I can't seem to find a definitive answer for the following questions, so any help you can provide is appreciated.

Does the contractor responsibility determination that I make prior to awarding a requirements contract carry over to the individual orders issued, or must a separate responsibility determination be made prior to issuing each order?

How about for an IDIQ contract or a contract with options? Does the initial determination cover all orders/options or must a separate determination be made prior to issuance of an order/option?

By Eric Ottinger on Thursday, June 21, 2001 - 05:01 pm:

Linda,

As I am sure you are aware, the signature on the contract is now the determination of responsibility.

FAR 9.105-2 Determinations and documentation.
(a) Determinations. (1) "The contracting officer’s signing of a contract constitutes a determination that the prospective contractor is responsible with respect to that contract. When an offer on which an award would otherwise be made is rejected because the prospective contractor is found to be nonresponsible, the contracting officer shall make, sign, and place in the contract file a determination of nonresponsibility, which shall state the
basis for the determination."


On the other hand, there is always the possibility of a determination of nonresponsibility.

I assume that a determination of nonresponsibility for an order under a contract would be the same thing as a termination.

All and all, I don't think we would do a determination of nonresponsibility for an order under a contract unless we were ready to terminate. If we choose to terminate, there is no need for the determination of nonresponsibility.

Eric

By Linda Koone on Thursday, June 21, 2001 - 08:06 pm:

Eric:

I am aware that the signature signifies a determination of responsibility pursuant to FAR 9.105, however, under FAR Subpart 4.8 (don't have the exact cite handy), the contractor responsibility determination is listed as an item that should be in the contract file. We've gone round and round with this, but higher level authority has more or less mandated that we document contractor responsibility or non responsibility.

I also agree that you would terminate a requirements contract if the contractor's performance was subpar.

But considering our requirement to document contractor responsibility, right or wrong, do you think it's necessary to document it for each order or is the original determination sufficient for the entire period of performance?

By Vern Edwards on Friday, June 22, 2001 - 05:50 am:

Linda:

The FAR does not explicitly require a determination of responsibility prior to the issuance of an order or the exercise of an option. However, I would say that both orders under an IDIQ contract and exercises of options constitute purchases or awards. FAR 9.103 says, "No purchase or award shall be made unless the contracting officer makes an affirmative determination of responsibility." Italics added. The award of an IDIQ contract does not purchase anything; it's the issuance of an order that makes the purchase (see the Ordering clause at FAR 52.216-18 and the Indefinite Quantity clause at FAR 52.216-22); the exercise of an option is the purchase of something that would not have been purchased if the option had not been exercised.

You can also approach it this way: Suppose that you are about to issue an order under a task order contract or exercise an option under any contract and that you learn or suspect that the contractor is about to declare bankruptcy -- would you still issue the order or exercise the option? What if you learned that the contractor would not be able to comply with the order or with the contract after the exercise of the option? What if the contractor's record of performance had not been satisfactory? What if it did not have a satisfactory record of integrity or ethics?

In my opinion a contracting officer should make an affirmative determination of responsibility before issuing an order or exercising an option. However, I do not think that means the CO must obtain another preaward survey or make any other extensive investigation; that's a different issue and depends on how much time has passed since the original determination of responsibility and on what information has come to the CO's attention since then.

Having said all of this, I acknowledge that since the regulation does not expressly state such a requirement either in FAR 16.505 or 17.207 one could argue that such a determination is not necessary.

By bob antonio on Friday, June 22, 2001 - 08:18 am:

Linda:

You asked a complicated question. I thought about it a bit last night and during my subway ride this morning. Here are my thoughts. I am adding FAR sections only to make my point. I am sure you have committed the FAR to memory.

On a requirements contract (FAR Part 16), the FAR states "For the information of offerors and contractors, the contracting officer shall state a realistic estimated total quantity in the solicitation and resulting contract." "The contracting officer . . . should base the estimate on the most current information available." With this in mind, I consider the initial responsibility determination, at the signing of the contract, to cover all possible quantities within the scope of the contract. That would negate the need for a complete responsibility determination on orders under a requirements contract. However, things change. In my view, you cannot issue an order with a firm that cannot complete the order. So, you would have to at least consider some aspects of a responsibility determination. I think having a checklist with all the standards in the file would be a useful idea. However, I have one caveat. I would be careful to make sure that any actions cannot be construed to be a constructive suspension or debarment. For example, FAR Part 9 says "Ordering activities may continue to place orders against existing contracts, including indefinite delivery contracts, in the absence of a termination" with debarred or suspended contractors. This issue will take some additional time and thought.

On an indefinite quantity contract, things are a bit different. Again, FAR Part 16 says "(1) The contract must require the Government to order . . . at least a stated minimum quantity of supplies or services." "The contracting officer should establish a reasonable maximum quantity based on market research, trends on recent contracts for similar supplies or services, survey of potential users, or any other rational basis." So the original responsibility determination may cover the estimated quantity. Even on a multiple award, indefinite quantity contract, I think this would be so. However, under an indefinite quantity contract, the FAR explains "(iii) The contracting officer should consider the following when developing the procedures (for placing orders): (A)(1) Past performance on earlier orders under the contract, including quality, timeliness and cost control. (2) Potential impact on other orders placed with the contractor." You are required to do some parts of a responsibility determination here. Again, I would suggest a checklist with the same caveats about a constructive suspension or debarment.

I consider the exercise of an option to be similar to the items above. There is one case where you must do a new responsibility determination on an order or option exercise. If there is an action beyond the scope, it is a new procurement. If the option is exercised improperly, it is a new procurement.

I am sure I have not thought everything out. This is a complicated issue. In short, I think a partial responsibility "update" should be made. However, it should not constructively suspend or debar a contractor.

