By Vern Edwards on Friday, June
07, 2002 - 05:11 pm:
The following Q&A appears in the Post-Award Procurement and
Contracting section of Ask A Professor (I have inserted
paragraph breaks in the professor's answer to make it easier to
read):
"Is there a statutory authority for a contracting officer to
enter into a supplement agreement that is not specifically
authorized by a contract clause or special contract requirement
of the contract? Posted to Post-Award Procurement and
Contracting on 5/29/02 by Tim Pink
The Scenario
In researching this question, we've been unable to determine
what gives a contracting officer the statutory authority to
enter into a supplemental agreement that is not specifically
authorized by a contract clause or special contract requirement
of the contract.
The Question
Over the years, I've seen this question asked but have not seen
a definitive answer. In Ask A Professor, I saw a question
regarding the proper authority for a supplemental agreement. The
answer was FAR 43.103(a). Many regulations are based in law. Is
there a statutory authority for a contracting officer to enter
into a supplemental agreement for an in-scope change that is not
specifically authorized by a contract clause or special contract
requirement of the contract?
The Answer
I suspect the reason you have been unable to determine what
gives a contracting officer the statutory authority to enter
into a supplemental agreement that is not specifically
authorized by a contract clause or special contract requirement
of the contract is because there isn't one, at least I am not
aware of any. However, in some organizations, the authority
cited for the type of situation you described is 'mutual
agreement of the parties' which is really no authority at all.
A question about 'mutual agreement of the parties' came up some
time ago, and I have included the reply that was given and hope
it helps: Can 'mutual agreement of all parties' in a
supplemental modification be used when no other authority
applies? Answer No.
First – Isn’t the statement 'mutual agreement of the parties'
redundant? When the parties sign a bilateral modification, it is
intuitively obvious that the parties have agreed, as evidenced
by their respective signatures on the same document. Simply
stating the obvious does not constitute authority.
Second – Parties can mutually agree to anything - even illegal
actions. But that does not constitute authority to take an
illegal action. Catch my point here?
Which brings me to the last point: Third – The role of the
Contracting Officer is to obey the laws of the land and to carry
out acquisition policy as cited in the FAR. As onerous as this
may sometimes be, the Contracting Officer must always take
lawfully correct actions that may not be easiest or fastest. In
fact, the short methods, while mutually agreeable to the
parties, may not be within the spirit and intent of the law or
acquisition policy. It is the role of the Contracting Officer to
either 'legally' determine how something may be done fast and
simple, or barring that, take the appropriate course of
contractual action to meet the spirit and intent of laws and
acquisition regulations and policies.
In order to demonstrate (to ANY and ALL observers) that
contractual actions, modifications and changes are appropriate
(lawful), the Contracting Officer must cite the source of their
authority for consummating this binding agreement on the
parties. By citing this authority to make a change, it acts as a
check and balance on what the Contracting Officer can do.
Therefore, a casual observer (say, a competitor) could examine
the agreement (modification) between the Contracting Officer and
the contractor and understand the legal/regulatory rationale for
making the change."
* * *
In light of the professor's answer, consider the following
scenario.
Suppose that a firm receives a competitively-awarded IDIQ
contract that requires the contractor to deliver supplies within
ten days after receipt of a delivery order. Shortly after
contract award, the contractor decides that it would like to
have more time to deliver. It can deliver within ten days, but
fifteen days would be more convenient. So after fulfilling the
first of what the parties expect to be several delivery orders,
the contractor asks the contracting officer to modify the
contract to give it fifteen days to deliver, and offers a unit
price reduction of five percent in exchange.
The contractor officer checks with the requiring activity, which
says that the change is okay by them. In fact, they're excited
at the prospect of saving some money, which will enable them to
buy more of the supplies in question. So the contracting officer
prepares a supplemental agreement to effect the change.
