I have read too much into your response to John. Yes, we're having a bull session. After all, this site used to be called the "water cooler." These are the kinds of discussions, arguments, bull sessions, (whatever) that should be happening from time to time in all contracting offices. We can learn from these sessions, especially if they motivate us to read more often and more deeply.

By Eric Ottinger on Sunday, February 27, 2000 - 09:52 am:

Vern,

I am confused. I thought you were opposed to consideration.

I am not sure where we differ at this point. On Thursday you disagreed with me because I thought, that under certain circumstances, consideration might be needed. You disagreed. Now, you seem to have come around to the idea that consideration might be needed.

If the consideration is not for something that the Government has done unilaterally (since the clause was in the contract all along), what authority do you have for the consideration.

As I see it (Note: This is pure speculation.)—

1. No consideration is required to comply with the law (which we all should have known from the start.)

2. Consideration may be required to remove some part of the contract, to which we had previously agreed, particularly if we had explicitly negotiated that part of the contract.

3. In most cases, no consideration or nominal consideration should be sufficient. For instance, changing to payment by EFT.

I haven’t actually used (or misused) the phrase “equitable adjustment” in this thread. The careful reader will note that I never equated “consideration” and “equitable adjustment.” However, I did note that in practice they both equate to price.

I think John’s definition of consideration is a little too restrictive. I refer the reader to the “Contract Law” course available in the Deskbook:

“6-1. A fundamental concept involved in contract formation is bargain and exchange. Each party receives something of value and gives something of value. "Consideration" is the name given to the "something of value," i.e., the price paid for a promise. Actually, a number of things may constitute consideration: an act, a promise, forbearance, or the creation, modification or destruction of a legal relation. (Restatement of Contracts, Section 75.) In a bilateral contract each party exchanges a promise for a promise. For example, if the Government hires a contractor to build an airplane, the contractor promises to build the plane and the Government promises to pay money. Each promise is the consideration for the other. In a unilateral contract one party gives a promise as consideration, and the other party performs without making a promise. The classic example is an offer to pay $500 to whoever captures a named outlaw, "dead or alive." In that instance, the offeror is not asking anyone to promise to capture the
outlaw.

7-1. The concept of "equitable adjustment" is one of the larger unresolved issues in Government contracting. Although the phrase appears expressly or implicitly in the "adjustment clauses" e.g., "Changes," "Government Property," "Differing Site Conditions," etc., the determination of what constitutes an equitable adjustment has not been objectively quantified by the regulation. The term "equitable adjustment" is
construed as a "fair," "reasonable," "just," or "right" arrangement or settlement. As mentioned above, in Government contracts this involves a determination as to an adjustment of the contract price, the period of performance, or both.”

I have no problem speculating about legal theory as long as everyone knows this is a bull session. However, we should all be careful not to confuse our readers by using a term of art, without giving the term an exact definition.

Regards,

Eric

By Vern Edwards on Saturday, February 26, 2000 - 12:04 pm:

Eric:

You asked: "Vern, Do you have a case where the Government explicitly agreed to do or not do something in negotiations then unilaterally, and without consideration, overrode the negotiated contract by citing the Christian doctrine. My bet is that you won’t find one."

No, I don't have such a case. Why should I? The Christian Doctrine doesn't have anything to do with agreeing to one thing and then doing another. It has to do with conforming to the law, knowledge of the limits of KO authority, and the responsibilities and risks associated with doing business with the government.

Many seem to find the Christian Doctrine shocking, and can't get past the seeming unfairness of it. They want to give the contractor more money if inserting the clause would increase its costs. And I'm sure that some find my tenacity in pointing to the limits of KO discretion as an indication that I'm being unreasonable.

If I was a KO and discovered that I had omitted a required clause from the contract, I would tell the contractor and show her the requirement for the clause. I would explain that as KO it had been my responsibility to include the clause and that I had left it out through carelessness. I would then explain that my authority is limited, that by law I cannot leave out a required clause, and that my action could render the contract void ab initio or result in the invocation of the Christian Doctrine.

I would explain to the contractor the courts' position--that she was presumed to know what the laws and regulation require. I would give her copies of cases in which the court had invoked the Christian Doctrine and refer her to appropriate textbooks. I would encourage her to talk to her lawyer and to tell the lawyer to call me if he or she had any questions.

I would then ask the contractor to agree to the inclusion of the clause and what consideration (not equitable adjustment) she would require to sign a bilateral contract modification in which she promised to comply with the clause. I would tell her to be reasonable, because if she asked for too much the government might declare the contract void or invoke the Christian Doctrine. If she asked for too much I would negotiate by warning her that the courts consider it her responsibility to know the rules and to check solicitations for omissions. I would tell her that she would have to accept the fact that she can't get everything she wants.

Once I had reached a tentative agreement with the contractor [I would advise her that it was subject to my superiors' (not my lawyer's) approval] I would go to my superiors and my lawyer, explain the situation, and ask if they would object to a supplemental agreement that would include the clause and provide consideration to the contractor. They might say, "No way, she's not entitled to anything!" But if they would go along, I would sign the supplemental agreement, cite the clause prescription on SF30, and be done with it. If they would not go along, I would ask if they thought that it would be worth a dispute and appeal to avoid giving the contractor something (not an equitable adjustment) for agreeing to accept the clause without making a fuss. If they still refused to go along with a supplemental agreement with consideration, then I would ask whether they thought we should void the contract or rely on the Christian Doctrine.

I think it's nice that so many of you are worried about being fair to the contractor. That's appropriate. But KOs are creatures with limited authority. They can't just do what they want because they think it's "fair."

And as professionals, we don't have to be lawyers to discuss and debate the law among ourselves. That's not "practicing law without a license"; that's trying to educate ourselves about things like the Christian Doctrine, the difference between consideration and equitable adjustment, and the difference between legal and equitable relief. We should try to learn what we can do before we ask or decide what we should do.

Every contracting officer should have, or have access to, the books that I've been citing. True professionals don't go running to their lawyers every time they have a problem, asking, "What do I do?" They do their homework, fashion what they think is a reasonable course of action based on what think they know, and then go to their lawyer to seek professional advice and counsel. That's how they learn and earn respect. That's how they rise above the level of procurement clerk.

By Eric Ottinger on Saturday, February 26, 2000 - 09:49 am:

For those who haven’t sat through “The Constitutional and Legal History of England” in school, when the English found that the common law courts didn’t always do the right thing, they established separate “equity” courts. This may or may not have something to do with the distinction that John is making.

I think we are all starting to practice law without a license. I really don’t know what logic or theory the law would require, to allow a Contracting Officer to do the equitable (i.e. fair) thing. But, I don’t trust a theory which leads to blatantly inequitable results.