By Eric Ottinger on Friday, June 22, 2001 - 11:29 am:

Linda,

I am not a lawyer, but it seems to me that if you do a determination of nonresponsibility and you do not award the order, you have breached the contract. Of all the possible ways to breach the contract, this would about as shoddy and inappropriate as anything that I could imagine.

If the contractor really can’t perform, you should do a termination. A determination of nonresponsibility as a de facto termination would be a really bad idea.

If your higher headquarters wants a stand-alone affirmative determination of responsibility in spite of the plain language in FAR 9.105-2 you should give them whatever redundant, pointless piece of paper their hearts desire as long as you don’t do something patently improper or illegal. Modern word processing equipment makes it easy to crank out meaningless boilerplate. I recommend it highly.

For whatever it is worth, indefinite quantity contracts started out as vehicles to order routine commercial type items. The authority to issue orders is often delegated. I can’t imagine an ordering officer in a motor pool, buying tires or batteries, writing a determination of responsibility to go with each order.

In short, since we are talking about something which isn’t really required, doesn’t do any good, and might do some harm, I can only say to give higher headquaters whatever it takes to make them happy.

To whomever it may concern,

Here we have at least three really smart people pursuing a really arcane convoluted piece of logic, because higher headquarters thinks the checklist in FAR 4.8 takes precedence over the plain language in FAR 9.105-2.

If you wish to understand why acquisition reform is hard, this is a great example.

Eric

By Kennedy How on Friday, June 22, 2001 - 12:08 pm:

We've generally considered any award of a delivery order/whatever as a separate contractual action in it's own right. So, if you take that at face value, you probably be safe in making a responsibility determination.

What I remember doing is checking to see if the contractor is performing satisfactorily, checking the Debarred list to make sure they aren't on it, and maybe checking with DCMC just in case. This last one isn't done always, unless we suspect something. As stated earlier, if something bad comes up, we would have to work up some documentation as to why we don't make an award. If things are clean, we go ahead and award, thus using the definition that the KO signature on the award signifies that the contractor is responsible.

Kennedy

By CMercy on Friday, June 22, 2001 - 01:43 pm:

To all
would you consider a responsibility determination on a FSS holder before placing an order?

By Eric Ottinger on Friday, June 22, 2001 - 01:54 pm:

CMercy,

I would say "no." But that is because GSA is the Contracting Officer.

I don't believe the rest of us have that authority.

If your point is that ordering officers are often not contracting officers or not "the" contracting officer, I agree.

Eric

By Anonymous on Friday, June 22, 2001 - 02:23 pm:

The scope of subpart 9.2 says it covers prospective contractors, that is contractors that do not yet have a contract. The responsibility determination is made at the time of award and covers the entire scope of the contract (this includes orders that are placed under an IDIQ contract).

By bob antonio on Monday, June 25, 2001 - 05:38 am:

Linda:

I have a few moments so I will be brief. I don't like the idea of documenting an "intra-contract" determination of responsibility. If one needs to document such a thing on a contract that they award and issue orders against, then I wonder about the quality of their contract administration. If the agency has an ongoing order with the contractor, they should be aware of any changes with the contractor.

The constructive suspension stuff is real. It happened with GSA and Art-Metal.

By Eric Ottinger on Monday, June 25, 2001 - 11:31 am:

Linda and All,

I would read FAR 9.103(b) in light of FAR 9.103(a):

(a) Purchases shall be made from, and contracts shall be awarded to, responsible prospective contractors only.

(b) No purchase or [contract] award shall be made unless the contracting officer makes an affirmative determination of responsibility.


If FAR 17.2 requires a determination of responsibility to exercise an option, I would expect that the FAR would say so. More to the point, there is an explicit list of issues that must be considered. Responsibility issues are not included.

Regarding Kennedy’s comments, the FAR allows orders under an existing contract to a debarred contractor. The DFARS forbids orders to a debarred contractor after the ID/IQ minimum has been satisfied.

FAR 9.405-1 (b) “Ordering activities may continue to place orders against existing contracts, including indefinite delivery contracts, in the absence of a termination.”

DFARS 209.405-1 Continuation of current contracts.

“(b) Unless the agency head makes a written determination that a compelling reason exists to do so, ordering activities shall not--

(i) Place orders exceeding the guaranteed minimum under indefinite quantity contracts: or

(ii) When the agency is an optional user, place orders against Federal Supply Schedule contracts.

(c) This includes exercise of options.”

I would infer that there is no requirement to make a responsibility determination for orders at the FAR level. In DoD it would be highly prudent to check the debarred list.

I initially found Anon convincing because I agree with him. However, it is 9.1, not 9.2, and Anon is reading quite a bit in.

In any case, we all agree that it would be imprudent to issue an order when we know that the contractor can no longer perform. The question is, what should be done at that point.

I checked my CCH to see what I could find about “constructive suspension.” This appears to be strictly a construction contracting term.

The Art Metal case is too old to be included on my CCH disk. From what I can see, it appears that “de facto debarment” would be a better term.

For those who don’t have long memories, Art Metal was for many years the most successful low-bid supplier of ugly, gray GSA office furniture. Art Metal, with the help of a Washington Post expose, made significant contributions to the concepts of best value and past performance.

Eric

By bob antonio on Monday, June 25, 2001 - 11:51 am:

Eric:

The Art-Metal case is below. I was there.

http://www.wifcon.com/analmetal.htm

The Art-Metal case is a little different because it involved a few more non-actions. However, it results in about the same end. You just have to use a little imagination and see where things could lead.

By Eric Ottinger on Monday, June 25, 2001 - 12:36 pm:

Bob,

Thanks. Everyone should be aware of Art Metal.

After giving the matter some more thought, i would say that the risk of litigation would depend quite a bit on the circumstances.

Using an "intra-contract" determination as a de factor termination when a termination would be more appropriate strikes me as a very dubious procedure.

On the other hand there may be situtations where the contractor may prefer that we not issue orders for some period of time.