What is the contracting officer's authority to enter into this
supplemental agreement? It's not the Changes clause, because
that clause does not authorize changes to the contract delivery
schedule. It's not the Default clause, because the contractor is
not in default and is not claiming any excusable delay. The
contractor seeks the change merely for its convenience. Thus,
FAR § 49.402-4 is not the authority for the same reason that the
Default clause is not. FAR § 43.103(a) is not the authority,
because that is merely a general description of bilateral
modifications.
Under the common law of contracts, any two parties that make a
contract can modify it by mutual agreement, but the professor
says that common law rule is not authority to enter into a
supplemental agreement. (Others have said the same thing.)
So, what is the contracting officer's authority to make the
supplemental agreement in question? Do contracing officers have
authority to make such a supplemental agreement? If so, what
authority should the contracting officer enter on SF30?
By anonymous8 on Monday, June
10, 2002 - 07:41 am:
I have used mutual agreement as an authority and know many
others who have as well. This is a great question, because
sometimes we get suggestions that are to the benefit of the
government, but are only evident in hindsight or as contract
work progresses.
Could we try the authority of the Value Engineering Clause? Or
is it too big a stretch? (Contractor initiated cost reduction
proposal to change the specs, drawings, other requirements of
the contract)
Is there an easier way?
By Mike Wolff on Monday, June
10, 2002 - 08:59 am:
How about using 43.103(a)(3)? Does this imply that the FAR
recognizes that parties will enter into supplemental agreements
not elsewhere authorized? My office uses "mutual agreement of
both parties" all the time, and no one has ever questioned it
(which doesn't necessarily make it correct, but it hasn't been
an issue).
Mike
43.103 Types of contract modifications.
Contract modifications are of the following types:
(a) Bilateral. A bilateral modification (supplemental agreement)
is a contract
modification that is signed by the contractor and the
contracting officer. Bilateral
modifications are used to-
(1) Make negotiated equitable adjustments resulting from the
issuance of a
change order;
(2) Definitize letter contracts; and
(3) Reflect other agreements of the parties modifying the terms
of contracts.
By Anon on Monday, June 10,
2002 - 09:12 am:
FAR Part 2 defines a supplemental agreement as: "Supplemental
agreement" means a contract modification that is accomplished by
the mutual action of the parties.
In light of this definition and its use in the regs. (see
bilateral mod. above which also states "reflect other agreements
of the parties...) the obvious authority for a supplemental
agreement is the mutual agreement of the parties.
So that's what I use and encourage others to use as well.
By Linda Koone on Monday, June
10, 2002 - 01:17 pm:
Vern:
How about citing the authority found at FAR 42.302(b)(3)?
Or perhaps the authority of FAR 1.102(d) could be used.
By anoncon on Monday, June 10,
2002 - 07:33 pm:
I'm not quite sure that common law should be ruled out. Why not
the law of equity? According to the Legal information Institute,
equities "refers to a particular set of remedies and associated
procedures".. which are distinquished from "legal" ones." Why
couldn't the CO cite a supplemental agreement under equity(i.e.-the
block entitled " other")? I've used it several times with
forward thinking COs. Equity can be to the benefit of both
parties, so I do think the common law can be applicable.
By joel hoffman on Monday, June
10, 2002 - 11:07 pm:
ACO's are usually delegated limited authority to modify
contracts only under specified clauses.
Are you saying that a KO can modify a contract for any mutually
agreeable reason?
I am aware of clauses which provide for adjustments and
equitable adjustments and I know that new out of scope work can
be added, pursuant to the authorities for exemptions to full and
open competition in FAR Part 6.
Are you also saying that a KO can simply agree with the
Contractor that the Contractor deserves or is entitled to an
equitable adjustment, when there is no applicable clause?
If so, can you describe some examples?
happy sails! joel hoffman
By Vern Edwards on Tuesday,
June 11, 2002 - 06:41 am:
Joel:
To whom are your questions addressed?