Vern,

Do you have a case where the Government explicitly agreed to do or not do something in negotiations then unilaterally, and without consideration, overrode the negotiated contract by citing the Christian doctrine. My bet is that you won’t find one.

Eric

By Vern Edwards on Saturday, February 26, 2000 - 03:11 am:

John:

An addendum to my last post: The Court of Federal Claims can grant equitable relief in bid protests. That relief is limited to bid and proposal costs. You can check this at the Court's home page at http://www.law.gwu/fedcl/.

By Vern Edwards on Friday, February 25, 2000 - 05:18 pm:

John:

You wrote: "Thus, contracting officers are given the power to grant eqitable relief to contractors as well as legal relief." That is not correct.

First, let me explain to some of the readers what equitable relief means. Black's Law Dictionary defines that term as follows: "That species of relief sought in a court with equity powers as, for example, in the case of one seeking an injunction or specific performance instead of money damages."

Black's defines equity as follows: "Justice administered according to fairness as contrasted with the strictly formulated rules of common law... . The term 'equity' denotes the spirit and habit of fairness, justness, and right dealing which would regulate the intercourse of men with men... . A system of jurisprudence collateral to, and in some respects independent of 'law'; the object of which is to render the administration of justice more complete, by affording relief where the courts of law are incompetent to give it, or to give it with effect, or by exercising certain branches of jurisdiction independently of them."

You read FAR 1.602-2(b) too broadly when you interpret it to grant equity powers to contracting officers. Neither the FAR nor the Contract Disputes Act of 1978 (41 U.S.C. 601-613) grant equity powers to contracting officers. In fact, the boards and the Court of Claims do not have equity powers. Only the U.S. District Courts and the Federal circuit courts have equity powers. (I checked this with my lawyer, Ralph Nash.)

The Disputes Act and the Disputes clause at FAR 52.233-1 require contracting officers to decide "claims." FAR 33.201 and the Disputes clause define a "claim" to be "a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract." Underlining added.

The key phrase in the definition of "claim" is: "as a matter of right." In order for a contracting officer to grant relief pursuant to the Disputes Act and the Disputes clause, he or she must determine that a contractor is entitled to relief, based on a contract clause, a breach of the contract, or some other common law rule such as mutual mistake. Note, too, that the certification of claims required by the Disputes clause requires the contractor to certify that it believes that the government is "liable" for the relief sought. A request for equitable relief is not a matter of right or liability and is not covered by FAR 1.602-2, the Disputes Act, or the Disputes clause.

If the government has a right to have the contract interpreted to include an improperly omitted clause by virtue of the Christian Doctrine, then a contracting officer who agrees to compensate the contractor for an increase in cost that is attributable to the clause is agreeing to a contract modification without consideration. Contracting officers may not agree to modify a contract without obtaining considertion except in accordance with FAR Part 50, Extraordinary Contractual Actions.

FAR 33.205 and 50.102(c) do state that the Contract Disputes Act of 1978 expanded the relief available from contracting officers. But that is because prior to the passage of the Disputes Act, contracting officers and the boards of contract appeals could only settle claims "arising under the contract." The Disputes Act of 1978 added claims "relating to the contract." That is why agencies can now rescind or reform a contract for mutual mistake. Mutual mistake is related to a contract, and pursuant to the common law of contracts recission or reformation is a matter of right when the parties have made a mutual mistake. See The Restatement of the Law, Second, Contracts, 2d, § 152.

I think that Joel has adequately addressed the cases that you mentioned.

By joel hoffman on Friday, February 25, 2000 - 03:08 pm:

John, I think I confused applicability of the "Christian Doctrine" with other Government caused pre-bid/pre-award problems, in my last post.

I've read several cases concerning clauses which were omitted from the contract documents for one reason or another, in which the "Christian Doctrine" was applied. From my recollection, those cases generally involve situations which arose AFTER contract award, such as when Government terminated a contract for convenience, then the Contractor claimed a breach of contract occured, not T4C, because the Gov't left out the T4C clause. Another situation involved a Contractor which encountered a differing site condition and the "Differing Site Condition" clause was missing.

These cases are distinguished from mistakes in pre-bid/proposal interpretation of various requirements by the Government, which misled the bidder or offeror in pricing or planning performance.

I believe the situations you discussed - as well as the hypothetical one I covered in my last post - are based on other principles than "Christian".

The "Blackhawk Hotel" Case you cited, involved an incorrect determination by the Government that the Service Contract Act did not apply to the solicitation/ subsequent contract in question. Therefore, the contract didn't include the correct clauses or SCA wage rates. The Department of Labor later advised that the contract was indeed subject to SCA. When the Government refused to allow an increase to cover the higher SCA labor rates, the Contractor refused to perform at higher cost. The KO "KO'd" the Contractor (T4D). This was a case of out and out misinterpretation of the correct contract requirements by the Government prior to bid, directly misleading the bidders, not an "inadvertantly omitted clause".

In the other two cases you referred to, didn't the Government's incorrect interpretation directly mislead the bidders? From experience, I know that applicability of Cost Accounting Standards (CAS) to a specific contract requires some careful interpretation. The clauses implementing the Cargo Preference Act were written by Philadelphia lawyers - probably the same ones who wrote the Buy America Act implementing regs and clauses! Were those cases where Government misinterpretation directly resulted in clauses omitted or simple Government pre-bid misinterpretation of clauses already in the contract?

(I won't be-labor another line of discussion in yout post but the cases you referred to more likely involved "mutual mistakes" not "unilateral mistakes", as you inferred.)

Anyway, sorry I started a tangential discussion about "mutual" and "unilateral" mistakes. The Christian Doctrine is another principle. Happy Sails! Joel

By John Ford on Friday, February 25, 2000 - 11:17 am:

To All, I think we are facing the quandry experienced by policy writers in quite a few instances. We are trying to enunciate rules for all situations when it is apparent that the outcome should be dependent upon the facts of the specific case.