Even if we have satisfied our minimum requirement, a contract is still a two way relationship. We should communicate and be honest with the contractor.

Looking at it from the contractor's point of view, I can see where the government should set strict standards of responsibility before making an award. However, there shouldn't be double jeopardy.

The only relevant case that I could find was Trilon:

Trilon Educational Corporation v. The United States.

In the United States Court of Claims. No. 241-76. Decided , June 14, 1978, 578 F2d 1356


Bidder Responsibility--Erroneous Affirmative Determination--Government Challenge.

"--The government was bound by a contracting officer’s allegedly erroneous determination that a contractor was responsible because the same considerations and reasoning that prevent an unsuccessful bidder from challenging an affirmative responsibility determination apply to challenges by the government. The government awarded a contract for small arms gunfire flash-noise simulators and then discovered that the president of the contractor’s parent company had been convicted of defrauding the government. After this discovery the contract was terminated. The contractor argued that the termination was for the convenience of the government and claimed costs. The government argued that it was not liable for costs as the finding of responsibility was erroneous and the contract was void. Absent allegations that there was fraud or bad faith in making an affirmative responsibility determination, such decisions will not be overturned because they are based, in large part, on subjective judgments that are not readily susceptible to review. The same reasons for not revewing the decision applied when the government was the one questioning it, and therefore, the government was bound even if its initial judgment was incorrect."

Eric

By Linda Koone on Monday, June 25, 2001 - 03:53 pm:

My thanks to all of you for your time and considered opinions and offerings.

Eric: In the Trilon case, what was the basis for the Government's claim that there was an 'erroneous responsibility determination'? Was it based on a lack of consideration of the element of contractor responsibility, or a difference of opinion?

Bob: I understand your position, but think that there are instances where the most proactive contract administration can't prevent changed circumstances under a long term contract, which many IDCs and option contracts are, such as the death of the owner of a small business.

By Eric Ottinger on Monday, June 25, 2001 - 04:10 pm:

Linda,

It turned out that the CEO was an Ill Wind sleaze.

Like the Art Metal story that Bob provided, the government had second thoughts about the award after reading the Washington Post.

It isn't entirely on point for the question which you asked, because the contractor had already started work on the orders.

However, I am sure that it would be cited if this issue were ever litigated.

Eric

By Vern Edwards on Tuesday, June 26, 2001 - 06:20 am:

Linda:

Getting back to your original question:

While I think that a CO should make a determination of responsibility before issuing an order or exercising an option, I think that a separate written memo in support of an affirmative determination of responsibility is unnecessary.

However, there may be some merit to such a requirement as a device for forcing COs to think consciously about an offeror's responsibility. That may be especially true in an organization that deals with a large number of small manufacturers and when delays in product delivery could adversely affect operational effectiveness.

I don't understand the talk in this thread about breach of contract. If a CO finds that an IDIQ contractor has become nonresponsible since the initial award, and if the minimum requirement has not been ordered, then the proper response could be to either: (1) terminate the contract for convenience or default, depending on the circumstances, or (2) talk about the problem with the contractor and give it time to fix the present shortcomings in its capability or qualifications, assuming that they are fixable within the time remaining in the ordering period. If the contract involves multiple awards and a fair opportunity to be considered, then a determination of nonresponsibility would fulfill that requirement -- a CO should always consider a contractor's present responsibility when giving it a fair opportunity. If the contract action is the exercise of an option, no further action is required by the CO following a determination of nonresponsibility, since contractors are not entitled to the exercise of an option.

By bob antonio on Tuesday, June 26, 2001 - 07:52 am:

Linda:

I see nothing wrong with a mental check for contracting officers before placing orders. As I mentioned in my first note, a checklist may be useful. My concern is with documenting some action that is not required. If the contracting officer's analysis reveals reasons for not executing an order, the appropriate action on the appropriate contract may be taken as Vern suggested.

As we all know, contract files are required to include certain basic items by law or regulation. Then there are agency add-ons. They should be kept to the minimum necessary to document the history of a procurement.

Many years ago, I was reviewing a source selection when I came across a document with the following: "(Program title) source selection or (Program title) Watergate." After spending three months reviewing the source selection, I was confident that it represented the best efforts of over 200 federal employees and their consultants to identify the best contractor for the specific mission. I took the file with the document to the source selection team and asked if the document was needed in the file. That was the last anyone saw of the document.

The Art-Metal case was an oddity. I don't think there is anything else like it. However, it usually appears somewhere in federal contracting texts and it is on record in the federal court system. It is an excellent example of what a skilled attorney can do. Art-Metal's attornies were well-practiced.

By Kennedy How on Tuesday, June 26, 2001 - 12:08 pm:

If I remember correctly, we used to have a boilerplate form which the Contracting Officer signed when he was exercising an option. There were some words to the effect that there was a check done to make sure the contractor was still eligible for the award (as in, he wasn't debarred in the interim). I also believe that there was a blurb regarding the fact that the contractor was currently performing satisfactorily.

As far as Delivery Order awards are concerned, I'm with Vern in that we don't really need a full blown Responsibility determination every time we award one, but you can be if the contractor went into the tank or screwed up royally in the interim, we'd be documenting that fact for further consideration as to what steps to take next. In other words, status quo, no formal documentation. If negative/adverse info, formally document!

Kennedy

By CMERCY on Tuesday, June 26, 2001 - 03:21 pm:

I agree with Bob but further,if a nonresponsibility determination was written to support a T4D, and the contractor was a small business,aren't you opening a door that is best left closed? If a termination for default is called for ,of what value is a responsibility determination at that point? I simply cannot accept that a determination is an alternative to termination. And it is because of that that in my opinion a RD before any contract action would be indicative of poor contract admin...not vigilant admin.

By Eric Ottinger on Tuesday, June 26, 2001 - 03:39 pm:

CMERCY,

I agree. Endorsing something like an affirmative determination of responsibility for orders without thinking through the consequences of a negative determination is illogical.

