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By
Fred on Friday, January 03, 2003 -
04:24 pm:
1. Can the Federal
Government contract directly with an individual?
2. If so, what part(s) of the FAR or other guidance should I
refer to and be concerned with?
By
Anonymous on Friday, January 03,
2003 - 05:23 pm:
Fred,
This is what is called a "personal services" contract.
By
2ndAnon on Friday, January 03, 2003
- 11:05 pm:
No, I don't think you are correct Anonymous. "Personal
services" does not deal with the contracted entity so much as
the deliverable. An individual contracted to deliver a specified
product is not under a personal services contract. A company
contracted to deliver a workforce to do "whatever a government
supervisor wants" is dealing in personal services contracting.
The key is the services being contracted for and who is
supervising the work rather than "an individual."
By
Eric Ottinger on Saturday, January
04, 2003 - 09:40 am:
Fred,
Here is a good answer out of the Ask A Professor website:
"Definition of Personal Services
Posted to Contract Law on 8/28/01 by Kenji Farinelli
The Scenario"
The Question
"I'm looking for a clear definition, with examples, of personal
services - when it is not allowed and when it is (if ever)."
"A “personal services contract” (PSC) is a contract that, by its
express terms or as administered, makes the contractor personnel
appear, in effect, Government employees. The FAR defines and
explains the concept at Part 37.104. An example would a DoD
medical treatment facility (MTF) that hires a physician, by
contract, to provide medical services at the MTF. This physician
will work at the facility, be personally supervised by the
Department Director of the MTF, and will be indistinquishable
from the other federal civilian service doctors working at the
MTF. The provisions explaining PSC restrictions are found at
above-cited FAR section and for DoD contracts at DFARS 237.104.
The FAR & DFARS sections cited above can be accessed at
http://www.arnet.gov/far/> and
http://www.acq.osd.mil/dp/dars/dfars.html/"
Stephen Copetas,
Law Instructor,
DAU Norfolk Campus
Regards,
Eric
By
Vern Edwards on Saturday, January
04, 2003 - 05:54 pm:
Fred:
There is no rule against the government contracting with an
individual. See: Enrique (Hank) Hernandez, ASBCA No.
53,011, Dec. 12, 2000, 01-1 BCA ¶ 31,200, in which the board
said: "There is no proscription against the Government entering
into a contract with an individual in the capacity of
individual."
See, too, FAR § 4.102(a), which prescribes the rules for
obtaining contractor signatures on contracts, and which says:
"A contract with an individual shall be signed by that
individual. A contract with an individual doing business as a
firm shall be signed by that individual, and the signature shall
be followed by the individual's typed, stamped, or printed name
and the words, 'an individual doing business as
_____________________' [insert name of firm]."
Furthermore, a contract with an individual is not necessarily a
personal services contract within the meaning of FAR § 37.104.
If the individual, as contractor, is to perform in accordance
with a contract statement of work and is not subject to
employer-employee type supervision by government personnel, then
the contract is a nonpersonal services contract.
I, as an individual and as an individual doing business as a
firm, have entered into many, many nonpersonal services
contracts with the government, and so have many other persons.
By
Eric Ottinger on Saturday, January
04, 2003 - 10:27 pm:
Vern,
Thanks. Now I see what 2ndAnon was getting at.
Eric
By
Eric Ottinger on Saturday, January
04, 2003 - 11:15 pm:
All,
On second (actually third) thought, the legal definition of
"personal services" is a little different from the definition of
“improper personal services” that we have had in mind. A
contract with Vern probably is a “personal services” contract
(albeit not FAR 37.104) because I can’t imagine that any
substitute would be acceptable.
"in contract law, the talents of a person which are unusual,
special or unique and cannot be performed exactly the same by
another. These can include the talents of an artist, an actor, a
writer or professional services. The value of personal services
is greater than general labor, so woodcarving is personal
service and carpentry is not. Therefore, if an actor contracts
to perform in a movie and fails to show, he/she will be liable
for damages based on the difficulty to replace him. An artist
who contracts to paint a picture cannot send a subsitute since
he/she was retained for his/her unique ability and product."