Vern, while it is true that contractors are held to constructive knowledge of what is in the FAR, that does not equate to a responsibility to ensure that contracts comply with law or regulations. That responsibility is conferred on the contracting officer by FAR 1.602-1(b). Additionally, FAR 1.602-2(b) requires contracting officers to ensure "that contractors receive impartial, fair, and equitable treatment." Thus, contracting officers are given the power to grant eqitable relief to contractors as well as legal relief. (The appeals boards and COFC have this same power.) This, coupled with the KO's power under the CDA and Disputes clause to resolve all claims arising under or relating to a contract, would be the basis for a KO to grant an equitable adjustment for increased costs due to the KO's failure to comply with his/her responsibilites under the FAR. As for a specific case holding that a contractor is entitled to an equitable adjustment in Christian Doctrine situations, I cannot give you a case that is directly on point, but there are some that would support this concept. Blackhawk Hotels Co., ASBCA No 13,333, 68-2 BCA 7265, where the government mistakenly told offerors that the Service Contract Act did not apply to a procurement when it did, is one. Another case (sorry I cannot give you a cite on this one) involved the situation where the contracting officer had determined that a contract was not CAS covered when in fact it was. The government later tried to apply the CAS retroactively to the entire contract. However, the ASBCA (and I believe the Court of Claims) refused to permit this. Finally, we have the situation where the Department of Defense interpreted the Cargo Preference Act, and its implementing FAR provision, as not applying to components shipped to the U.S. for incorporation into end items. Thus, these components could be shipped using cheaper foreign flag vessels. However, the Fed Cir held that the Act does apply. Under these circumstances, contractors received equitable adjustments to their contracts to reflect the higher shipping costs of using U.S. flag carriers if they could demonstrate that they priced their contracts based on using foreign flag carriers. The common thread in these situations is that the government made a mistake in interpreting what must be admitted are not very clear laws and regulations. The contractors all relied on the government mistake. As a matter of equity and allocation of risk for a unilateral mistake, the government bore the financial consequences of its mistaken actions. I would agree that if a requirement is clear and the contractor is aware that the government has made a mistake by omitting a mandatory clause, the contractor should not be permitted to remain silent and ambush the government at a later date. This again is based on equity and the implied covenant of good faith and fair dealing that accompanies every contract.

By Vern Edwards on Friday, February 25, 2000 - 10:29 am:

Joel:

Mutual mistake is one of the most obscure legal doctrines that I know of. For the benefit of others:

FAR 15.508 says that mistakes disclosed in a contractor's proposal after award shall be processed substantially in accordance with the procedures for mistakes in bids at 14.407-4.

FAR 14.407-4 says, in part, that agencies may rescind or reform a contract when a mistake is discovered after award if: (1) there is clear and convincing evidence of a mistake, (2) the mistake was mutual, or (3) if the mistake was not mutual it was so apparent that the KO should have noticed it.

FAR does not define mistake. The Restatement of the Law, Second, Contracts, 2d, § 151 defines a mistake as "a belief that is not in accord with the facts." Black's Law Dictionary defines mistake as "Some unintentional act, omission, or error arising from ignorance, surprise, imposition, or misplaced confidence. A state of mind not in accordance with reality." Black's goes on to say, "A mistake exists when a person, under some erroneous conviction of law or fact, does, or omits to do, some act which, but for the erroneous conviction, he would not have done or omitted. It may arise either from unconsciousness, ignorance, forgetfulness, imposition, or misplaced confidence." See, too, the entry for mistake in Nash, Schooner, and O'Brien, The Government Contracts Reference Book, 2nd ed. (Washington, DC: The George Washington University, 1998).

Restatement § 152 discusses mutual mistakes. Cibinic and Nash discuss mutual mistake in Administration of Government Contracts, 3rd ed. (Washington, DC: The George Washington University, 1995), pp. 321-330. Calamari and Perillo discuss mutual mistakes in Contracts, 3rd ed. (St. Paul: West Publishing Co., 1987), pp. 379-386.

I have not been able to find a case in which a contractor has sought to rescind or reform a contract based on mutual mistake in a Christian Doctrine situation. (There may be some, I just haven't found them.) If anybody out there does find such a case, please let us know about it.

A key sticking point is the position of the boards and courts when applying the Christian Doctrine that the parties either knew or should have known about the published law or regulation that requires the clause. That stance deprives the parties of any claim to ignorance, surprise, imposition, forgetfulness, or misplaced confidence. Thus, it's hard to argue that the omission of a clause is a "mistake" in the legal sense, i.e., as defined by the Restatement and Black's. Moreover, the government's omission of a clause is more often a matter of carelessness or rather than forgetfulness, and thus may not be a "mistake" for that reason.

One type of mutual mistake is sometimes called a mutual mistake in integration. See the Restatement at § 155. That's when the contract document does not reflect the actual agreement of the parties. It doesn't seem to apply in Christian Doctrine cases because the constructive knowledge rule of the boards and courts eliminates the "mistake" element.

With regard to ambiguities -- as I said in my last message, the court will resolve any ambiguity that results from the insertion of a clause by determining whether the ambiguity was latent or patent. If the insertion of the clause resulted in a latent ambiguity, and if the latent ambiguity increased the costs or time of performance, then the contractor is going to get an equitable adjustment. If the insertion created a patent ambiguity, then the contractor is going to get nothing. The Federal Circuit dealt with that very issue in the General Engineering & Machine Works case that I cited in my earlier message. It denied the contractor's claim for relief based on an ambiguity created by the insertion of the clause, finding that the ambiguity was patent, not latent.

I don't claim to be certain about all of this. But I'm pretty sure that you can't claim a mistake (mistaken belief) when the courts say that you either knew or should have known that the regulations required the inclusion of the missing clause.

Now, it's usually about this time that somebody says that the reader should check these things with their lawyer. So I'll say it: We're just talking here. If you're facing a real situation, check with your lawyer.

By joel hoffman on Thursday, February 24, 2000 - 08:28 pm:

I agree with Vern and Eric. Vern has pretty well covered the legal principles and what the KO can and can't legally do concerning mandatory clauses.

Notwithstanding the fact that an omitted mandatory clause is already a contract term, I suppose it is possible in a sole source, negotiated contract (detailed cost negotiations)that both parties could negotiate SPECIFIC TERMS AND COST AREAS inconsistently with the requirements of an omitted clause. If such a situation is possible, I believe it constitutes a "mutual mistake in contract formation." Aren't such situations usually grounds for reformation of the contract?

For example, on a construction contract, the parties agree that a specific foreign made control valve of substantial value is acceptable, and later discover a new Buy America Act provision was effective at the time of negotiations. The new provision prohibits use of the foreign made valve and requires the Contractor to purchase a vastly more expensive American made valve. Assuming it can be reasonably determined that neither party was aware of the new clause, I believe a case of "mutual mistake" could be established, whereby the Government would allow an adjustment for the increased cost to comply with the new clause. What do you think?

A unilateral mistake, on the other hand, does not automatically entitle the mistaken party to an adjustment. As Vern states, the parties are "presumed" to know the applicable contract terms. Neither the Government nor the Contractor is guaranteed a "fair" bargain....
Happy Sails! Joel

By Vern Edwards on Thursday, February 24, 2000 - 01:39 pm:

Eric:

You wrote: "To pick the most obvious example, it may have been explicitly agreed by both parties that we would not include the clause. I don’t think you can use the Christian Doctrine to override such agreement without consideration."