Certainly, we should assure that the customer is actually going to obtain the product on schedule. However much that might be like a determination of responsibility, it is not the same thing. The Trilon case should make it clear that the determination of responsibility is a one-time action not an ongoing process.

Eric

By Vern Edwards on Tuesday, June 26, 2001 - 03:50 pm:

CMercy:

I don't think that anyone in this thread has said or suggested that a determination of nonresponsibility is an alternative to contract termination. A determination of nonresponsibility might be a reason for termination, but it is not a way to end an existing contract.

Please explain how making a determination of responsibility after award but prior to any subsequent contract action -- such as issuance of an order or exercise of an option -- would be indicative of poor contract administration. The contractor might be nonresponsible for reasons that have nothing to do with the contract in question.

By Eric Ottinger on Tuesday, June 26, 2001 - 04:13 pm:

Vern,

I (and I think CMERCY) would say that an affirmative determination of responsibility implies a determination of nonresponsibility.

An affirmative determination of responsibility without any possibility of determination of nonresponsibility is like a one sided pancake.

Would you do only affirmative determinations of responsibility at the outset of a contract without ever doing a determination of nonresponsibility?

If you think the contractor may be nonresponsible (after award) for reasons that have nothing to do with the contract in question, you really should read Trilon.

Eric

By Eric Ottinger on Tuesday, June 26, 2001 - 05:09 pm:

In the United States Court of Claims. No. 241-76. Decided , June 14, 1978,

Trilon Educational Corporation v. The United States., (June 14, 1978)

"Absent allegations of fraud or bad faith, then, affirmative determinations of responsibility generally will not be overturned, and ordinarily
protests in this regard will not even be entertained. See Central Metal Products, Inc., 54 Comp. Gen. 66 (1974). Although this reasoning
usually appears in the context of challenges by unsuccessful bidders, this court has implied that it also is applicable to the recipient of a
government contract who later realizes that the favorable responsibility determination as to him was erroneous. Transcountry Packing Co. v.
United States [24 CCF¶82,055], 215 Ct. Cl.--,--, 568 F. 2d 1333, 1338 (1978). Similarly, then, the government should also be bound by its own
assessment even if it should later conclude that the initial judgment was incorrect."

By Vern Edwards on Tuesday, June 26, 2001 - 06:19 pm:

Eric:

Trilon is not applicable to the matter under discussion. In Trilon the government awarded a contract and then learned of facts that it did not know about when it made the initial affirmative determination of responsibility. The facts were available, but the government did not discover them. Upon discovering the facts the government declared the contract "cancelled," i.e., void, and refused to terminate the contract for convenience. This meant that Trilon was not entitled to reimbursement of costs that it had incurred in preparing to perform. Trilon went to court to obtain a convenience termination, seeking recovery of those costs.

The Trilon court effectively held that the contracting officer was negligent in making his original determination of responsibility and that the contractor was not to blame for this. The court held that the facts of the case did not justify a declaration that the contract was void and converted the "cancellation" to a termination for convenience. The court did not hold that a termination for convenience was improper; it did not order the government to continue in the contract; it held that a "cancellation" was improper under the circumstances and ordered it converted to a termination for convenience.

In the matter that we have been discussing the issue is whether contracting officers should make a new determination of responsibility prior to placing an order under an IDIQ contract or exercising an option. I have not been discussing a situation in which the contracting officer has learned new facts that were in existence at the time of the original determination and that have led him to change his mind. I have been talking about cases in which new facts have come into existence since the original award and that have affected the contracting officer's thinking about future contract actions.

So Trilon is inapplicable to the circumstances that I have been discussing. But even if it were applicable, it simply says that termination, not cancellation, may be the more appropriate course of action upon discovering that a contractor has become nonresponsible since the original contract award. It does not say that there is no way for the government to get out of the contract.

Trilon is short and easy to read and to understand, and anyone who has been following this thread should look it up and read it. You will see that my reading is the correct one and that the case does not apply to my response to Linda's question. Trilon Educational Corp. v. United States, 217 Ct.Cl. 266 (1978).

By Eric Ottinger on Tuesday, June 26, 2001 - 09:42 pm:

Vern (03:50): “Please explain how making a determination of responsibility after award but prior to any subsequent contract action …. The contractor might be nonresponsible for reasons that have nothing to do with the contract in question.”

Court of Claims: “… the government should also be bound by its own assessment even if it should later conclude that the initial judgment was incorrect."

The Court has made a plain English statement to the effect that the government may only make one responsibility determination per contract. After that, the government is “bound.”

You seem to contemplate that the contractor might be “nonresponsible” under an existing contract for some reason having “nothing to do with the contract in question.”

I have no idea how you can reach that conclusion, if there is only one responsibility determination per contract and the government is subsequently bound by that determination.

Eric

By bob antonio on Wednesday, June 27, 2001 - 05:25 am:

Vern:

Linda also mentioned a requirements contract.

By Vern Edwards on Wednesday, June 27, 2001 - 07:01 am:

Eric/Bob:

Eric: When I say "nothing to do with the contract," I mean nothing to do with anything the contractor has done under the contract in question. One example of a way in which the contractor might be nonresponsible for reasons having nothing to do with anything the contractor did under the contract would be financial incapacity that makes the contractor incapable of further performance. Another might be fraudulent conduct under other government contracts that affects its record of integrity. Yet another might be fragrant violations of the terms of other government contracts, e.g., intentional failure to make a good faith effort to meet the small business subcontracting goals in its subcontracting plan. Another might be seizure of its assets by the IRS that makes it incapable of performing. Any of these and numerous other circumstances that are not directly related to what the contractor has done under the contract in question may justify a determination of nonresponsibility prior to the issuance of an order or the exercise of an option.