Vern
By joel hoffman on Tuesday,
June 11, 2002 - 06:49 am:
To anyone. The discussion seems to indicate that a KO and a
contractor can agree to mod the contract and I'm interested in
learning how far that authority extends. happy sails! joel
By joel hoffman on Tuesday,
June 11, 2002 - 07:39 am:
Let me re-phrase my comment and questions.
I understand that ACO's are usually delegated limited authority
to modify contracts only under specified clauses. So the
discussion relates to KO's, here.
To the folks above or anone else, do you think that a KO can
modify a contract for any mutually agreeable reason?
I am aware of clauses which provide for adjustments and
equitable adjustments. Plus, I know that new out of scope work
can be added, pursuant to the authorities for exemptions to full
and open competition in FAR Part 6.
Can a KO agree with the Contractor that the Contractor deserves
or is entitled to an equitable adjustment, when there is no
applicable clause?
If so, can you describe some examples?
happy sails! joel hoffman
By joel on Tuesday, June 11,
2002 - 07:44 am:
Regarding the above questions, please address Vern's topical
question, first. I was simply curious because of the authorities
being cited as justification to make the change...
By Mike Wolff on Tuesday, June
11, 2002 - 08:55 am:
Joel asked, "do you think that a KO can modify a contractfor any
mutually agreeable reason?"
My answer is "yes, as long as it is within the scope of the
contract." If it is outside of the scope of the contract one may
have to do a justification for other than full and open
competition. I like Linda's use of FAR 1.102(d), which states in
part that, "if a specific
strategy, practice, policy or procedure is in the best interests
of the Government and is not addressed in the FAR, nor
prohibited by law (statute or case law), Executive order or
other
regulation, that the strategy, practice, policy or procedure is
a permissible exercise of authority."
Since the FAR, nor anything else I'm aware of, limits when
supplemental agreements may be used (as long as they are for
legal purposes, etc.) why do people think a specific FAR clause
must be referenced as an "authority."
Mike
By joel hoffman on Tuesday,
June 11, 2002 - 09:07 am:
Mike, can you or someone else give me some examples of
supplemental agreements, within the scope of the contract, but
not covered by a contract clause which provides for an
adjustment? (Nevermind adjustments covered by operation of law
or application of the Chrisitian Doctrine, e.g., mandatory
clauses inadvertantly omitted from the contract. I'm familiar
with those examples.) Thanks. happy sails! joel
By joel hoffman on Tuesday,
June 11, 2002 - 09:10 am:
Mike, by "but not covered by a contract clause" I also include
any other provision in the contract, like a condition or
contract term in the statement of work or specs which would
provide the mechanism for an adjustment. I'm familiar with those
examples. happy sails! joel
By Anon on Tuesday, June 11,
2002 - 09:48 am:
Joel, I'll take you up on your request and try (mind you, try)
to provide an example. Say under a FFP supply Kt a contractor
informs you that delivery will be delayed for 30 days, your
response is that you will accept the late delivery provided
consideration is agreed to. Both parties agree to extend the
delivery with consideration being a 1% deduct from the contract
price. A supplemental agreement is drawn up.
Now I would simply have "mutual agreement of the parties" as my
entry in block 13c of the SF 30. I've encountered other PCOs who
cite the Default clause as their mod. authority for such an
action (which I always felt was insulting in a certain light
since the contractor is trying to work with you to a mutually
agreeable resolution to the problem). Who's right, I really
don't know but I've relied on Marshall J. Dokes, Jr ESQ who gave
a fairly reasonable discussion on the authorities for the SF 30
in the 1 Jul 91 issue of the Federal Contracts Report.
I can FAX this to you if you so desire, just a matter of working
out the logistics.
By Mike Wolff on Tuesday, June
11, 2002 - 10:14 am:
Joel,
One example would be adding equipment to a building on a
mechanical maintenance services contract. This would be done by
supplemental agreement with no specific authority other than
mutual agreement of both parties (unless the contract has a
requirement that the contractor maintain all new equipment).