I disagree. A KO cannot agree to exclude a clause required by law unless authorized to deviate. Deviation without authorization would exceed his or her authority, and the government generally is not bound by the unauthorized acts of its agents. See FAR 1.401(b), 1.403, and 1.602-1. The Christian Doctrine would override any such unauthorized agreement and, therefore, the KO could not provide "consideration" for inserting the clause into the contract document. As the Federal Circuit said, contractors are presumed to know what the laws require.

If the inclusion of a clause by virtue of the Christian Doctrine creates an ambiguity in the contract, the proper interpretation of the contract will depend on whether the ambiguity is latent or patent. Since the Federal Circuit has held that "government contractors are presumed to have constructive knowledge of federal procurement regulations" and should know what clauses are required in government contracts, a board or court may decide that any conflict was a patent ambiguity, not a latent ambiguity. In that case the contractor would not be entitled to anything. If the ambiguity is latent, then the contractor would be entitled to an interpretation in its favor. In that case the contractor might be entitled to an equitable adjustment if some government act or omission based on a faulty interpretation constituted a constructive change.

Also, consideration and equitable adjustment are very different ideas.

Consideration must accompany an agreement. It is necessary to bind the parties, being the inducement to contract. See Black's Law Dictionary. The amount of the consideration is not, per se, important; it need not reflect the impact of any act or omission. See Calamari and Perillo, Contracts, 3rd ed. (St. Paul: West Publishing Co., 1987), p. 192-195.

The concept of the equitable adjustment is related to the concept of compensatory damages. Equitable adjustments and damages follow an act or omission. They are not inducements, but forms of compensation. Equitable adjustments and compensatory damages compensate one party to a contract for the impact of an act or omission by the other party. The amount of the equitable adjustment is crucial; it must reflect the impact of the act or omission. We call such compensation an equitable adjustment if entitlement is based on a contract clause; we call it damages if entitlement is based on a breach of contract. (See the entries on consideration, damages, and equitable adjustment in The Government Contracts Reference Book, 2nd ed., by Nash, Schooner, and O'Brien (Washington, DC: The George Washington University Law School)).

By Eric Ottinger on Thursday, February 24, 2000 - 12:06 pm:

John and All,

Just in case you are wondering--

Vern and I did not collude on our previous responses.

Eric

By Eric Ottinger on Thursday, February 24, 2000 - 10:46 am:

John,

I see your point but I am not sure that I agree.

(Any smart lawyer who wants to step in here and straighten us all out is welcome.)

I think you are slicing the distinction between consideration and equitable adjustment finer than necessary. I don’t disagree with the distinction that you make regarding usage. However, both terms describe what we pay, to get what we want. And, because we are the Government, we should always be equitable.

(I have been hearing lawyers say, “You can’t do this without consideration” for as long as I have worked in contracting. I have never understood this to mean that a nominal amount would be OK vice an equitable amount.)

I think Joel has it right. The Christian Doctrine isn’t authority for us to ADD the clause. We are merely doing a clarification because the clause WAS IN THE CONTRACT ALL ALONG. Normally, there shouldn’t be any consideration.

However, if the contract is logically inconsistent after the clarification, something must be done to resolve the inconsistency, which would entail a bilateral modification and some consideration.

To pick the most obvious example, it may have been explicitly agreed by both parties that we would not include the clause. I don’t think you can use the Christian Doctrine to override such agreement without consideration.

If we are merely correcting a mistake to which both parties were oblivious at the time of the negotiation I would think the correction should be done on a no cost basis.

If we are overriding something that both parties explicitly agreed to, there should be consideration.

(John, I didn’t argue that no consideration is due. I argued that I would not pay more than nominal consideration if the contractor is obligated to make the change under another contract. Otherwise, the taxpayers are going to be paying twice to obtain the same change.)

Eric

By Vern Edwards on Thursday, February 24, 2000 - 10:42 am:

John:

Suppose that a KO omitted a mandatory clause that has cost consequences for the contractor and that the KO's lawyer says that a board or court would read into the contract by virtue of the Christian Doctrine.

I would argue that the contractor is not entitled to an equitable adjustment. I would go further and argue that the KO has no authority to give the contractor an equitable adjustment, even if the clause indisputably would require the contractor to incur costs that it had not anticipated during contract formation.

The thrust of the Christian Doctrine seems to be that a mandatory clause is, in fact, in the contract "by operation of law" (quoting the Federal Circuit). Therefore, inserting the clause into the contract document does not change the contract; it simply acknowledges that the contract document as distributed did not accurately reflect the agreement between the parties. (This is why KOs and others have to understand the distinction betweent the contract, as a matter of law, and the contract document. The two are not necessarily the same.)

In the case of an omitted mandatory clause the Federal Circuit has said (in General Engineering & Machine Works v. Sean C. O'Keefe, Acting Secretary of the Navy, 991 F.2d 775 (1993)):

"[G]overnment contractors are presumed to have constructive knowledge of federal procurement regulations. General Builders Supply Co. v. United States, 409 F.2d 246, 250-251 (Ct. Cl. 1969). Thus, appellant should have known that it was required under federal regulations to maintain separate cost pools, particularly since the payments clause upon which appellant would rely is typically used in fixed-price service contracts."

Thus, the clause is in there, whether the contractor consciously knew about it or not.

Accordingly, since inserting a required clause into the contract document by virtue of the Christian Doctrine does not change the contract as a matter of law, the contractor has no claim to entitlement to an equitable adjustment. And without entitlement, on what basis would a contracting officer agree to a price increase? KOs ordinarily cannot grant price adjustments just because they think it would be "fair" to do so; they have to have a basis in law or contract regulation. It's always a "judgment call," but such judgments are not unfettered. That's why KOs have to have special authority to grant extraordinary contractual relief. See FAR Part 50.

So under what authority would you give such a contractor an equitable adjustment to cover the increased costs attributable to the clause?

By the way, two things:

(1) I am reasoning about this; I can't cite a case to bolster my argument. I don't know of any case in which a contractor has claimed that a Christian Doctrine clause insertion constituted a change to the contract, or sought an equitable adjustment after a board or court has read a clause into a contract by virtue of the Christian Doctrine. Maybe someone out there does know of such a case. If so, I'd like to know about it.

(2) I realize that this would be a hardnosed position for the KO to take with the contractor, especially if the contractor truly hadn't known about the clause. But I think that it's important for KOs to understand the law before they make decisions about solutions that they think are "fair." This is especially important because KOs don't have the authority to act on the basis of their personal notions of fairness. Their authority is limited to what the law allows them to do. This is why KOs need special authority to modify a contract without consideration (see FAR Subpart 50.3).