Eric: The Trilon court did not make any "plain English" or other statement to the effect that the government is limited to one responsibility determination per contract. It didn't come even close to that. If it did, please quote it the plain English statement you are talking about. (The quote in your June 26, 5:09pm message is not a plain English statement to that effect and, in any event, was quoted out of context.) What the court said was that since the government had been careless in making its original determination of responsibility, and since the contractor had not contributed to that mistake in any way, the government could not "cancel" the contract but had to terminate it for convenience, instead.

Bob: The fact that the contract is a requirements contract makes no difference. I believe that if something has happened subsequent to the initial award, but prior to the placement of a new order, that renders the contractor nonresponsible, then the contracting officer can use a determination of nonresponsibility to justify a good faith termination for convenience.

Eric/Bob: In the spirit of theorizing: I think that a good lawyer could make a pretty good argument that under a government indefinite-delivery contract (definite-quantity, indefinite-quantity, and requirements) the contractor has an implied obligation to conduct its business in a manner that maintains its responsibility, as defined in FAR 2.101 and 9.104, throughout the ordering period of the contract, and that failure to do so entitles the government to refuse to issue further orders under the contract.

Maybe such contracts should include a Section H clause to that effect.

By Anonymous on Wednesday, June 27, 2001 - 10:43 am:

Vern,

I'm not sure I agree with your June 22, 5:50 AM analysis of FAR 9.103 regarding the "purchase or award" language. The analysis appears to ignore the FAR 9.102 "Applicability" language which states the Responsibility regulations apply to "all proposed contracts." I would argue that orders under ID contracts and mods exercising options aren't "contracts" as defined in FAR Part 2.

The practical effect of this may be that a 3rd party couldn't challenge an order or option mod as violating the FAR when the Government fails to support the order or option exercise with a responsibility determination, even if the contractor was "non-responsible" at the time of the order or mod.

That being said, I believe proper contract administration necessitates a responsibility-type analysis before issuing an order or exercising an option. This is just common sense. In all but the rarest circumstances, the Government shouldn't make a "purchase" with a Kr that would fail a FAR 9.104 analysis at the time of such "purchase."

By Vern Edwards on Wednesday, June 27, 2001 - 11:12 am:

Anonymous:

I'd argue that an order under an IDIQ contract is a "contract" as defined by FAR 2.101. It's mutually binding, it commits the government to an expenditure of appropriated funds, and it's in writing. I also think a task order is clearly a "purchase."

However, as I said in one of my earlier messages, I'm not hard over about any of this. FAR does not explicitly require a responsibility determination before the issuance of an order or the exercise of an option, so if I was working in a contracting office I wouldn't make an issue about making formal responsibility determinations.

I'm in complete agreement with your common sense analysis.

Vern

By Anonymous on Wednesday, June 27, 2001 - 12:34 pm:

And I would argue a delivery order is not a contract within the meaning at FAR 2 as it is not mutually binding on its own terms,and since it has no terms it does not constitute a writing in the legal sense.If each order were so constructeed then what does one call the instrument against which it is issued? Also Part 9 repeats several times the term "prospective contractor". The term means a contractor who,as yet has no contract. Once he does he is no longer "prospective" and therefore nothing in Part 9 is or can come back to life.

By Eric Ottinger on Wednesday, June 27, 2001 - 12:53 pm:

Anon,

Before you invest too much in this argument, there is a recent case which states that delivery orders are contracts.

Eric

By Vern Edwards on Wednesday, June 27, 2001 - 01:39 pm:

Anonymous:

FAR 2.101 defines "contract" as follows:

"'Contract' means a mutually binding legal relationship obligating the seller to furnish the supplies or services (including construction) and the buyer to pay for them. It includes all types of commitments that obligate the Government to an expenditure of appropriated funds and that, except as otherwise authorized, are in writing. In addition to bilateral instruments, contracts include (but are not limited to) awards and notices of awards; job orders or task letters issued under basic ordering agreements; letter contracts; orders, such as purchase orders, under which the contract becomes effective by written acceptance or performance; and bilateral contract modifications. Contracts do not include grants and cooperative agreements covered by 31 U.S.C. 6301, et seq."

Task and delivery orders issued against IDIQ contracts satisfy every requirement of that definition. Besides--if "job orders," "task letters" issued under BOAs are contracts, then it seems clear to me that task and delivery orders issued under indefinite-delivery contracts are contracts.

By Anonymous on Wednesday, June 27, 2001 - 02:28 pm:

At the risk of being unctuouness how is a delivery order against an IDIQ mutually binding? Where is the offer and acceptance? In the context of Lindas original inquiry I believe the delivery order is more properly defined as a "contract action" as opposed to a "contract". It is also interesting to note that job orders and task letters are not considered,within the definitation,bi-lateral..therefore would not be considered mutually binding until some other evernt.

By Vern Edwards on Wednesday, June 27, 2001 - 03:04 pm:

Anonymous:

A delivery order requires a contractor to delivery supplies and requires the Government must to pay for them upon acceptance and invoice submission. The basic IDIQ contract doesn't obligate the Government to pay anything, since nothing is purchased until an order is issued.

Since a delivery order requires both parties to do something, it is mutually binding.

By Eric Ottinger on Wednesday, June 27, 2001 - 03:37 pm:

Anon,

Trust me Anon. There is no risk of you being unctuouness.

We had a long thread on this topic a year or two ago, so the answer is not self-evident.

However, Vern is right. When the relevant case surfaces, I will provide it.

Eric

By Eric Ottinger on Wednesday, June 27, 2001 - 07:47 pm:

I drafted a reply to Vern. Then I found a case which makes further discussion unnecessary.

Note that Cibinic and Nash cite an old case, (which I find convincing) which equates orders under indefinite quantity contracts with options.

E. Huttenbauer & Son, Inc.

Comptroller General Decision , , No. B-258018.3, March 20, 1995
Alan M. Grayson, Esq., for the protester.