This isn't a great example, but the first one I thought of
Mike
By Jerry Zaffos on Tuesday,
June 11, 2002 - 10:59 am:
Does FAR 1.602-2 provide any guidance? It reads, in part,
"contracting officers should be allowed wide latitude to
exercise business judgment" in ptotecting the public interest.
See also, Cibinic and Nash, "Administration of Government
Contracts," 3ed, pp. 10 et seq.
By Vern Edwards on Tuesday,
June 11, 2002 - 11:36 am:
Anon of 6-11 at 9:48 a.m.:
The default clause in not authority to allow the contractor to
continue to perform under a revised delivery schedule unless the
delay is excusable.
However, FAR § 49.402-4(a) authorizes a contracting officer to
allow a contractor to continue performance under a revised
delivery schedule.
By Vern Edwards on Tuesday,
June 11, 2002 - 12:30 pm:
Linda:
FAR 42.302(b)(3) says that an ACO can make supplemental
agreements when authorized by the CO. But what is the CO's
authority to authorize supplemental agreements?
As for FAR 1.102(d), maybe, I don't know.
The real question is: Why does SF30 require a CO to cite the
authority to make a supplemental agreement? Look at SF26, SF33,
SF 1447, and SF1449 -- none of them require a CO to cite the
authority to enter into a contract. If a CO does not have to
cite authority to enter into a contract, why does he or she have
to cite authority to enter into a supplemental agreement?
Maybe SF30 is screwy.
By Charlie Dan on Tuesday, June
11, 2002 - 12:33 pm:
I've worked in several contracting offices - DoD and civilian,
and reviewed contracts in dozens of offices. I've seen
modifications citing "mutual agreement of the parties"
everywhere I've been.
I've also heard the argument expressed by the Professor in
Vern's original message - that a contracting officer must have
specific, statutory or regulatory authority for any contract
modification. Trouble is, I don't see this kind of argument in
the instructions on the SF30 itself. The FAR's instructions for
the SF30, at 53.243, don't even mention block 13. The
discussions of contracting officer authority in FAR Subpart 1.6
don't make this argument, either.
So, I don't accept this argument. As long as a contracting
officer is not violating a law or regulation, and is taking
actions in the best interests of the Government, I think they
can modify a contract. I don't see a problem with using "mutual
agreement" as an authority. If there's something "illegal" about
it, there are a lot of illegal mods out there!
By the way, for those who agree with the Professor's argument, I
like the ideas of using FAR 1.102(d) and/or 1.602-2 as the
authority.
By joel hoffman on Tuesday,
June 11, 2002 - 01:30 pm:
Thanks for the examples, Anon, Vern and Mike. FAR provides
authority for certain actions, like time extensions. Mike, if
your example "mod" is within scope, would the changes clause be
applicable? If not, is it because the contract doesn't include
the purchase of any equipment,materials or supplies? Then, is it
"in-scope"? I didn't quite understand what you menat by "adding
equipment to a building" - real property inatalled equipment or
personal equipment used for maintenance purposes?
Anon, I'd appreciate it if you'd please FAX your article to
256-895-1547. happy sails! joel
By Linda Koone on Tuesday, June
11, 2002 - 01:42 pm:
Vern:
You probably have it right - it's the SF30 that's hosed, which
leads to screwy answers like the Professor's. (Obviously, I'm in
agreement with Charlie Dan!)
By Anon on Tuesday, June 11,
2002 - 02:09 pm:
Joel, it's on its way, hope its readable.
Vern, I agree with you. Question though, mucho years ago someone
once made the comment that the authority for a mod shouldn't
cite FAR parts 1 - 51, rather the authority had to come from a
FAR part 52 cite (well, actually then is was the ASPR, father of
DAR). Later on I got converted to "mutual agreement of the
parties" (about the third year into my career after taking the
AFIT Contracting Law course).
