FAR 1.602-3(b) provides the policy for ratification of unauthorized commitment. FAR 1.602-3(b)(5) states that "Unauthorized commitments that would involve claims subject to resolution under the Contract Disputes Act of 1978 should be processed in accordance with Subpart 33.2, Disputes and Appeals."

What does this mean? Does this mean that, if an unauthorized commitment is made against an existing contract, the contractor can submit a claim against the contract, and be paid under the procedures from FAR Subpart 33.2 without ratification procedures outlined in FAR and its supplements?

Or is "ratification" required for all "unauthorized commitments"?

By John Huckle on Tuesday, August 22, 2000 - 03:36 pm:

If the unauthorized commitment arises under, or relates to a contract, and it leads to a request for money, then according to the Disputes Clause (FAR 52.233-1) the claim is disposed of using Disputes procedures of that contract. Suppose someone forgets to renew a maintenance contract of a photocopy machine. And the machine continues to be serviced by the contractor after the expiration of the contract. The resulting request for money for the continued service is treated as a claim under the Disputes Clause, not as an unauthorized commitment.

By Kennedy How on Wednesday, August 23, 2000 - 12:22 pm:

Speaking generically (and going by memory of past experience), the Disputes Clause regarding claims against the Government only comes into play when the Contractor submits a certified claim. Prior to that, an unauthorized committment (I define this as direction by somebody not holding a Contracting Officer's warrant) can be taken care of via "ratification". Inasmuch as the contractor says "I did this under this direction, it costs this, I want to be paid", and the Government acquieses.

For example, say a Two-Star calls up the contractor and directs them to do certain things that are deemed outside of the existing scope of work. The two-star does not have the contracting authority to obligate the Government to do this, especially since it's outside the scope. The Contracting Officer would have to step in and generate a contractual document to cover the Government's liability after the fact. (I've seen this happen, the action resulted in an ASBCA case, since it went to the Disputes stage.)

This may be an oversimplification, we don't normally use the term "ratification" around here, even though technically, that's what it is.

Kennedy

By joel hoffman on Wednesday, August 23, 2000 - 02:32 pm:

As a general rule - there may be exceptions -the law does not recognize "apparent authority" of a Government Official.

In Kennedy's case, I would surmise that the Government, itself, has no inherent "liability" due to the Two-Star's directive, unless the KO has actual knowledge or should know of the directive, in time to stop performance. "Ratification" is an action an authorized official CAN take to cover the General's behind - to keep the 2 Star from personally paying for the directed service or product!

Of course, there are many more situations involving ratification. I just wanted to comment on a misconception the particular cited example might portray. There is widespread belief that an official's directive automatically "obligates the Government", simply because they are a "Two Star".

I believe the policy in FAR 1.602-3(b)(5)of resolving "claims" arising from an unauthorized commitment may be intended to cover other situations.

One example is a directive by a COR or a directive by an ACO above or outside their specified authority, for which the Government (could be either the COR, the ACO or the KO) takes a position that the directive is not a change but is a contract requirement. The Contractor disagrees and a dispute ensues. These actions occur frequently.

I believe the language in FAR 1.602-3(b)(5) is intended to explain that such an act should be not be resolved using the "ratification" procedures, once the Government determines that the claim has merit.

The policy of handling an unauthorized commitment resulting in a "claim" has been a source of constant gross, abuse by a certain DOD Branch of my clients for years. They tell me the Government can simply direct the contractor to perform extra work under some pretext, when funds aren't available. Make the Contractor submit a claim, in order to get paid. The KO should deny the claim; let the Contractor appeal. The "claims judgement fund will pay for it, eventually. "It won't be our problem, if it results in the authorized appropriation ceiling being exceeded."

I suppose Kennedy's example could result in a claim. If the Government uses the lack of apparent authority defense in the case of the Two Star's directive, the Contractor can then submit a formal claim. The claim would be handled under the Disputes Clause. That wouldn't necessary save the Two Star from being personally liable to somone for the cost. Happy Sails! Joel

By Vern Edwards on Wednesday, August 23, 2000 - 02:49 pm:

Ratification is required for all "unauthorized commitments."

An unauthorized commitment is an agreement that is not binding because the Government representative who made it lacked the authority to do so. Ratification is the act of authorized official to approve an unauthorized commitment after the fact. See FAR 1.602-3(a).

Contracting officers below the level of the chief of the contracting office do not have the authority to ratify unauthorized commitments. See FAR 1.602-3(b)(3). (They do it all the time anyway by issuing contracts after the fact without obtaining ratification.)

If a Government employee makes an unauthorized commitment to a company by ordering supplies or services, an authorized official must ratify it before a contracting officer can issue a contract that will enable the company to get paid.

If a Government employee makes an unauthorized commitment to a contractor in a matter that is related to a contract (e.g., an unauthorized change that increases the cost of performance), the contractor can submit a claim to the contracting officer pursuant to the Disputes clause seeking payment under the existing contract rather than award of a new contract. If you read FAR 1.602-3 and FAR Subpart 33.2 together, it appears that an authorized official must ratify the unauthorized commitment before the contracting officer can agree to pay the claim under the existing contract.

If no one can or will ratify the unauthorized commitment, then the company must request payment on a quantum meruit basis through the General Accounting Office. See FAR 1.602-3(d).