What do you think?

By John Ford on Thursday, February 24, 2000 - 10:13 am:

Eric, you missed my point. My point is that if an omitted clause would require a contractor to do something it is not otherwise doing, or obligated to do under a specific contract, the contractor would be entitled to an equitable adjustment for its increased effort and cost under that contract. The amount of the equitable adjustment would depend on the cost impact to that contract of the new effort. Don't get consideration and an equitable adjustment confused. Consideration is a legal concept regarding the enforceability of an agreement. It need not have anything to do with the value or cost of work done under a contract, i.e., an agreement supported by "adequate consideration." An equitable adjustment is a mechanism to make a contractor whole as a result of government action. An equitable adjustment is more akin to damages than consideration.

Vern, et al.
To answer Vern's question to me, I issue administrative modifications as follows: (see definition in 43.101), pursuant to 43.103 (b)(1).

On the SF 30 , check block 13B. (Administrative Changes) and mark in Block 13E. Contractor is not required to sign and return the original.......

In Block 14, explain to the effect that this is an administrative modification to add Clause....... which was inadvertantly omitted from the contract documents but was in effect at the time of bid opening and contract award. Sometimes we describe the directive we received to include the clause. Mainly an explanation why the mod is necessary.

Been doing it that way for years with no problems.

Happy Sails! Joel

By Eric Ottinger on Wednesday, February 23, 2000 - 03:45 pm:

John,

Sure, but most government contractors have more than one contract. If the contractor is required to make the change by another Government contract, the additional expense argument is specious.

This isn't an argument for a unilateral modification, but the consideration shouldn't be any more than nominal if the contractor is required to make the change to "its accounting system or its inspection system" by at least one Government contract.

Getting back to EFT, if the contractor has more than one contract, it is unlikely that the clauses have been ommitted from all of the contracts.

If the contract is truly a "one each," it might be better to write the waiver and pay by check.

Eric

By John Ford on Wednesday, February 23, 2000 - 03:26 pm:

Vern, limiting the discussion only to the Termination for the Convenience of the Government clause, I would agree because the T4C clause does not require the contractor to do something that costs it money or delays performance of the contract. On the other hand, if the omitted clause required the contractor to do something such as change its accounting system or its inspection system, then I believe, in some circumstances, the contractor would be entitled to an equitable adjustment to the contract to compensate the contractor for the additional expenses. In other words, if the contractor had been required to do this from the beginning, the cost of these changes would have been built into the contract price. The government should not be permitted to get a free ride on this. The equitable adjustment would simply be a mechanism for putting the parties in the position they would have been in if things had been done right from the beginning.

By Eric Ottinger on Wednesday, February 23, 2000 - 01:18 pm:

Vern,

FAR 43.103(b)(3) is more permissive than I remember. Either my memory is faulty or it has been rewritten to be less restrictive

Personal Opinion: The SF 30 should be rewritten. But the fellow who wrote it retired many years ago, nobody knows for sure what he intended, and there are many other projects with higher priority.

I think the Statute, which you cited, is a much more compelling argument than the Christian Doctrine.

I would simply state that, “After January 1, 1999 the statute doesn’t allow us to pay you by check.” The contractor, if he isn’t a fool, will want to see the fine print. This would lead to the Treasury Dept. Regulations which appear to be significantly more permissive.

I have no idea what the scenario is (which makes this a somewhat strange discussion), but if the sole source contractor, who only expects one payment by check, is crackpot genius who thinks EFT has somehing to do with black helicopters and the “New World Order,” I don’t think I would get very far arguing the Christian doctrine. I would be working on that waiver.

Eric

By Vern Edwards on Wednesday, February 23, 2000 - 12:38 pm:

John and Eric:

John first:

If the clause is not in the contract (i.e., the legal agreement) by virtue of the Christian Doctrine, then adding it would require a bilateral modification and consideration.

However, if the parties agree that the termination for convenience clause a part of the legal agreement by virtue of the Christian Doctrine, then inserting it into the contract document should require no consideration, since the clause is already a part of the legal agreement and adding it to the document merely acknowledges that fact. The authority for SF30, block 13C could be the clause prescription, e.g., FAR 49.502(b)(1).

Do you agree?

Eric:

It is an intriguing notion that FAR 43.103(b)(3) indicates that a KO could cite the excluded clause as the authority for unilaterally inserting that same clause into the contract on the basis of the Christian Doctrine. I agree that it's a good question for a lawyer. I doubt that there is any case law about it, but I'm sure that a good lawyer can make up an answer upon request.

However, I don't know what you mean when you say that you would agree with the contractor that "this Christian Doctrine suff is off on a tangent... ." Do you mean that you think the Christian Doctrine is bad law, or that you think that it doesn't apply to the Linda's EFT clauses, or both?

By Eric Ottinger on Wednesday, February 23, 2000 - 11:21 am:

Vern,.

I wouldn’t worry about Block 13. We do unilateral modifications which are not really administrative.

“FAR 43.103 Types of contract modifications.

(b) Unilateral. A unilateral modification is a contract modification that is signed only by the contracting officer. Unilateral modifications are used, FOR EXAMPLE, TO--

(1) Make administrative changes;

(2) Issue change orders;

(3) MAKE CHANGES AUTHORIZED BY CLAUSES OTHER THAN A CHANGES CLAUSE (E.G., PROPERTY CLAUSE, OPTIONS CLAUSE, SUSPENSION OF WORK CLAUSE, ETC.); AND

(4) Issue termination notices.”

I think Joel would use 43.103(b)(3), which doesn’t appear very restrictive, and use the authority of the clause, which is in there by virtue of the Christian Doctrine, as sufficient authority to make sure that the contractor knows what the clause (which has been in the contract all along) has to say.

(The question of what can be done unilaterally, does seem to me, to be an issue where we should rely on the advice of counsel.)

If we are going to hypothesize a hard-headed, sole source contractor who only wants one payment by check, who never heard of the Christian Doctrine, I would suggest that it would be much better sit down with the contractor, read the law which says that we are forbidden to make payments by any method other than EFT, then read the implementing regulations.

From the point of view of this hypothetical, hardheaded contractor, this Christian Doctrine stuff is off on a tangent, and I would tend to agree with the contractor.

