Situation:

I have a subcontractor that has failed to make timely delivery on technical data as well as several other key items contained within the statement of work. Ignoring the obvious, such as our right to terminate, (we are over a barrel such as no second source and our client hollering for our final delivery),we have decided to provide additional funding and to extend the period of performance. I have told the subcontractor that this will come as a unilateral change to the contract. His consultant believes this should be in the form of a supplemental agreement (bilateral in nature). Because of the circumstances described above, we disagree. Any thoughts? Thanks

By Ron Vogt on Monday, January 14, 2002 - 12:19 pm:

The first thing to remember is that your subcontract is a commercial contract, not a government contract. Sure, you flowed down a lot of FAR clauses, but you are not the government, and you can't rely on any government contracting principles to do what you want to do.

That said, read your contract. If there is a clause in there that allows you to extend the period of performance unilaterally, then follow that clause. If not, then your only choice is to negotiate and reach agreement on a modification (which I assume is what you mean by a supplemental agreement). I can't imagine why your sub would not agree, since extending the period of performance and providing additional funding sound like a generous remedy for a failure to deliver. It just sounds like your sub wants you to use the correct vehicle -- a modification.

Just out of curiosity, why do you think you can impose a unilateral change?

By Eric Ottinger on Monday, January 14, 2002 - 12:29 pm:

Anon1,

I am missing something. If the subcontractor (and presumably the prime) are willing to sign a bilateral, why would you want a unilateral?

Eric

By anon1 on Monday, January 14, 2002 - 12:41 pm:

Ron, if this is a commercial contract, then why flow FAR clauses down if you can't depend or utilize them in the administration of the contract. Notwithstanding that one of our stipulations on our terms and conditions state that if the subcontract is a result of a Government Prime, certain issues would be decided under Federal venue instead of State. What are we missing-Again thks for the input.

Further, if I can't use FAR in the contract interpretation, how do I successfully use termination for convenience without breaching the contract since commercial contracting has no counterpart for TforC

By Ron Vogt on Monday, January 14, 2002 - 01:49 pm:

Anon1: I think you may have misunderstood my post. I never said that FAR clauses would not apply. I said that certain FAR principles would not. There's a big difference. A FAR clause will apply if you flow it down, but it reads just like any other clause between you and your sub. FAR principles that are extra-contractual, like the Christian Doctrine, will not apply to your subcontract.

There are 2 reasons for flowing down FAR clauses. First, you as the prime have a contractual obligation to do so, because your contract says that you will flow down certain clauses to your subcontractors. Second, there are business reasons for flowing down certain other clauses, such as the Stop Work clause. If you fail to do so, you will be stuck when the government takes certain actions.

In response to your second post, you can successfully T for C a sub if you have included a T for C clause in the subcontract. If you have not included a T for C clause, then no amount of interpretation will get it in.

By anon1 on Monday, January 14, 2002 - 02:38 pm:

Eric, in answer to you question, their "consultant" is advising them not to do a "BI" if we won't agree to increasing the fee under this CPFF arrangement. That's where the CPPC issue came up. I know what I would really like to do. Unfortunately, I took this over quite recently after everything hit the fan.

By anon1 on Monday, January 14, 2002 - 02:43 pm:

Ron: reference your input, thanks, make sense. Is it an absolute known that the Christain doctrine has never been applied against a first tier subcontractor when an action is initiated in a Federal Forum? Secondly, has anyone experienced the unallownace of a cost when the Prime allowed a cost plus percentage of cost type of contract to occur by an S/C and paid them.(I know-a no-no at the prime level-Tks

By joel hoffman on Monday, January 14, 2002 - 03:09 pm:

Anon1, if your subcontract has a change order clause, I agree with your unilateral action. You said that the sub won't bilaerally agree to the extension, without a fee increase. You extended the performance period in lieu of terminating. Now, it is up to the sub to make an appeal for or litigate the fee issue, while maintaining performance. happy sails! joel

By Eric Ottinger on Monday, January 14, 2002 - 03:11 pm:

Anon1,

Based on the facts that you have provided, I would say this "consultant" is a nuisance.

I would sign a bilateral with the prime. I would indicate to both the prime and the sub that they will get a very negative past performance report if the work is not completed.

They really do have you over a "best efforts" barrel insofar as you must provide more time and funds to get the reports completed. But you shouldn't be paying more fee.

(That probably would not be CPPC, but you would violate the rule cited by the Supreme Court in the Muschany case. "Under the second class [cost-plus-a-fixed-fee], the fee is not affected by variations in costs, but only by changes in the scope of the work.")

This really is your prime contractor's problem. Give the prime the appropriate motivation to get this resolved.

Eric

By Ron Vogt on Monday, January 14, 2002 - 03:12 pm:

Anon1: As far as I know, no board (in a sponsored claim) or court has applied the Christian Doctrine to a subcontract. I can't answer your second question.

I'm reading between the lines, but I assume the reason you want to do a unilateral change is because the sub is insisting on an increase in fee, is that true? If that's the case, you may have some other options. For example, you can let the sub know that you intend to deduct your damages from any payments due if they won't agree to a reasonable modification. The UCC permits this (2-717) if you don't have a clause that says otherwise. However, it is difficult to give advice here without knowing all of the facts. If the sub is claiming that you are responsible for its delays, then you have a much more complicated problem.

By the way, a fee increase does not necessarily create a CPPC contract if the fee increase is fixed.

By Eric Ottinger on Monday, January 14, 2002 - 03:23 pm:

Anon1,

To make a dumb obvious point. If the sub (or maybe the prime) is just flat refusing to do the work and the customer still has a requirement, why are we talking T for C. Wouldn't default be more appropriate.

Eric

By anon1 on Monday, January 14, 2002 - 03:24 pm:

Thanks to everyone for the input, really appreciated. Yes,their 'consultant' is a problem. Incidentally, we are the prime to the Feds-Have a good week.

By joel hoffman on Monday, January 14, 2002 - 04:16 pm:

Good luck, Anon1. My comments were intended for you, as the prime. happy sails! joel

By anon1 on Monday, January 14, 2002 - 07:36 pm:

And thank you Joel, always good to see your comments in this forum. Ron looked at the UCC and makes sense. Seems I got them coming and going and I don't believe in screwing anyone. We didn't cause the delays, the sub has been getting rich before I came on board. Sad-I hope there are some ethics still left in this world. Of course, a new PM might be in the offing-Cheers

By Anonymous on Tuesday, January 15, 2002 - 01:50 pm:

This raises an interesting question. Anon1 is obviously the prime, not government. The prime is having what appears to be unreasonable difficulty with a sub. The prime's past performance may suffer while the sub is in the "no privity" category.

I've seen past performance on subs and factored that into risk. The question is whether the primes have the same methods. It might be interesting if primes conducted a past performance survey of other primes and government offices where the sub had been involved in a contract -- even as a "noseeum" sub.

I never saw a question from a potential prime. Anyone ever seen this done?

By joel hoffman on Monday, January 21, 2002 - 07:58 am:

In construction, mnay primes are now requiring their larger subs to be bonded. That weeds out some, as the bonding companies perform screening and background checks. Many reputable construction primes also check out references on their potential subcontractors on subcontracts of significance. happy sails! joel

By Philip G. on Tuesday, January 22, 2002 - 09:56 am:

I work in procurement for a prime contractor. We routinely request and evaluate past performance as part of the award process. We also request bonds on a routine basis - similar to fed world practice.
All other primes that I know of do the same. Philip