Courtesy of law.com
If Fred is merely contemplating a contract with an individual,
Vern provided the answer than he needs. If he is contemplating
something that fits FAR 37.104, he should get help from agency
counsel.
Eric
By
Vern Edwards on Sunday, January 05,
2003 - 04:55 pm:
Eric:
We should probably explain to Fred that the term "personal
service contract" has two, generally unrelated legal meanings.
The first meaning is the one in FAR § 2.101, which defines
personal services contract as follows:
"'Personal services contract' means a contract that, by its
express terms or as administered, makes the contractor personnel
appear to be, in effect, Government employees (see 37.104)."
The second meaning is a common law usage, unrelated to and long
pre-dating FAR, referring to contracts in which the buyer hires
a particular person or firm because of unique qualifications.
One of the legally significant facts about this kind of personal
service contract is that the contractor cannot delegate
performance. See Contracts, 3d ed., by E. Allan
Farnsworth (New York: Aspen Law & Business, 1999), pp. 744-745:
"One of the most significant of these circumstances [in which a
court will prohibit delegation of performance] is the extent to
which the performance is 'personal,' in the sense that the
recipient must rely on qualities such as the character,
reputation, taste, skill, or discretion of the party that is to
render it. For example, an artist who contracts to paint a
portrait or a singer who contracts to sing for an opera cannot
delegate performance, even though the delegate's performance
might be superior to that of the delegating party."
The classic common law personal service case is Lumley v.
Wagner, 42 Eng. Rep. 687, which dealt with a contract
awarded in 1851 to Johanna Wagner, an opera singer, who was to
perform at Lumley's Her Majesty's Theatre in London, but who
then refused to do so. See: Damning with Fulsome Praise:
Assessing the Uniqueness of an Artist or Performer as a
Condition to Enjoin Performance of Personal Service Contracts in
Entertainment Law, by Sharon F. Carton, in Villanova
Sports and Entertainment Law Journal, 5 Vill. Sports & Ent.
L.J. 197, 1998. (Anybody remember the Kim Bassinger case of a
few years ago?)
A government contract with an individual is not necessarily a
personal service contract in either sense of the term. For
example, the government can contract with Joe Doakes, working as
an individual, to perform janitorial services at a field office
based on a performance work statement. Joe provides his own
tools and supplies, works at night when no government employees
are around, performs in accordance with the work statement, and
is not subject to employer-employee type supervision. The
contract with Joe is with an individual, but it is not a
personal service contract in either sense of the term.
It appears that some contracts can be for personal services in
both senses of the term, e.g., some contracts with physicians.
Vern
By
Fred on Monday, January 06, 2003 -
08:07 pm:
I intentionally asked my original questions in a broad
way in order to get the broadest answers and perspectives
possible. There are oftentimes no right or wrong answers in this
business, but there sure are a lot of positions, opinions, and
interpretations--that's what I really wanted to get--various
opinions on (what seemed to be) a simple topic, and I got it.
All the answers, even some that prematurely jumped to
conclusions, were helpful in that they brought up perspectives I
might not have considered before. Vern, you did provide the
answer I was looking for with your Jan 4, 5:54 p.m. reply.
Thanks to everyone that responded!
By
Kennedy How on Wednesday, January
08, 2003 - 12:17 pm:
Well, I'm back after a long vacation and some TDY
thrown in....
The only time I ever contracted with an individual was for
Transcription Services to get transcripts in relation to an
ASBCA Case. Our JAG sent us a note saying please contract with
such and such a person for X number of copies of the transcript
for ASBCA # xxxxxx. I can't remember if I had to make any
determinations or not (this was at least 10yrs ago), but I
remember having to research it to ensure it wasn't a personal
service.
Kennedy
By
Neil Ray on Thursday, January 09,
2003 - 12:48 pm:
Excellent discussion! I have been interested in this
subject for a long time, and I really appreciate the insights of
the usual crew of experts, and especially the longer, detailed
responses.