Eric

By John Ford on Wednesday, February 23, 2000 - 10:52 am:

Joel and Vern have raised an interesting issue. Assuming that the Christian Doctrine applies to a clause, how do you implement the Doctrine and evidence the incorporation of the clause in the contract? Vern's advice about negotiating with the contractor is sound. The government may be convinced the Doctrine applies, but the contractor may think otherwise. Also, the possibility exists that the contractor is correct. To avoid the possibility of a dispute and the disruption that would cause, negotiating is always the better course. Having said that, the next problem is what mechanics does the government use to incorporate the clause. If the clause is clearly an admin clause and does not impose any obligations on the contractor, a unilateral mod checking 13b on SF 30 would seem permissible. On the other hand, if the clause would impose obligations on the contractor that effect cost or schedule, it seems to me the contractor would be entitled to an equitable adjustment for that impact. Conversely, if the clause reduced the cost to the contractor, the government would be entitled to a price break. Thus, in these situations, a bilateral mod would be appropriate. However, that does not answer the question of what authority is to be cited for that mod. Sometimes legislation provides the answer as was the case when FASA authorized agencies to amend contracts to reflect the streamlining anticipated by the statute. Generally, I do not think there is a universal answer to this question. Instead, theoretically, a detailed analysis of the clause and what it is intended to accomplish should be done to determine what is the appropriate authority. In some cases, the Changes clause might be appropriate while in others it may not. In any event, I don't think this will be much of an issue for a board or court if the matter goes to dispute. They will only be concerned with whether the Christian Doctrine applies.

By Vern Edwards on Wednesday, February 23, 2000 - 10:02 am:

Joel:

Lets pursue this. The word "contract" is used in two ways. The first refers to the legal agreement between the parties; the second refers to the document that memorializes that agreement, i.e., the "contract document" that the KO and the contractor sign. We all know that the legal agreement between the parties can be different than the contract document. Indeed, that's the gist of the Christian Doctrine -- that the content of the legal agreement depends in part on the law and not just on the conscious agreement of the parties, and thus their document of memorialization may not accurately reflect their legal agreement.

Now suppose that a KO has awarded a fixed-price supply contract and distributed the contract document. The document does not include the termination for convenience clause, which we know is a required clause to which the Christian Doctrine applies. A month after contract award the KO discovers the inadvertent omission. She checks with her lawyer, who confirms that the clause should be in the document and that a board or court would probably insert it pursuant to the Christian Doctrine.

The KO notifies the contractor that the clause is missing and that it applies despite the fact that it is not in the document. However, the contractor has never been to school and has never heard of termination for convenience or the Christian Doctrine, so he tells the KO that he doesn't agree to let the Government terminate the contract for its convenience and that the KO can't just insert a clause that he never heard of and to which he did not assent. Nothing the KO says or does convinces him, not even providing copies of court decisions.

What does the KO do? She doesn't want to terminate the contract at this time, but she knows that a termination may be coming. Does she send the contractor a certified letter stating that the clause is, in fact, included in their contract and let it go at that, or does she issue a contract modification to insert the clause in the contract document?

If the KO decides to issue a modification, does she do so unilaterally? If yes, what does she put in block 13 of Standard Form 30?

Does she check block 13A? If yes, what does she cite as her authority? She can't cite the Changes clause, because the changes clause for fixed-price supply contracts, FAR 52.243-1, doesn't include "inserting a clause" among the things listed in paragraph (a) that the KO can change.

Does she check block 13B? If yes, would inserting the clause be an administrative change pursuant to FAR 43.301(b)? After all, she doesn't think she's changing the legal agreement, she's just changing the contract document to reflect what the legal agreement really is, right?

(She doesn't check block 13C, because that would require her to obtain the contractor's signature.)

Does she check block 13D? If yes, what type of modification is it, unilateral or bilateral, and what does she cite as her authority?

Or does she just ingore block 13?

Vern, thanks for the clarification. After thinking about it some more, adding a new clause and its effect on the Contractor retroactively is probably outside the scope of the contract, thus the changes clause isn't applicable. An out of scope supplemental agreement is appropriate.

However, I don't necessarily agree that the KO must or should obtain the Contractor's bilateral agreement to add a clause which is already a contract requirement but was omitted from the contract documents at award (i.e., when the Christian Doctrine specifically applies to the situation). It is not a change. Years ago, our headquarters Counsel advised to add such clauses, using an Admin Mod - they are already a contract requirement.

I see no real value in "negotiating" and obtaining agreement on a contract term which is already applicable. I don't mind meeting with the Contractor and explaining the situation and mutually discussing its effect on the Contractor or the contract. But I don't need his official "agreement", which is what a bilateral mod represents.

I already deal with several of the DOD's mega-contractors (cost plus corporate mentality) who love to dictate to us their own, "new" and "novel" (read "twisted") interpretations of existing, traditional FFP contract terms. I wondered where they learned such practices, until I realized they are all run by ex-brass and KO's far removed from practice.

I don't need or want to negotiate their agreement whether or not existing contract terms apply. Happy Sails! Joel

By Vern Edwards on Tuesday, February 22, 2000 - 07:33 pm:

Joel:

I know that you know this, but I want to clarify it for others who do not know: A contracting officer cannot use the "changes clause" (any of the FAR 52.243 clauses) to add a clause (as defined in FAR 52.101) to a contract. The changes clauses enumerate what they allow contracting officers to do, and none of them allow contracting officers to add clauses. Nor do I know of any other FAR Part 52 clause that authorizes the unilateral addition of clauses to a contract. In order to add a clause to a contract the parties would have to negotiate a supplemental agreement (bilateral modification), as defined in FAR 43.101 and discussed in FAR 43.103.

If the parties agree that a clause should have been included in their contract and that it already applies to the contract by operation of law even though the contract document makes no mention of it, then they still should sign a supplemental agreement in order to acknowledge and document their agreement in that regard.

And a note to all:

Several of you have advised Linda Koone to check with her lawyer. That's well-intentioned and helpful, but I know Linda personally (and saw her recently) and you all should know that she is a knowledgeable and experienced Navy contracting official. She knows to check with her agency's lawyer before deciding that the Christian Doctrine entitles the Government to read a clause into a contract. She also knows that it is better to reach an agreement with the contractor rather than to force the clause down its throat. I'm sure that she asked her question about the Christian Doctrine just to get our thoughts and to stimulate some discussion. Since I know her I thought that I would share some information about her.

Again, I suggest you check with counsel. The "Christian Doctrine" is not applicable when the Government attempts to retroactively apply a new statutory requirement to an existing contract. If the contract in question precedes the statute, I believe the "changes clause" is appropriate, at the least. If there will be additional cost to the Contractor to implement, in such case, you must negotiate.

On the other hand, if the contract in question is later than the statutory or regulatory language mandating an EFT implementation date, the Christian Doctrine may be applicable. You might be able to add the requirements by "Administrative Modification", because they were already a mandatory contract condition.