By Joel on Wednesday, August 23, 2000 - 03:23 pm:

Vern, after reading your 8/23 post at 02:49 pm, I see there apparently is a distinction between "an agreement" and a "directive." Does this mean that unilateral Government directives are not "unauthorized commitments"?

If the 'agreement' is not binding (I too, said that apparent authority does not bind the Government), a "claim" would probably generally arise when the KO refuses to ratify the agreement, requiring the Contractor to claim. The Government simply taking no action to write a mod to pay the Contractor for the 'agreed work' could also result in a claim from the Contractor. Happy Sails! Joel

By bob antonio on Wednesday, August 23, 2000 - 03:50 pm:

Vern:

In 1996, GAO's authority to settle claims was changed substantially by shifting the authority to various agencies. I think the provision in FAR 1.6 is one of those items.

By Ramon on Wednesday, August 23, 2000 - 04:03 pm:

Perhaps I'm reading too much into all the possible ways to pay the contractor, but it appears there is entirely too much emphasis in the interesting mechanics of tapping the Treasury and not enough roasting the "two star."

The mechanics need to be there as extraordianry means of correcting an extraordianry situation, but if commonly used (as I gather from that "gross abuse" comment) it seems time to get some stern measures going against the abusers. My general impression is that this goes on entirely too often and the "two star" paying is largely theoretical. Is this abuse as common as it seems?

By bob antonio on Wednesday, August 23, 2000 - 04:22 pm:

Ramon:

"Two-stars" can be very persuasive with GS-14 contracting officers?

By Vern Edwards on Wednesday, August 23, 2000 - 04:56 pm:

Joel:

FAR defines an unauthorized commitment as an agreement that is not binding because the person who made it did not have the authority to do so.

I'm not sure what you mean by "unilateral Government directive." "Unilateral" is clear and so is "directive" (i.e., command), but what does "Government" mean? If "Government" means an authorized representative of the Government acting within the scope of his or her authority, then a unilateral Government directive is not an unauthorized commitment. But if "Government" means any Government employee, then a unilateral directive is an unauthorized commitment if it was issued by an employee who does not have the authority to make it and that leads a firm or contractor to incur costs in the belief that the Government has agreed to pay those costs.

There may or may not be a distinction between a directive and an agreement. Absent some statutory authority, the only authority that the Government employee who issued the directive would have over the contractor would be the authority to seek breach damages if the contractor refused to comply. If a contractor decided to comply with the directive, believing itself to be entitled to an equitable adjustment in accordance with the terms of the contract, then one could argue that it had agreed to do so, since the relationship between the parties is contractual. Thus, the directive and the compliance would constitute an agreement. If the Government employee had no authority to issue the directive, then it would be an unauthorized commitment.

A claim is a demand arising under or relating to a contract. The claim would probably arise when the contractor sought payment on the basis of costs that it incurred in complying with the directive and the contracting officer refused to pay it because the person who issued the directive did not have the authority to do so. The Government could deny the claim on the ground that the employee who issued the directive had no authority and the contractor should have know that, or it could ratify the unauthorized commitment and pay up. Ratification is discretionary.

By joel on Wednesday, August 23, 2000 - 06:59 pm:

thanks, Vern. That clarified my question. Happy Sails!

By Ramon on Wednesday, August 23, 2000 - 10:19 pm:

Bob,

Absolutely. The "two star" is figurative. I doubt it takes nearly that much brass in practice all too frequently.

I think what causes an itch for me in these types of discussion is the nearly universal treatment of symptoms, not the disease. No machine is perfect, but when mechanisms intended to cause or inhibit some action frequently fail we have a broken machine. I'm afraid the "governor" on this particular machine is about as effective as the $50 fine for blasting through a stop light. Maybe it is time to increase the risk.

By bob antonio on Thursday, August 24, 2000 - 08:41 am:

Ramon:

There are no easy solutions and often perils.

In the old forum, a discussion was started about a contract awarded in the UK with the work being done in Germany. The person initiating the thread wanted to be designated a COTR so he could assist the contractor because he had no authority under the contract. My concern was that by informally assisting the contractor without authority and by relaying information to the actual contracting officer in the UK, the individual in Germany gave the appearance that they had authority under the contract. If something occurred under that contract beyond its scope and the individual in Germany saw it, I felt that there was an opportunity for the contractor to claim that the contracting officer in the U. K. had "constructive knowledge" of the event. That would result in a ratification of the event. Many ratifications result from innocent actions of program staff or inspectors.

On the other hand, arrogance and ego create the problem. For example, one individual would make tours of the contracted effort. In addition to the government entourage, there was a contractor entourage pursuing the individual. One of the contractor's entourage carried a clipboard. That individual would listen for the "do this" and "do that" phrases and write everything down that followed. At the end of the tour, the clipboard would be delivered to the contractor's claims processing staff. You wouldn't believe the havoc this created.

Outside of the courts, power determines or at least influences blame in many cases. This power would identify the innocent errors and punish the individuals that caused them. The gross abuses are often caused by the arrogant who have the power. Of course these individuals are faultless and do not accept blame.

The best thing we have going is an alert contracting officer who documents the causes for these actions in the contract file. Every once in a while, the right individual opens that contract file and has the opportunity to nail the arrogant.

By joel hoffman on Thursday, August 24, 2000 - 08:53 am:

Vern - In your (4:56 pm 8/23) post, you indicated that you weren't sure what I meant by "unilateral Government directive."

To clarify my (3:29 pm 8/23) question to you, my original, (2:32 pm 8/23) post focused on "directives" by unauthorized officials for extra work.