[Text of Official Digest]

“A decision not to exercise an option based on responsibility-type concerns does not require referral to the Small Business Administration where the contractor is a small business since such decision does not involve a responsibility determination; the concept of responsibility is applicable only in the contract formation process and not in the administration of contracts already awarded.

[See 5275 ]

[Text of Decision]

E. Huttenbauer & Son, Inc., a small business, requests reconsideration of our decision, E.Huttenbauer & Son, Inc., B-258018.2, Feb. 21, 1995, in which we dismissed E. Huttenbauer’s protest that the Defense Logistics Agency was required to refer the question of Huttenbauer’s responsibility in connection with the agency’s decision not to exercise an option in Huttenbauer’s contract to the Small Business Administration (SBA). We held that contract options are exercised solely at the discretion of the contracting officer and that there is no requirement for a referral to the SBA prior to a decision not to exercise a contract option.

In its reconsideration request, Huttenbauer argues that we ignored the Small Business Act in rendering this decision. Huttenbauer states that under the act only the SBA, not the contracting agency, can determine that a small business is not responsible, asserts that the decision not to exercise the option was based on a nonresponsibility determination, and concludes that therefore a referral to the SBA was required before the agency could properly decide not to exercise the option.

We did not ignore the requirements of the Small Business Act in rendering our decision. We explicitly noted that the SBA has the conclusive authority to determine the responsibility of a small business for the purpose of receiving and performing a government contract. We further stated, however, that the SBA referral requirement is not applicable to post-award situations.

We reached this conclusion because the concept of “responsibility” has no applicability with respect to a contract once that contract has been awarded. Responsibility is a contract formation term that refers to the ability and willingness of a prospective contractor to perform the contract for which it has submitted an offer; by law, a contracting officer must determine that an offeror is responsible before awarding it a contract. See 10 U.S.C. §2305(b)(3), (4) (Supp. V 1993); Federal Acquisition Regulation (FAR) §9.000 et. seq. Once that offeror is determined to be responsible and is awarded a contract, the role of “responsibility” with respect to that contract is over.

The new relationship between the government and the awardee/contractor is not governed by contract formation rules; instead, it is governed by principles of contract administration, any applicable FAR provisions, and the provisions of the contract itself. That means that if the contractor should perform poorly or not comply with specification requirements, the contracting officer does not then make a new responsibility determination and find the contractor to be nonresponsible; instead, the contracting officer proceeds under contract provisions permitting him to take certain actions up to and including termination of the contract for default or for the convenience of the government.

Similarly, if a contract contains option provisions, the contracting officer is not required to make a new responsibility determination before deciding whether to exercise an option; he simply proceeds pursuant to those option provisions and to the applicable provisions in FAR §17.207. Those provisions establish no prerequisites for a decision not to exercise an option; thus, that decision is solely within the discretion of the contracting agency. In other words, in administrating the contract the contracting agency is free to decide, whether on the basis of concerns about performance or for any other reason, that it does not wish to extend or expand the contract through the exercise of an option.

In short, a decision not to exercise an option, even if based on responsibility-type concerns 1 about acceptable contract performance, does not involve a determination that the contractor is not responsible--it is simply one of several decisions--such as whether to issue a cure notice, see FAR §49.402-3, whether to impose liquidated damages, see FAR §49.402-7, and whether to terminate the contract, see FAR part 49, that a contracting agency having such concerns might make in administering its contracts.

Since a responsibility determination is not being made, there is no requirement that such a matter be referred to the SBA pursuant to its authority under 15 U.S.C. §637(b)(7)(A) (1988) to certify the responsibility of a small business to receive and perform a contract.

The decision is affirmed.

Robert H. Hunter Senior Associate General Counsel

1It is not uncommon for responsibility-type concerns to be taken into account in situations that do not involve responsibility determinations and therefore do not require SBA referral. See, e.g., Tri-Services, Inc., B-256196.4, Sept. 30, 1994, 94-2 CPD 121.”


If I may quote the excellent words of my good friend Old Timer. “Careless use of acquisition terminology suggests ignorance of the rules and is a great source of confusion and trouble.”

I think the following comments are still apropos, from am acquisition reform point of view, if nothing else--

Vern,

(I am glad you are no longer hard over, but …) In my dictionary “bound” is defined as, “Under legal or moral obligation or contract.” That sounds like “for better or for worse” to me. You can’t just say, “I didn’t think you were ugly when we started this relationship, but now I think you are ugly.”

To me, “bound” is plain English, meaning, “You only get to make this decision once.”

You are going way out of your way to make my acquisition reform argument. Your doctrine is redundant, unnecessary, one sided, and unsupported by anything other than your own suppositions.

Nobody is arguing that we don’t have appropriate policy and procedures for doing terminations or negotiating deductive changes. We know how and when to do these things. If a termination is appropriate, there is no need for a nonresponsibility determination to support the termination.


In a way we are making progress. Last year I had to argue that orders are each separate contracts. Now, it seems most of us are agreed on that point.

I can see Linda’s logic for doing a separate determination of responsibility for an individual order (assuming the government is not contractually bound to award the order). But, I don’t see how you can do a nonresponsibility determination for an order, without repudiating the affirmative responsibility determination, which the government has made for the overall contract, and making that responsibility determination an ongoing process rather than a one-time determination.


At the FAR level, it is not even contemplated that the Government will withhold orders from a debarred contractor (albeit the DFARS goes the other way, with the possibility of a high level waiver). That should have been enough to bring this argument to closure, but this forum is off making policy in places that the FAR clearly doesn’t want to go.


If one of our participants started talking about a contract, which is not really a contract, but it is something like a contract, or a termination which is not really a termination, I don’t think most of us would consider that good practice.

Significant terms, which have exact meanings, should not be used imprecisely.

Linda asked whether she should be doing a determination of responsibility, not whether she should be doing something like a determination of responsibility.