A significant question arises from the fact that several exculpatory reasons were explained in the implementing directions to forego the "mandatory" EFT requirements, in such cases. If any of those conditions exist, the Contractor might rightfully complain if the Government unilaterally adds the clauses to the contract, after award. Happy Sails! Joel

By Eric Ottinger on Tuesday, February 22, 2000 - 12:46 pm:

Linda,

Here is the section on waivers out of the Treasury Department Regulation.

http://frwebgate1.access.gpo.gov/cgi-bin/waisgate.cgi?WAISdocID=403894750+0+0+0&WAISaction=retrieve

It may be easier to make the "one time payment" or determine that the cost of EFT is more than the cost of a check, than to fight with your contractor. As someone else recommended, it might be a good idea to talk to your legal counsel.

Eric

Sec. 208.4 Waivers.

Payment by electronic funds transfer is not required in the
following cases:
(a) Where an individual determines, in his or her sole discretion, that payment by electronic funds transfer would impose a hardship due to a physical or mental disability or a geographic, language, or literacy barrier, or would impose a financial hardship. In addition, the requirement to receive payment by electronic funds transfer is automatically waived for all individuals who do not have an account with a financial institution and who are eligible to open an ETA^SM under Sec. 208.5, until such date as the Secretary determines that the ETA^SM is available; (b) Where the political, financial, or communications infrastructure in a foreign country does not support payment by  electronic funds transfer; (c) Where the payment is to a recipient within an area designated by the President or an authorized agency administrator as a disaster area. This waiver is limited to payments made within 120 days after the disaster is declared; (d) Where either:  (1) A military operation is designated by the Secretary of Defense in which uniformed services undertake military actions against an enemy, or (2) A call or order to, or retention on, active duty of members of the uniformed services is made during a war or national emergency declared by the President or Congress;
(e) Where a threat may be posed to national security, the life or physical safety of any individual may be endangered, or a law
enforcement action may be compromised; (f) Where the agency does not expect to make more than one payment to the same recipient within a one-year period, i.e., the payment is non-recurring, and the cost of making the payment via electronic funds
transfer exceeds the cost of making the payment by check; and (g) Where an agency's need for goods and services is of such
unusual and compelling urgency that the Government would be seriously injured unless payment is made by a method other than electronic funds transfer; or, where there is only one source for goods or services and the Government would be seriously injured unless payment is made by a method other than electronic funds transfer.

By Vern Edwards on Tuesday, February 22, 2000 - 10:52 am:

John, et al.,

FACs 90-29 (June 3, 1995) through 90-46 (March 17, 1997) are available in the Federal Register edition at the Federal Acquisition Regulation site, http://www.arnet.gov/far/. Just click on the link at the top of this page.

Vern

By John Ford on Tuesday, February 22, 2000 - 09:59 am:

Vern, based on the information you have provided, this certainly is a clause that promotes a substantial government interest. Thanks for the information. Now that I have learned something for today, my day is a success and I can go home while I am ahead of the game. We do not have access to FACs before the 97 series so your research was most helpful.

By Vern Edwards on Friday, February 18, 2000 - 10:28 am:

John:

The electronic funds transfer clauses mentioned by Linda in her original inquiry are, I believe, FAR 52.212-4(i), 52.232-33, and 52.232-34. These were added to FAR by FAC 90-42 on August 29, 1996, 61 Fed. Reg. 45770, an interim rule. The FAC also added FAR Subpart 32.11, Electronic Funds Transfer.

According to the Supplementary Information that accompanied the FAC in the Federal Register, the clauses are mandated by Public Law 104-134, the Omnibus Consolidated Rescissions and Appropriations Act of 1996, part of which was the Debt Collection Improvements Act of 1996, which the FAC quotes in part as follows:

"(e)(1) Notwithstanding subsections (a) through (d) of this section, sections 5120(a) and (d) of Title 38, and any other provision of law, all Federal payments to a recipient who becomes eligible for that type of payment after 90 days after the date of the enactment of the Debt Collection Improvement Act of 1996 shall be made by electronic funds transfer."

According to the FAC, this requirement is codified in 31 U.S.C. § 3332. The FAC states that the statute defines "Federal payments" to include "vendor payments and expense reimbursements." According to the FAC, the statute made EFT payments mandatory for all contractors after January 1, 1999, except where the Government is unable to make such payments. The power to waive this requirement is delegated to the Secretary of the Treasury. The FAC says that payments by credit card are considered to be EFT payments.

The FAC was issued in response to an interim regulation issued by the Treasury Department to implement the statute. According to the FAC, the statute says that until January 1, 1999, payment could be made by other means to those who certified that they did not have an account with a financial institution or an authorized payment agent. The FAC says, "Note that the certification is an explicit statutory requirement of 31 U.S.C. 3332(e)(2)."

Thus, according to the FAC, the requirement to pay by EFT is statutory. Do you think that this would qualify as a "significant" policy that would warrant application of the Christian Doctrine to incorporate the clause?

Linda, I suggest seeking advice from Counsel.

When the Prompt Payment Act Amendments of 1988 were finally implemented and mandated for all contracts awarded on or after (April 1, 1994 -I think), we had a pile of contracts awarded just after that date without the PPA clause and revised payments clause because we didn't receive the FAR notice until later.

We issued Administrative Modifications to add the clauses to all those contracts,including wording to the effect that the clauses were already applicable by law but were omitted from the clauses included in the contract (IFB or RFP)documents. Thus, no change affecting either parties rights - admin mod.

Contractors raised Hell because they didn't know about the new clauses either but all complied.
Happy Sails! Joel

By Vern Edwards on Friday, February 18, 2000 - 12:17 am:

John:

When you get a chance, take a look at General Engineering & Machine Works v. Sean C. O'Keefe, Acting Secretary of the Navy, a decision of the U.S. Court of Appeals for the Federal Circuit, No. 92-1440, April 16, 1993, 991 F.2d 775. This case was based upon a contract awarded in 1982, under the old DAR.

What happened was that the Navy inadvertently incorporated the wrong DAR payment clause into a T&M contract. The proper clause would have required the contractor to account for materials in a separate overhead pool. The Navy and DCAA decided that as a result of having left the proper clause out of the contract, the Government had overpaid the contractor $86,775, and demanded repayment, since the DAR had required the inclusion of the proper clause. The contractor filed a claim and lost before the ASBCA, which incorporated the proper clause based on the Christian Doctrine. The contractor appealed the ASBCA's decision to the Federal Circuit, which upheld the board's decision.

I quote now from the Federal Circuit's decision:

"[T]he Christian Doctrine applies to mandatory contract clauses which express a significant or deeply ingrained strand of public procurement policy... ." [Note the disjunctive "or" between "significant" and "deeply ingrained."]