I have a slightly different concern about contracts with
individuals. Are they really "independent contractors" or not?
If injuries and law suits or other problems develop from the
work, will the individual be treated by the law as an
"agent"/employee for whose acts the "principal"/employer is
responsible, or as a separate legal entity which bears its own
liabilities?
The FAR seems to ignore this subject, though it is implicit in
its concern over "personal services" contracts. But the IRS is
deeply involved with this question because of concerns over
payment (or nonpayment) of various payroll taxes for employees.
Consider the case a few years back of the Microsoft workers who
won assorted employment benefits (including pension rights)
after being labeled as "independent contractors" for many years
by Microsoft.
I like to know if an individual contractor has: any other
clients; a business license; a separate business taxpayer
identification number; an office with equipment, supplies, etc.;
any other staff? The IRS has a much longer list with questions
such as: Who sets the work hours? Is the individual paid by the
hour, week, month, or by the job? Can the person quit whenever
they want without being liable to the company for unfinished
work?
These issues get even trickier when the individual is a rehired
Federal annuitant -- often being rehired as a
"contractor/consultant" to come back and do the same work as
they were doing before as an employee. Pension reductions, tax
issues, and other legal problems arise that are best handled by
Personnel offices rather than contracting staffs, but it always
seems to take a fight to make this happen. These annuitants are
often so experienced that they need little or no actual
supervision. So the primary FAR test for "personal services" may
not screen out all of these people.
What do other contracting specialists do in these situations?
By
formerfed on Thursday, January 09,
2003 - 01:45 pm:
Neil,
You bring up several good points. As a CO I always tried my
hardest to use the rehired Federal annuitant route when the
agency wanted to bring back a former employee.
Let's face it - a recently retired employee may be in the best
position for a variety of reasons to do some job. But getting
this person through the procurement office usually is not the
best way. It puts the agency in general and the Contracting
Officer specifically in jeopardy. I say this because there are
two ways to get the person on board - either sole source or
competitively, and whichever way is subject to close scrutiny
and clearly smacks of favoritism to other sources that do the
same type of work.
The biggest problem usually is convincing the individual the
agency wants to come back as a reemployed annuitant for
financial reasons. The amount of money they receive is greatly
restricted and essentially capped to in the neighborhood of what
they made before retiring. Naturally that person wants to come
back as a contractor at $50, $75, $100 or more per hour and keep
their retirement annuity amount in tact.
I would advise any CO to highlight the pitfalls to their agency
management and insist on using the personnel avenue except in
the rarest and under extraordinary circumstances
By
Anon2U on Thursday, January 09,
2003 - 05:07 pm:
Our former employees provide thier resumes to three
professional services companies who let us know they want to be
employed. We compete the three companies via GSA FSS and award
to the best value. The individual is then hired by that firm if
they can come to an agreement on compensation. There seems to be
enough slush in the proposed rates that most of these people are
plenty happy with their pay even if they can't tell us what it
is. If they cannot be hired, we cancel the requirement. Most
personnel are done this way.
Another way (much less appealing to me) is to have the person
incorporate themselves, then provide a SOW that matches their
skills, and finally award sole source as unduly qualified. It
matters not to us that the only employee of the corporation is
the individual. Our legal and IG have never took issue.
By
Neil Ray on Friday, January 10,
2003 - 09:18 am:
Thanks, Anon2U, for these suggestions. Either one
sounds like a huge improvement over the way that we handle such
cases.
By
John Ford on Saturday, January 11,
2003 - 03:21 pm:
Anon2, how do your former employees know that you are
willing to hire them? It seems to me that there must be some
upfront bargaining between the exes and you before they go off
and start marketing themselves to front schedule holders.
By
Anon2U on Sunday, January 12, 2003
- 08:14 pm:
John,
Of coarse there is. The employee gets the approval of their
mangement before any of this starts. As long as we have
available funds to pay for contract help and you are well liked,
you can get back in. There are several professional services
firms who will play this game and the employees all know them. I
only hope it is still going on when it becomes my turn.
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