By Vern Edwards on Tuesday,
June 11, 2002 - 02:49 pm:
Anon:
I've never heard that FAR Parts 1 -51 shouldn't be cited as
authority. But I'm sure that there have been many different
interpretations of SF30's requirement for a source of authority.
Vern
By jerry zaffos on Tuesday,
June 11, 2002 - 03:13 pm:
Block 13B cites 43.103(b) as the authority for issuing an
administrative change, so the drafters of the form thought that
citing FAR Parts 1-51 was an acceptable practice.
Of course, 43.103(b) really isn't an authority; its really an
explanation of the different types of modifications and how they
are used.
By Anon on Tuesday, June 11,
2002 - 03:17 pm:
Good point Jerry, I'll keep that in mind the next time I hear
that argument.
Never too old to learn something in this crazy business...
By joel hoffman on Tuesday,
June 11, 2002 - 05:10 pm:
Ok, let me throw a little wrinkle into this. I have an old blank
SF-30, which says it ia a GSA prescribed form, dated 10-83. It
references FAR 52.243. (Was that the provisional FAR?) At any
rate, Block 13c is the same as in the present SF30.
If anyone remembers back to that era, we used to refer to a
"supplemental agreement" as a modification, which was outside
the scope of the contract.
At some point, the term was revised to mean any bilateral
modification, after the original contract terms were
established, including both in-scope and out-of-scope. Was it
before FAR or as part of the initial FAR?
I believe that the SF30 or a predecessor included the
requirement to cite the authority for the (outside-of-scope)
supplemental agreement, in reference to the 6 or 7 statutory
exceptions to full and open competition. I think that's where
the requirement to cite the authority for "supplemental
agreements" on the modification came from. And I think it
precedes a supplemental agreement being re-defined to include
in-scope mods.
I've got some old "Defense Acquisition Regulations", ASPR
references and "Engineer Contract Instructions", somewhere,
which I'll dig out. I seem to remember exceptions to competition
addressed in some of those references, although the Competiton
in Contracting Act (1984)is probably the source for the current
exceptions.
Does anyone remember when the definition of a supplemental
agreement was changed? Before FAR? When FAR was issued? After
FAR? Am I dreaming? happy sails! joel
By anoncon on Tuesday, June 11,
2002 - 08:02 pm:
So when all is said and done, based on Vern's original post, I
am going to stick with what I said reference "common law"
By joel hoffman on Tuesday,
June 11, 2002 - 10:11 pm:
Anoncon, help me out here. Please gimmee an example or two of a
common law mod. Are you saying that entitlement is based on the
basis of common law? happy sails! joel
By Vern Edwards on Wednesday,
June 12, 2002 - 07:10 am:
Eric:
A couple of things:
1. The Oct 83 edition of SF30 probably mentions FAR because the
FAR was published in the Federal Register in September of 1983,
even though it did not take effect until April of 1984. GSA was
undoubtedly anticipating the effective date.
2. My recollection is that the requirement for a reference to
authority goes back to at least the early 1970s.
3. While all supplemental agreements may have been considered
out-of-scope mods where you worked, that was by no means
standard practice government-wide. Where I worked in the 70s, a
supplemental agreement could be either an in-scope mod or an
out-of-scope (new work) mod.
By Vern Edwards on Wednesday,
June 12, 2002 - 09:43 am:
Sorry, my last remarks were for Joel. I'm still caught up with
Eric in the novation thread.
By jerry zaffos on Wednesday,
June 12, 2002 - 11:14 am:
Going back to Vern's original example, wouldn't the contracting
officer's statutory authority be the same as for entering into a
contract since, in a sense, the parties have created a new
contract, albeit all the terms and conditions are the same
except for the delivery schedule and price?
By Dave Berkey on Thursday,
June 27, 2002 - 02:35 pm:
I like the idea that the authority for a contracting action such
as new awards, and mods not citing a contract clause, is the
Public Law creating the Agency. I believe these laws often cite
an Agency's authority to procure "necessary goods and services"
to support the mission. |