This type of unauthorized commitment is more common in my business than "agreements" between unauthorized officials and a vendor (resulting in a new action) or a contractor (on an existing contract).

After my first post, you added a post at 2:49 pm, which included a reference to the FAR definition of an "unauthorized commitment" as being an "agreement." Upon noticing that statement, I re-read the FAR definition and sure enough, it includes the word "agreement."

My 3:29 pm question to you then asked if it is necessary for there to be an "agreement" between the ordering official and the provider. Or is it also an "unauthorized commitment" when the Contractor simply follows the directive (perhaps thinking it to be an authorized or constructive change)?

I believe your 4:56 answer indicates that either a pre-performance agreement between the parties or a one way directive, obeyed by the Contractor, can result in an unauthorized commitment. If not, please advise. Otherwise, I think you answered my question.

Ramon, I guess I really stirred you up in my 2:32 pm post - sorry. I failed to mention that we (I'm unofficially speaking for most of my Organization, as a whole - our KO's are really conservative but extremely fair) tactfully ignore our client's request to lead a contractor into a claim or to deny merit on a claim, simply because funds are tight - in hopes that the "judgement fund will fund any necessary equitable adjustment".

I said that this client's attitude constitutes "constant,gross abuse", because it seems to be widespread belief of their organization. I've seen it articulated by their project managers, by their end users and their bosses throughout my association with them over roughly 14 years, on assignments in four different Districts in the Middle East, Europe and the U.S. I suspect that the client's own acquisition program must somehow follow this philosophy or their people wouldn't keep bringing it up.

Just wanted you to know that it may not be as badly abused in actual practice. Our GS-14 and 13 KO's aren't as easily persuaded by the client's "2 Star", as some others may be, when the others' jobs are on the line, directly working for the 2 Star. This independance is sometimes good, in that it reduces abuse and sometimes bad in responding to the customers' legitimate needs! Happy Sails! Joel

By Vern Edwards on Thursday, August 24, 2000 - 09:57 am:

Joel:

I think that either a pre-performance, express, bilateral agreement or a one-way directive obeyed by the contractor can result in an unauthorized commitment.

Let me explain my thinking about the one-way directive. The authority to direct a contractor must come from the contract, based on the terms in a contract clause. That being the case, when a contractor complies with a unilateral directive issued by a Government employee, its decision to do so is presumably based on its belief that it had agreed to do so when it signed the contract. It is thus acting in consonance with that agreement.

This becomes a problem when the contract says that the contractor will be entitled to an equitable adjustment when it complies with such directives and the contractor seeks money or some other adjustment that basis. If the contracting officer or some other authorized official had issued the directive, then it would have been an authorized commitment to make an equitable adjustment. But if the person who issued the directive did not have the authority to do so, then the directive was an unauthorized commitment.

I think that it is important for everyone to understand that contracting officers have no authority to mod contracts to make equitable adjustments on the basis of unauthorized commitments, unless he or she is a chief of a purchasing office or above and has been delegated the authority to do so by the head of the contracting activity. See FAR 1.602-3(b)(2) and (3). So contracting officers must seek ratification of the unauthorized commitment.

If a contracting officer mods a contract on the basis of an unauthorized commitment without having obtained ratification in accordance with FAR, then he or she will have made an unauthorized commitment.

Also, while apparent authority will not bind the Government, the boards and courts have developed a doctrine of implied authority, which they have used to bind the Government to commitments made by persons who did not have actual authority. See Cibinic and Nash, Formation of Government Contracts, 3d ed., pp. 95-98. Cibinic and Nash have also written extensively about ratification. See Formation, pp. 98-106. It should be noted in this regard that the boards and courts have developed a doctrine of implied ratification.

By joel on Thursday, August 24, 2000 - 10:28 am:

Vern, I may be in 100% agreement with you. But I want to point out that, in actual practice, a simple contract misinterpretation by a COR, a field office ACO (outside their delegated authority) or an inspector, resulting in a constructive change, will SELDOM (I won't say never) be considered as an "unauthorized commitment" by our KO's. Thus, formal ratification with all its limitations, consequences and ramifications are not used. Nobody would have a job and nobody would take any jobs admninistering contracts if every honest mistake or contract misinterpretation was treated as an unauthorized commitment! I also guarantee that there would be rashes of fist fights or worse, between those administering contracts and the designers and spec writers who "never prepare ambiguous or conflicting requirements".

Many, if not most, constructive change cases involve the implied authority situation, as explained in Nash and Cibinic.

I'm sure that there are lots of legal reasons for not requiring formal express, ratification. Nash and Cibinic discuss implied ratification, adoption of the unauthorized act by and authorized official, constructive or implied notice to the authorized official through daily reports or letters, oral reporting, etc.

Happy Sails! Joel

By Vern Edwards on Thursday, August 24, 2000 - 11:37 am:

Joel:

If a COR has been delegated actual authority to do something -- e.g., to inspect and accept or reject supplies or services -- but makes a mistake that results in a constructive change, then I (as CO) would not consider that error to be an unauthorized commitment requiring ratification. I would simply consider it to be a mistake.

However, if an inspector knowingly exceeded his authority when directing the contractor to do something differently than called for in the specification, then that would be an unauthorized commitment. If the contractor knew that the inspector had no authority to issue the directive, then I would not be obligated to make any equitable adjustment. But if I decided that the conditions in FAR 1.602-3(c) had been met and that we should pay the contractor, then I could not legally make the equitable adjustment without obtaining ratification.