Eric

By Anon2U on Wednesday, June 27, 2001 - 10:40 pm:

Once again I must say that contracting is far too complicated for even KO's with 10 years or more experience let alone the rest of us who are just coming on board. The Office of Federal Procurement Policy, the FAR council, or some other policy making agency should beat these gray areas to death and issue a single federal policy that all can understand. Not likely to happen due to politics however.

I discussed FAR policy with someone who works with the FAR council and they said that every time they issue a proposed rule for public comment, the lobbyists file hundreds of briefs with opposing positions. So after months of writing and rewriting to account for differing political pressures, the guidance that results is no longer understandable. We leave it to the GAO and legal systems to interpret it.

You go to contracting classes at DAU, MCI, ESI/George Washington and they all put a different spin on the same topic. Their instructors debate topics just like everyone does on this bulletin board, which leaves you not knowing which is the right way. You are always damned if you do or damned if you don't.

I'll grant you that a portion of the career field has to be art, but most should science. Follow the procedure and you will be right 99.9% of the time. But here we are with years of experience still debating what is an offer and what is not.

So, we beginners do the best job we can. If someone proves I'm wrong, I try to fix it. If I lose a protest, I may know how to do it right next time (provided a different lawyer don't interpret the same law differently). However, I don't think the taxpayers should have to pay for my getting experience by trial and error. And just think, half of the current experience is supposed to retire in the next 5 years. No wonder everyone is bailing out of contracting and my agency is complaining they can't hire enough contract specialists.

By Vern Edwards on Wednesday, June 27, 2001 - 10:53 pm:

Eric:

Good catch with GAO's Huttenbauer decision. I surrender on that basis. However, the rest of your comments are nonsense.

Vern

By Linda Koone on Thursday, June 28, 2001 - 04:17 pm:

Thanks for the assistance!

By John Ford on Thursday, June 28, 2001 - 08:46 pm:

Eric, not wanting to pile on, but your assertions that individual orders under IDIQ contracts are contracts is unsupported by the regulations and case law that I have been able to find. I know we had this discussion several months ago, but your position means that we have a contract, or several contracts, within a contract. You mention that you found a recent case that supports your position, but you did not identify the case. Please do so, as I explained in our previous discussion, I have found case law to the contrary.

By joel hoffman on Thursday, June 28, 2001 - 09:34 pm:

John, I feel that too many people take the FAR definition of a "contract" too literally. I think the definition was generalized so that it wouldn't have to be defined umpteen thousand times throughout the FAR. Note that in-scope modifications are lumped into the definition. Does that mean that every mod is a new contract? Heck no! happy sails! joel

By Vern Edwards on Thursday, June 28, 2001 - 10:56 pm:

John and Joel:

I'm with Eric on this one. See the GAO's decision in Sea-Land Service, Inc., B-278404, Feb. 9, 1998:

"An IDIQ contract for services contemplates the issuance of orders for the performance of tasks during the period of the contract. See 10 U.S.C. § 2304d(1) (1994). Such orders are contracts within the overall IDIQ contract, see FAR § 2.101 (definition of contract), and are subject to the terms and conditions of that contract."

By joel hoffman on Friday, June 29, 2001 - 10:19 am:

Vern, the Decision you cited merely confirmed that there was a contract when cargo was booked for shipment, even though the shipping order is prepared after the booking and/or sailing date. The booking is the contract order. All it really said was that an order is a contract instrument to obtain the service.

I didn't read it as though each order is a separate contract, any more than a bilateral modification is. Happy Sails! joel

By Vern Edwards on Friday, June 29, 2001 - 11:03 am:

Joel:

I'm sorry to disagree with you, but the GAO said what it said in very clear terms. The paragraph that I quoted was introductory and general and was not restricted to the specific facts of the case.

I don't understand on what basis you and John dispute that delivery and task orders are contracts. FAR 2.101 says that the term contract "includes all types of commitments that obligate the Government to an expenditure of appropriated funds and that, except as otherwise authorized, are in writing." Underlining added. That language describes delivery and task orders perfectly. The GAO says that task orders "are contracts within the overall IDIQ contract."

Where are you guys coming from on this?

By Eric Ottinger on Friday, June 29, 2001 - 11:10 am:

All,

Take a look at Ness Manufacturing, Inc. ASBCA No. 50747, January 17, 2001

http://www.law.gwu.edu/asbca/decision/pdf2001/50747.pdf

This is a case where the parties get into a lot of confusion because it isn’t clear which contract is the contract. However, the ASBCA doesn’t seem to be confused.

“The disputed language applies where a purchase order is converted to a bilateral contract …”

“…recognizing that issuance of a purchase order ‘constituted an offer to enter into a unilateral contract’”

Note that the ASBCA uses the terms “delivery order” and “purchase order” synonymously in this case.

I think “orders” are viewed as nice, easy to do, and easy to manage little creatures. When we collectively realize that we are proliferating little contracts, and each must be separately negotiated, separately funded, separately administered and separately closed out, there will be some second thoughts.

One thing that you learn doing contract administration-- On the average a small contract is less hassle than a large contract. However, the hassle per dollar is much greater for small contracts.

Although I agree with John that the idea of a contract inside of a contract makes my head hurt, this doesn’t seem to be an issue with the legal community.

Eric

By joel hoffman on Friday, June 29, 2001 - 11:51 am:

Vern, I apologize for appearing to disagree with you. I have no disagreement whatsoever with anything you said. I wasn't closely following this thread. I reread what discussions you were responding to and agree with you. I thought someone was resurrecting another argument.