The Court then cited a long list of cases in support of this statement.

The Court concluded that a clause requiring accounting for materials in a separate overhead pool was "sufficiently ingrained in public procurement policy to properly trigger use of the Christian Doctrine."

Then the Court said:

"However, the Christian Doctrine has also been employed to incorporate less fundamental or significant mandatory procurement contract clauses if not written to benefit or protect the party seeking incorporation... ."

This, too, was followed by a long list of cases.

You've persuaded me that a court or board might not apply the Christian Doctrine to a clause requiring payment by EFT. But, is it possible that a court of board would say that such a clause, if required by statute and not just regulation, does, on the basis of that very fact, reflect a "significant" public procurement policy (though not "deeply ingrained")? Keep in mind that in the original Christian case the termination for convenience clause was not required by statute, just by regulation. Is it possible that a court or board might conclude that a clause specifically required by statute is, by definition, a "significant" public policy?

I'd like to know what you think after you read the case, if you get a chance to do so.

By Eric Ottinger on Thursday, February 17, 2000 - 11:54 am:

All,

Leaning somewhat to John Ford’s point of view, I have a hard time imagining that the Christian Doctrine is going to be applied for something that comes down to an issue of administrative convenience.

I am not sure that Linda has asked the right question. And I am not sure that we are helping her very much.

I think she is asking us how to convince a contractor to go the EFT route after the contract has been awarded without the appropriate clause.

From the point of view of negotiation strategy, the Christian doctrine is way down my list. If the contractor is going to be doing business with the Government in the future, the contractor is going to have to make the change to EFT.

If this is somehow a strictly "one each" contract, with a contractor who has no interest in future government contracts, I don’t think it is worth the fight. I would find some way to accommodate him.

If we are dealing with a hard-headed contractor who doesn’t really like to be doing business with the Government, I suspect that a phrase like “Christian Doctrine” isn’t going to impress him very much. He will be likely to dig in his heels just to call your bluff.

Whether, this clause is a “significant government interest” or not, we won’t know whether the Christian doctrine applies to this specific clause until the issue is litigated. But I can’t imagine that anyone with good sense would wish to litigate this.

Eric

By John Ford on Thursday, February 17, 2000 - 10:27 am:

Vern, I stand by my statement that the Christian Doctrine has only been applied to mandatory clauses that are designed to protect significant government interests. In the cases cited from Nash and Cibinic, all the clauses fit this description, as you seem to agree for the most part. What the quote says is that the boards did not do an analysis of the appliction of the Christian Doctrine to the clause at issue in certain cases. Instead, they merely applied the Doctrine without a full explanation of why it controled the case. This demonstrates a problem with the way many board, and some court, decisions are written. Often what they do not say causes more confusion than what they do say. Another good example of this is the discussion of the Eichleay formula in various cases. Some cases make the explicit statement that the formula applies only to fixed indirect costs while others do not make this distinction. This imprecision in language makes it difficult to know what the rules of the game are and provides ammunition to both sides in a dispute. Additonally, it inhibits early resolution of many matters that result in strained relations between the government and its contractors. Writing in the Forum impresses me with the difficulty of writing clearly, but it is something I think the boards can do better.

By Lisa Billman on Thursday, February 17, 2000 - 09:39 am:

Regardless of whether enforceable when absent, what have you heard about enforcement when present? I have been told by RM types that the statute does not allow for withholding of payment for failure to submit EFT information. If so, what good is a clause that requires the submission of EFT information?

I realize that contractors are required to be registered in CCR prior to award of DoD contracts; however, I understand that our paying office cannot get EFT information or choose not to rely on EFT information from CCR (don't know the exact reaon). Therefore, submission of EFT information by the contractor is still required.

By Vern Edwards on Wednesday, February 16, 2000 - 05:29 pm:

John:

You might want to check your assertion about the Christian Doctrine applying only to clauses intended to protect significant government interests. The following is from Cibinic and Nash, Formation of Government Contracts, 3rd ed., p. 77:

"In the early application of [the Christian Doctrine], it was held to apply only to clauses that contained significant procurement policies, Chamberlain Mfg. Co., ASBCA 18103, 74-1 BCA ¶ 10,368 (Government Property clause). Subsequently, cases appeared to apply the rule to all mandatory clauses without analyzing whether they contained significant policies. See, for example, Balimoy Mfg. Co., ASBCA 43768, 93-1 BCA ¶ 25,437 (First Article Approval caluse); Rogers Constr., Inc., IBCA 2777, 92-1 BCA ¶ 24,503 (Assignment of Claims clause); M.E. McGeary Co., ASBCA 36788, 90-1 BCA ¶ 22,512 (Disputes Concerning labor Standards clause); and Fireman's Fund Ins. Co., ASBCA 38284, 91-1 BCA ¶ 23,439 (Disputes clause). Some later cases did, however, analyze whether the mandatory clause contained significant policies. See, for example, Miller's Moving Co., ASBCA 42114, 92-1 BCA ¶ 24,707 ( the board incorporated the Services Contract Act provisions in a contract because the Act was an 'obligatory congressional enactment'); and H&R Machinists Co., ASBCA 38440, 91-1 BCA ¶ 23,373 (the board incorporated the Default clause in the contract because it implemented 'fundamental procurement policy')."

I admit that I don't quite know what to make of this quote. Some of the clauses that the Professors seem to suggest did not represent significant procurement policies seem significant to me. It looks, however, like a board or court may apply the Christian Doctrine to any "statutorily mandated" clause.

By John Ford on Wednesday, February 16, 2000 - 04:46 pm:

To date, the Christian Doctrine has only been applied to mandatory clauses that are intended to protect significant government interests. Not every clause mandated by statute fits that description. Thus, it is arguable that not every statutorily mandated clause is covered. However, in regard to EFT, I cannot find a statute that mandates contractor payments be made in this way. The closest I come is Section 30 of the OFFP Act which encourages agencies to use electronic commerce procedures whenever and to the extent practicable. Thus, whether it is mandated by statute may not be a factor. In that case, we fall back on general Christian Doctrine principles. Based on this, I do not believe EFT clauses are covered by the Christian Doctrine. As in all cases of this nature, I suggest you consult with your legal advisor.

By Vern Edwards on Monday, February 14, 2000 - 04:01 pm:

Linda:

I would say that if the clause is required by a statute then the Christian Doctrine applies.

Vern

By Linda Koone on Monday, February 14, 2000 - 10:13 am:

Electronic Funds Transfers (EFT) Clauses. . . mandatory based on statute and thus applicable even in absence of the FAR Clause (by virtue of the Christian Doctrine); or enforceable only if specifically referenced in a contract?

Any opinions?