I realize the practical implications of what I'm saying and that most COs ignore (intentionally or out of ignorance) the ratification rules in cases like that. Still, we should know when we're violating a rule, don't you think?

By joel hoffman on Thursday, August 24, 2000 - 01:11 pm:

Vern, I totally agree with you, concerning correct policy. In fact, what you state is COE-wide policy, practiced for the most part.

Our Inspection personnel are fully aware of their limitations and the possible consequences of directing anything they KNOW to be beyond the contract requirements. The Contractors are also supposed to be advised during the post award meetings of everyone's authority limitations.

I also agree with you, that known changes are improperly directed - to the extent that there are occasions when someone on the ground orally directs the Contractor to proceed with a pending change. This is usually done in a good faith effort to minimize delay or tearout costs, even though known to be "wrong". Our field personnel are some of the most dedicated stewards of the taxpayers dollars and it galls them to see waste.

We have developed procedures to quickly issue formal NTP but they aren't always followed for various reasons. I will say that the old stumbling blocks once established by DOD/DA/COE Headquarters to almost prohibit undefinitized contract modifications have largely been removed.

Yes, the KO sometimes tends to look the other way - as long as there isn't a blatant paper trail - but not always. When the practice becomes becomes blatant, too obvious or after contractual relationships fall apart, the KO's, Chiefs of Construction or the District Commanders have been known to nail somebody and initiate a ratification action. Its not fun having to report an unauthorized commitment to the PARC's office!!! Happy Sails! Joel

By Kennedy How on Thursday, August 24, 2000 - 01:13 pm:

Gee, what a spirited discussion! I don't know where to begin!

To address Ramon's comment about the contractor clipboard, I've been on the wrong end of this one. It was used as ammunition as part of a larger issue before the Board. That part of the claim was "for excessive meetings called by the Government." What was unsaid was that the meetings were called to followup on contractor performance problems and schedule slippages. Not to mention engineering fixes agreed to during those visits.

As far as actualities are concerned, our activity has a reasonably close relationship with the PMs that run the various programs. Sometimes, the timing gets out of whack; the PM calls the contractor, tells them to do something, and closes with "The CO will be sending you a letter authorizing this.". I eventually get around to doing the letter, and the CO signs off, and it's faxed to my counterpart out there.

The Gulf War would be a good example of this; the PM says "Ship X amount of Y to place Z immediately." Well, there certainly isn't any contract language to cover that. But, since we had a close working relationship with the PM, we kinda knew what they were going to do, so we were ready to respond quickly. Still, there were those few hours where there isn't any "CO" authorization.

Where we ran into problems is where the PM is "out of control", we hear about it too late (if at all), and it gets way too far down the road. No documentation, the PM disagrees, or whatever, we go to Claims. On the other hand, if the PM says, yeah, no problem, we did that, we forgot to tell you, we have the money, go write a mod (or whatever), we'd probably not make a fuss. In the pre-email days, we'd need a DF to document, with e-mail, we just print out the message. In these days of streamlining, and teaming within the various offices, timing isn't as much of a problem as it once was. Still, when you have military PMs who report to higher HQ outside of the local activity, the "Yes Sir. Will Do, Sir." mentality can't always be suppressed.

I agree with the statement that, at least here, it doesn't happen flagrantly very often.

My favorite story was the one where we were costing out an effort to ship vehicles via C-5 to Saudi. The ACO called me up and told me they were just about finished negotiating the cost change, except for the $2200 for lumber costs. Seems that the loadmaster would not allow the planes to fly without major bracing. So, the contractor team went to the local lumber yard and bought whatever it took to satisfy the guy.

I OK'd the expediture, as it was an unexpected cost, the ACO wanted to be sure we were OK with it.

Kennedy

By joel on Thursday, August 24, 2000 - 02:05 pm:

How about this example?

Once upon a time, we had an Area Office in a "nameless" Central American Country, doing barracks renovation for the Army. The Army Installation requested a ~ $1-2 million change to the dormitory configuration and sent in current year (year end excess) O&M funds to pay for the change. The ACO negotiated a good, quick settlement but said it would and did take a month to write up the mod and send in to us for the KO's execution.

The Contractor, being:
1) Central American - a good, trusting guy
2) not wanting to disrupt the on-going renovations because the changed work was inseparable from the original work and
3) not wanting to unnecessarily increase the mod cost to the US Government by stopping to wait for the mod,

decided to to proceed with the changed work with full knowledge of the local ACO.

Well, the mod didn't make it to us until October -the new fiscal year. During legal review, our Attorney discovered that the Installation should have provided funding from the FY previous to the previous year funds (the original year O&M money) - and stopped the mod, dead. Of course, everyone now knew that the Contractor was proceeding.

The District directed the Installation to cough up the correct year funds but did not direct the ACO to stop the Contractor. The Installation balked and a debate over correct year funding ensued.

The KO, the District Commander (O-6), the Deputy Commander (O-5), Chief Counsel (GS-15) and Chief of Construction (GS-15) met about this problem for a month or two, until the funding issue was resolved.

Lo and behold, the "committee" decided a ratification action was necessary and that - yup -they would nail the ACO (the Area Engineer) for letting the Contractor proceed with the changed work.

The KO prepared an epistle to the Contractor, telling him that he should not have proceeded with the work until he received a mod - that the KO was going to be a good guy and issue the mod, anyway, etc., etc.