To me, a contract within a contract means that,although each ordering action or obligation is separate, they are under the umbrella agreement (contract) within existing scope limitations, terms and conditions, etc., unless modified in the bilateral agreement. A task order must fall within the scope of the contract, unless an out-of-scope supplemental agreement is otherwise authorized. Happy Sails! Joel

By Anonymous on Friday, June 29, 2001 - 12:11 pm:

BC "It depends on what the definition of is is." I,along with others,conclude that since a DO/TO has no meaning unless issued within the terms of a "contract" they are simply not contracts of or by themselves. They are merely events that take place within the four corners of "the" contract. It may be handy to think of them as such but that alone does not bring them within the definition of the FAR. The fact that casual use of the term in the referenced decisions should not be construed as the definition. The statement about contract mods not being contracts is on point . Another way of looking at it is the definite delivery contract. Fully obligated at award it still requires an order for events to occur. Does that meet the "contract" test? In all I think there are some of us who simply do not subscibe to the notion that you need a contract to carry out a contract.

By Eric Ottinger on Friday, June 29, 2001 - 12:46 pm:

Anon,

It is important to distinguish Technical Instruction Letters, Task Assignments, etc. which are technical direction under a contract, from Task Orders and Delivery Orders which are, in fact, contracts.

One key is the fact that the FAR (and the statute) specify that each order will have a distinct Part 16 contract type. The language in the FAR is about as muddy as you can get, but I have construed this language in the only way that you possibly can. Part 16 is contract types.

FAR 16.501-2 (c) “Indefinite-delivery contracts may provide for any appropriate cost or pricing arrangement under Part 16. Cost or pricing arrangements that provide for an estimated quantity of supplies or services (e.g., estimated number of labor hours) must comply with the appropriate procedures of this subpart.”

Also, it is typical for the indefinite quantity umbrella contract to specify that the orders may be more than one contract type (e.g. FFP and CPFF). It really isn’t possible for an order to have a contract type unless the order is itself a contract.

In any case, you are pursuing an argument long after you have lost the argument. You should find a better interpretation for the case law cited, or find better case law.

You should be at least a full professor before you should be allowed to let your preconceptions and irrefutable logic take precedence over the opinions of a court in this forum.

Eric

By Anonymous on Friday, June 29, 2001 - 02:30 pm:

Neither case was a court decision...legal forum but not a court.

By Anonymous on Friday, June 29, 2001 - 03:04 pm:

I admit the FAR Part 2 definition is poorly written, and a literal interpretation of the language would lead those unfamilar with contract law to conclude a unilateral order under an ID contract is a new contract, separate from the ID contract. Although I doubt it, perhaps the drafters of this definition even intended such to be the case under the FAR.

However, it doesn't take a professor in contract law to recognize unilateral ID orders are not separate contracts. As established through more than 1000 years of contract law, an essential element of any contract is "mutual assent." (most commonly, this element is satisfied through offer and acceptance).

There is no separate "mutual assent" in a unilateral task or delivery order. The contractor has already assented to perform the order in the base ID contract.

As stated above, I don't believe the drafters of the FAR 2 definition ever intended ID orders to be separate contracts. Note that all examples of "contracts" in the FAR 2 definition meet the common law requirement for "mutual assent." Even BOA orders, which are cited in the definition, require the contractor's assent as the contractor doesn't assent to anything upon formation of the non-contract BOA.

By Eric Ottinger on Friday, June 29, 2001 - 03:23 pm:

Anon,

You are correct of course.

However, anyplace where I address the judge as "Judge" would seem to be a "court" to me.

If I understand correctly-- (Keep in mind, I am not a lawyer.)-- these fora are outranked in the judicial pecking order by actual courts, but no one would say that they don't know a contract when they see one.

Eric

By Ron Vogt on Friday, June 29, 2001 - 07:08 pm:

I have no problem with the concept of a contract within a contract. We frequently do alliances, overriding agreements, or general terms agreements, under which orders are placed by issuing purchase orders or separate contracts. Both the top-level contract and the purchase order are separate contracts. Usually, the top contract states that any purchase order incorporates and is subject to the Ts and Cs set forth in the contract. That makes the order a complete contract.

Despite the interrelationship, the top contract and the orders placed under it are separate contracts. A breach of one is not necessarily a breach of the other. From a seller's perspective, you want the overall contract to survive even if there is a breach of an individual purchase order. Depending on how your write each contract, a breach of the top contract might terminate all orders placed under it, or it might call for completion of any pending orders.

The point is still the same - they are separate contracts with separate obligations and separate remedies. How much they affect each other depends on how you write them.

By Vern Edwards on Saturday, June 30, 2001 - 10:58 am:

All:

One mistake that some of you -- like Anonymous of June 29 at 03:04 p.m. -- are making is in thinking that the definition of contract in FAR 2.101 defines the legal concept of contract. It doesn't.

Read the beginning of FAR 2.101. The definition of contract in FAR 2.101 merely defines the term "as used throughout this regulation." Among other things, the definition serves to distinguish contracts to which the FAR applies from grants and cooperative agreements and from contracts awarded by nonappropriated fund instrumentalities.

As a definition of the legal concept of contract the definition in FAR 2.101 is entirely inadequate. All you have to do to see that is to compare it to the one in Black's Law Dictionary. Note that the definition in FAR 2.101 excludes contracts awarded by nonappropriated fund instrumentalities, even though they are contracts under the law. Also, while most grants are contracts under the law (see Cibinic and Nash, Formation of Government Contracts, 3d ed. (1998), p. 15.), they are not contracts under the FAR.

Talk about judicial pecking orders is beside the point. I quoted the GAO because John Ford asked for such a reference and to show that someone besides Eric and I think that delivery and task orders fall within the definition in FAR 2.101. The quote from the GAO is dicta; it is not a holding in that case. Note that it cites FAR 2.101 as authority, not a court decision or a contact law textbook.

I agree that the definition in FAR 2.101 is badly written, but it is not entirely obscure. The second sentence in the definition is clear enough and it clearly includes delivery orders and task orders. The Comptroller General agrees, which should be worth something.

What I don't understand is why this troubles some of you.