They were in the process of having me prepare the ratification action, when I reminded them that they - the Commander, Chief Counsel, Deputy Commander, the KO, the Chiefs of Contracting and Construction -- ALL -- had personal knowledge for over two months that the Contractor was proceeding with the work!!! They were as culpable as the ACO, who had been provided NO direction since he sent the mod up to us.

Needless to say, the whole incident was quickly forgotten... Happy Sails! Joel

By Vern Edwards on Thursday, August 24, 2000 - 02:30 pm:

Joel:

Yikes! When you say that the ACO "knew" that the contractor was proceeding, do you mean (a) that he and the contractor talked and agreed that the contractor should proceed, or (b) that the contractor made that decision on his own and the ACO knew what he was doing and didn't stop him?

I would consider (a) to be an unauthorized commitment requiring ratification, but not (b). I don't know how many times a contractor told me that it was proceeding in advance of a mod and I wrote a letter saying, "Proceed at your own risk. There's no deal until the mod has been signed and distributed."

By joel on Thursday, August 24, 2000 - 02:41 pm:

(b) is the correct answer, Vern.

The Chief of Construction then put out a directive to all of his Area Engineers, telling them that he would yank the warrant of anyone who knowingly allowed a contractor to proceed on a change before the mod was issued, at their own risk or not - it didn't matter. This was a "CYA" letter if I ever saw one.

Sounds good but let the first field office start enforcing that directive and the whole world will come down on their head! We all know that the one who gets the job DONE gets the Kudos while a law abiding enforcer might as well kiss their career goodbye. Happy Sails!

By bob antonio on Thursday, August 24, 2000 - 03:12 pm:

OK guys:

Here is an actual case. This has a bit of everything. Ratification by inaction, constructive knowledge, de facto authority, etc. You must read through about two-thirds of it to get to the discussion.

http://www.oalj.dol.gov/public/bca/decsn/94bca03.htm

By Anonymous on Thursday, August 24, 2000 - 03:40 pm:

I didn't realize that my post will result in so much discussion.

I posed the question because we have a situation where a project manager directed a contractor to ship additional equipment under an existing task order. The project manager did not have authority to bind the GOVT. The KO did not know about the unauthorized commitment.

I asked our Office of Counsel if FAR 1.602-3(b)(5) would apply since there is a contract in place. They recommended that I use the ratification procedure of FAR 1.602-3 since they felt that all unauthorized commitment must be "ratfied". I think that most contracting activities have the same opinion.

I want to make sure that we are doing the right thing.

Under FAR 1.602-3 and agency supplements, the individual that initiated the unauthorized committment must provide evidence on why the ratifying official should ratify the action. Under ratification procedures, the contractor does not have prove to the ratifying official why he followed the instructions of an individual without authority to bind the GOVT.

On the other hand, the burden of proof shifts to the contractor if he requests a claim under the Contracts Disputes Act of 1978.

Based on this and the language in FAR 1.602-3(b)(5), I think that John Huckle post may be correct when he states:

"If the unauthorized commitment arises under, or relates to a contract, and it leads to a request for money, then according to the Disputes Clause (FAR 52.233-1) the claim is disposed of using Disputes procedures of that contract."

What do you think?

By Eric Ottinger on Thursday, August 24, 2000 - 04:05 pm:

Dear A,

Did this technical direction require additional funding or directly result in an increase in the price?

Just for clarity--

Eric

By joel hoffman on Thursday, August 24, 2000 - 04:34 pm:

Thanks, Bob. Though very detailed, it is an excellent example of implied authority and ratification by adoption or acquiescence. Happy Sails! Joel

By joel hoffman on Thursday, August 24, 2000 - 04:55 pm:

Anonymous -

Has the extra work actually been carried out? If not, stop it or initiate a change to add it. If it hasn't been completed and the Government doesn't stop it, I believe it will then be considered a ratification by adoption.

If y'all don't want to pay for the extra work and it is truely an "unauthorized" commitment", assuming it has already been performed, you don't have to have the directive ratified. The KO can deny entitlement and require the contractor to eat the cost. The contractor can submit a claim to prove entitlement or the contractor can sue the guilty project manager. Y'all need to consider all the consequences, such as cost and effort involved to defend the claim, value received, relationship with the contractor, etc. before deciding whether or not to pay for the extra work.

On the other hand, if you decide it is best to pay for the extra work already performed, the KO can initiate ratification procedures, then mod the contract. Don't make the contractor submit a formal claim - it is waste of everyone's time and resources, if you intend to pay for the extra work.

I would never suggest just writing a modification which doesn't reveal that the work is already done!! Happy Sails! Joel

By Vern Edwards on Thursday, August 24, 2000 - 05:01 pm:

Anonymous:

Since the project manager did not have actual authority to order additional equipment, the contractor has no right to payment, unless it can make a case for implied authority. If you don't want the stuff, tell the contractor to come and get it at its own expense. If you want the stuff, and the criteria in FAR 1.602-3(d) are met, then ask someone in authority to ratify the commitment and mod the order. When you mod the order, cite the Disputes clause as your authority.

By Vern Edwards on Thursday, August 24, 2000 - 05:27 pm:

Hey Gang:

Want a laugh? Look up the decision of the Department of Agriculture's Board of Contract Appeals, RMTC Systems, AGBCA No. 88-198-1, March 21, 1991, 91-2 BCA 23873. It begins as follows:

"In the late summer of 1986, an SCS [Soil Conservation Service] employee, who was not a contracting officer and held no authority to enter into a contract on behalf of the Government, set out on the inevitable quest of computer buffs everywhere, the acquisition of more memory."

In the course of getting funnier, the decision provides us with some good information about ratification and the Contract Disputes Act.

Have fun.

By joel hoffman on Thursday, August 24, 2000 - 05:59 pm:

Can't wait to read it during a break, tomorrow, when I get back to work.

Vern, I don't believe Anonymous should cite the Disputes Clause as authority for the mod, unless there is a formal claim which has determined to have merit to entitlement. Under the Disputes Clause, the contractor is entitled to interest, by law, pursuant to the Contract Disputes Act.

I'd hate to go from "no entitlement" to voluntarily paying for the extra work to having to pay interest on the darned thing! I would cite the Changes Clause or another clause, if more appropriate. Happy Sails1 Joel

By Vern Edwards on Thursday, August 24, 2000 - 06:49 pm:

Joel:

Good point about the interest. However, if the matter does fall under the Disputes clause he's going to be entitled to interest whether the CO cites the Disputes clause or not.

Here's a thought: If a commitment relating to a contract was, in fact, unauthorized, then the contractor cannot submit a claim to recover since a claim is a matter of right. See the definition of claim in FAR 33.201. Right comes from entitlement under a clause or breach of contract. When the Government decides to ratify an unauthorized commitment and cite the Disputes clause as the basis for its authority to mod the contract, the Government is simply using its authority under the Disputes clause to settle under the terms of an existing contract rather than award a new contract. Make sense? I wonder.

Read the RMTC Systems decision and see what you think.

Vern

By Anonymous on Thursday, August 24, 2000 - 07:41 pm:

The proper action would have been to issue an modification to the task order to add the equipment. However, the project manager directed the contractor to ship the equipment before a mod was issued.

The contractor complied with the direction and submitted an invoice to the project manager who forwarded it the contracting office for action.

This action will result in increase of the task order and will require additional funds.

If there was no contract in place, I agree that we must get the unauthorized commitment ratified and issue a purchase order to pay the contractor.

The answer is not as clear when there is a contract in place.

Please note the contractor will only submit a claim unless the GOVT does not pay. However, based on the "philosophy" that "all unauthorized commitments must be ratified", the GOVT normally goes through the ratification procedure. Accordingly, the only time a claim would be submitted would be if the ratifying official does not approve the ratification.

I wonder if the GOVT has been making payments through ratified actions when we should have processing these actions through the claim procedures. If I were a contractor, I would take the direction of an GOVT personnel without authority to bind the GOVT, if I knew that historically, the GOVT would just "ratify" the unauthorized commitment. If I knew that I had to submit a claim to get paid, I would certainly be more cautious.

I don't have access to Department of Agriculture's Board of Contract Appeals or WESTLAW. Does it give any insight on what we should be doing?

I want to thank all of you for your input!

Anonymous

By Vern Edwards on Thursday, August 24, 2000 - 10:42 pm:

Anonymous,

If appropriate in accordance with FAR 1.602-3(d), your agency should ratify the project manager's unauthorized commitment, mod the order to add the additional equipment, and pay the contractor after inspection and acceptance of the equipment and receipt of a proper invoice.

If your agency decides that ratification is not appropriate, then you should tell the contractor to come and get its equipment at its own expense. If the contractor chooses to submit a claim demanding payment, then the CO should issue a final decision denying it because the Government employee who ordered the equipment had neither actual or apparent authority to do so and the Government will not be bound by unauthorized commitments.

By Ramon on Friday, August 25, 2000 - 12:25 am:

Good grief! I got on to let Bob know I'm aware of the facts of life with regard to the egotistical powerful and Joel that yes, intentional, willfull actions of this sort do set me off. Now a whole book appears!

Before I go off into the reading adventure Bob and Vern have offered I'll simply say the following.

I used the stop light runner intentionally. Action making a mistake whole or of relatively little consequence seems similar to a judge letting the person going through a high yellow off the hook. Those willfully going through a flat red are scofflaws and dangers to society and need to be met with high risk of being caught and credible punishment. I am disturbed by the go along to get along culture that I hear of and have sometimes withnessed.

Second, of all people, military officers should be the last to breach the chain-of-command. I can imagine our hypothetical two star's reaction if covering forces had been directed elsewhere by "apparent authority" leaving his flank naked to attack. Actually, in my limited experience, I found flag officers fairly sensitive to procedure in this arena. The most aggressive were civilians, sometimes trying to wear the stars or eagles of their bosses.

Lastly, if the contracting system cannot posture itself to meet real world, legitimate short fused emergencies the system needs reengineering, not circumventing. The first has benefit, the latter potentially dangerous sand in the gears. With today's computer, conferencing, and other communications technology there is much less excuse for delays in coordinating necessary quick actions. Oh yes, there was also that idea of the IPTs working in parallel rather than playing ping pong with memos to cover the people side. The process can be made to work very fast, though it does take organization and discipline -- and a real will to make it work.

Oh, Kennedy, it was Bob's story about the clipboard, not mine.

By bob antonio on Friday, August 25, 2000 - 07:12 am:

Ramon:

I was just being chatty. However, in answer to your last note, the Air Force has an idea in its "Corona" exercise. Here is the article from the Hickam Kukini. Somewhere around the middle of the article, placement of contracting staff is discussed for the exercise.

http://www2.hickam.af.mil/wingpa/2000/aug_00/000803.html

By joel on Friday, August 25, 2000 - 10:02 am:

Anon and Vern - Just read the RMTC Systems Case. I have to admit that the writer made a dry subject interesting, through humor!

Anon - (1986 time frame) a Soil Conservation Service user sought more memory for his computer and it was approved. So he called around for the best price and found it at RMTC. The enthusiastic sales person said they could ship it right away and asked for a PO number from the user. The user gave them the only number he had, which was his request case number and said he would go directly to his procurement shop. Then he sent everything over to procurement, thinking they would buy it from his source. Of course, they went out and did their own thing, finding a cheaper source. In the meantime, RMTC shipped out their memory. Upon receipt, the user called up Contracting and asked what to do. He was told to send it back and did so. RTMC checked with some contacts about what to do and was told to ask the Contracting Office to ratify the unauthorized commitment. The KO basically determined that since the Government didn't accept the shipment, there was no benefit gained, thus no need or even possibility of ratification under the test conditions in FAR. RTMC then submitted a claim for abour $1,100 or so in "re-stocking fees" and $25 shipping fees. The KO denied it and RTMC appealed to the AGBCA. AGBCA dismissed the appeal for lack of jurisdiction because it could not find any basis for a binding contract - no apparent or implied authority - the vendor is charged with knowing the authority of the purchaser - and this is important - no benefit received by the Government. Since no contract, no jurisdiction - plus no benefit, so the action didn't meet the test for voluntary ratification.

I suggest you ratify the action and mod the contract. Apparently it is too late to send back the merchandise, if the Government is using it. Why make the vendor submit a claim? You can teach him a lesson by sending him a letter, warning him. Happy Sails! Joel

By Vern Edwards on Friday, August 25, 2000 - 10:41 am:

Back to Anonymous's issue:

It has just dawned on me that Anonymous considers ratification and dispute to be alternative procedures. I have not been thinking that way, but maybe I'm wrong. Maybe ratification and dispute are alternative procedures.

Anonymous may be reacting to FAR 1.602-3(b)(5), which says: "Unauthorized commitments that would involve claims subject to resolution under the Contract Disputes Act of 1978 should be processed in accordance with Subpart 33.2, Disputes and Appeals."

Upon re-reading that passage, I wonder what it really means. Does it mean (a) that when someone has made an unauthorized commitment in association with an existing contract the CO should follow the disputes procedure instead of the ratification procedure, or does it mean (b) that the CO must follow the disputes procedure in conjunction with the ratification procedure?

Bear with me, set aside practical realities, and think about this scenario:

A working-level CO (below the level of chief of the purchasing office) issues an order for specified equipment. The project manager, who has no contracting authority, contacts the contractor and requests additional equipment.

The contractor was notified in writing that the project manager has no authority to order supplies or services, and contract administration has been consistent with that notification (thus eliminating implied authority). Neither the project manager's superiors nor the CO had any knowledge of the project manager's actions (thus eliminating constructive ratification).

The contractor ships the additional equipment, expecting the CO to modify the original order, and the CO discovers what the project manager has done when the receiving dock notifies him of the discrepancy between the order and the shipment. Upon inquiry, the CO learns that the requiring activity wants the additional equipment and has funds for it.

The commitment was unauthorized. The CO is below the level of a chief of a purchasing office. FAR 1.602-3(b)(2) and (3) clearly state that working-level COs do not have the authority to ratify unauthorized commitments.

Question: Does FAR 1.602-3(b)(5) mean that the limit on CO authority to ratify does not apply in when an unauthorized commitment is made in association with an existing contract?

FAR 33.201 and the Disputes clause at 52.233-1 define a claim as a demand asserted "as a matter of right." But it is well-established that the Government is not bound by the unauthorized acts of its employees. (Read the RMTC Systems decision that I cited in my earlier post. It contains a nice discussion of this rule.)

Moreover, FAR 33.203(a) says that the disputes procedure applies to "any express or implied contract." But there cannot be any contract of any kind, express or implied, when the Government employee who made the agreement has neither actual nor implied authority. (The RMTC Systems decision addresses this.)

So, assuming that these facts are not in dispute: (1) the commitment was unauthorized (no actual or implied authority) and (2) there was no constructive ratification, here's are two questions:

On what basis could the contractor assert that it has a right to payment, either under or relating to the contract?

Under what circumstances would the disputes procedure ever apply to unauthorized commitments?

If the contractor cannot find a basis upon which to assert a right to payment, and if there is no express or implied contract, how can the contractor make and certify a claim on the basis of the disputes clause? And without a legitimate claim, how does the disputes procedure apply to this matter? In fact, how can the disputes procedure ever apply to an unauthorized commitment?

Which leads me to my final question:

Can the CO mod the contract without ratification of the project manager's unauthorized commitment by higher authority, or in light of FAR 1.602-3(b)(2) and (3), would such an act itself constitute an unauthorized commitment? (See FAR 1.602-1(a), second sentence.)

Thoughts?

By Eric Ottinger on Friday, August 25, 2000 - 10:52 am:

Anonymous,

So many interesting threads in this conversation—

Given a choice between litigation and quantum meruit, lawyers usually prefer the choice which involves less pain.

I guess the question is whether your agency really needs these items. If your technical person is only guilty of getting out ahead of the correct process, you probably don’t want to send the items back.

Eric

By bob antonio on Friday, August 25, 2000 - 11:07 am:

Anonymous:

Here are my final thoughts on this issue. First, set aside the term "ratification" for a moment. Check the FAR Policy from 1.602-3 (b) and FAR 33.204. It is below.

"Agencies should take positive action to preclude, to the maximum extent possible, the need for ratification actions. Although procedures are provided in this section for use in those cases where the ratification of an unauthorized commitment is necessary, these procedures may not be used in a manner that encourages such commitments being made by Government personnel.".

"The Government's policy is to try to resolve all contractual issues in controversy by mutual agreement at the contracting officer's level. Reasonable efforts should be made to resolve controversies prior to the submission of a claim."

To preclude, we must train and correct. Training should be provided to project managers, officers, etc, through classes to avoid this. From my experience, manuals and training material do this in federal agencies. If an unauthorized committment occurs, the contracting officer should take action to make sure the program office knows it is wrong. The agency should support the contracting officer with policy that corrects or removes the program officer for repeated abuses.

I think there have been good answers about actions on the noted situation. So I won't add anything more.

Before we move to the procedures for approval of the action, I would ask the obvious. That is, can the U. S. Government win in court? If we are of the opinion that we will lose, we move to the approval process for the unauthorized action quickly and try to avoid a claim. The approval process is spelled out clearly in FAR 1.602-3 (c). If we meet that criteria, we approve the action and ratification is done. Next, we contact the contractor and settle before the claim arrives. That is what the policy states.

By Joel Hoffman on Friday, August 25, 2000 - 01:40 pm:

Vern, This is in response to your questions as they relate to your specific example:

Q: "On what basis could the contractor assert that it has a right to payment, either under or relating to the contract?"

A: The Contractor could assert anything, I suppose. However, in order to bind the Government, the Contractor would have to show that there was implied authority by the PM or that the CO had actual or constructive knowledge of the PM's actions in time to stop or in time to minimize the Contractor's extra cost or that the Government is obtaining the benefit of the extra equipment and that the extra equipment could be segregated from the basic product and shipped back to the supplier.

Q:"Under what circumstances would the disputes procedure ever apply to unauthorized commitments?"

A: I would say that there has to be an existing contract. The Disputes clause would apply, if the Contractor submitted a claim pursuant to the contract, asserting that it has a right to payment. Now, the claim may have no merit and may be dismissed for lack of jurisdiction by a court or board. But the Disputes Clause becomes the forum for the Contractor to seek a right to payment as an alternative to some other type of legal action.

(I think the above also responds to the next question in Vern's post, so I skipped it.)

Q: "Can the CO mod the contract without ratification of the project manager's unauthorized commitment by higher authority, or in light of FAR 1.602-3(b)(2)"

A: I don't know - its an interesting question. Technically, the FAR seems to require ratification by someone higher than the CO before the CO is "authorized" to execute the Mod. And technically, the CO is not "authorized to ratify" the action. However, Case law may state that a mod written, without ratification by an authorized official, would still be binding on the Government.

The law seems to recognize a binding obligation by implied ratification, implicit or explicit adoption of unauthorized acts by those otherwised authorized to commit the Government. So, if the CO writes a mod, is there is a binding obligation?

Q:"(3), would such an act itself constitute an unauthorized commitment? (See FAR 1.602-1(a), second sentence.)"

A: Another interesting question - what does the case law say? Happy Sails!

By Vern Edwards on Friday, August 25, 2000 - 02:06 pm:

Joel:

The boards ignore FAR's limitation on CO authority to ratify. I found several relatively recent cases in which boards have found that a CO's knowledge of an unauthorized commitment and subsequent inaction constituted constructive (implied) ratification. The Kumin Associates decision of the LBCA that Bob cited illustrates this: "To the extent the Contracting Officer knew or should have known of the change, and took no action to countermand the directive issued by O'Malley via Caperton, his silence or inaction constitutes ratification."

One of the reasons that I raised these points and asked these questions was to show how confusing the FAR can be and how hard it sometimes is to determine the intent of the FAR Council. I don't have answers to my own questions.

It appears to me upon looking at the FAR and several agency FAR supplements that the policy-makers withheld the authority to ratify unauthorized commitments from working-level COs so that unauthorized commitments would have to be brought to the attention of higher-level managers so that they could take corrective action. I have no idea what the FAR Council had in mind, if anything, when it wrote that some unauthorized commitments should be handled throught the disputes procedure.

By Joel Hoffman on Friday, August 25, 2000 - 02:26 pm:

We need to remember that Contract Law is more encompassing than the Regulations. The Courts and Boards must fill in the blanks and try to address the inconsistencies and conflicts within the Regulations or between the Regulations and the law (Case Law as well as Statutory). Happy Sails! Joel

By Vern Edwards on Friday, August 25, 2000 - 04:40 pm:

Joel:

Here's a quote from Contract Disputes Act Annotated, by Robert Peacock and Peter Ting (Washington, DC: Federal Publications, Inc., 1998), p. 1-12:

"Where a Government employee without authority makes a commitment (to purchase supplies, for example), and the CO refuses to ratify the unauthorized commitment, there is no CDA [Contract Disputes Act] jurisdiction on the ground that there was no express or implied contract."

The authors cite RMTC Systems.

By joel on Friday, August 25, 2000 - 08:20 pm:

Thanks, Vern. Happy Sails!