Can routine commercial business transactions with the Federal Government or its contractors bind a business to Federal contractor obligations beyond those normal in ordinary commerce? That issue deals with an announcement by Home Depot it will not accept business, even cash purchases, that may be intended for government use.

As background, I am Anonymous on Friday, June 14, 2002 - 07:50 pm who has personally witnessed one attempt by a contractor to retroactively impose reporting and compliance documents on a businessman who had offered services under ordinary commercial terms. Delivery and payment had been made by the contractor. Some weeks later the contractor demanded the business certify compliance with a number of terms similar to the Home Depot concerns.

The small business was in more than compliance with public benefit laws. It offered health and retirement benefits when competition did not and such were not even usual in the industry. EEO was not even hinted as an issue. The company had just worked with EPA in proving a cleaner method worked commercially. The issue was form after form to be filled out in detail - all under penalty of law - that the business was in compliance as a sub contractor on a Federal contract that had been a walk-in credit card transaction. I have heard of one other similar incident.

On a busy day the very thought of that was enough to create considerable heat and concern. I was asked my opinion and commented that I did not think a contract could be formed without initial informed consent to terms and I'd refuse. The customer might not come back, but was not a regular. In my opinion the customer was pulling some sort of CYA and it was entirely their problem, if it was a problem at all. I also ventured that a commercial firm's failure to pay where payment had not yet been made in such a situation would not be legal. They had incurred the obligation under ordinary state law of commerce without revealing special conditions in advance, thus making them binding on the merchant through contract.

I suspect there is no legal basis for such retroactive actions and no legal means that a simple cash or commercial credit card transaction can form an obligation as a subcontractor to a government contract. Apparently some government, contractor and business people believe it can and act on that belief. Perhaps this forum can shed some light on the subject that will help all sides.

By Anonymous on Tuesday, June 18, 2002 - 08:44 am:

If a company (Home Depot or any other company) engages in a "commercial" transaction with the federal government (i.e., a prime contract) it can become bound by government requirements (EEO & others) in one of two ways. First, the terms of the agreement may expressly impose the requirements on the company, and the company, by signing the agreement with actual knowledge of the requirements, is bound by them. Second, certain requirements are required by law to be inserted into specific types of contracts/agreements, and under the Christian Doctrine the contract may, if certain criteria are met, be construed as though the required provisions are part of the contract even if they were omitted. To my knowledge, the Christian Doctrine has never been applied where the contractor was not on notice that its transaction was with the federal government.

Subcontracts under a government prime contract follow similar principles. A subcontractor may, by signing/accepting an order that expressly states that certain socioeconomic requirements apply to the subcontractor, be bound to follow those federal requirements. I am not sure if the Christian Doctrine has been applied to subcontractors but I see no reason it couldn't be (assuming the various criteria for application were met). Again, however, I do not think the Christian Doctrine could be applied to a subcontractor that was not on notice that the federal government was ultimate user/higher tier purchaser.

The St. Louis Post Dispatch article you cited seemed to indicate that Home Depot was aware that it was selling to the federal government. Assuming that no written agreement imposed the socioeconomic provisions at issue (it appears that most of the relevant transactions were by government purchase card), then I'd think the only way Home Depot could be bound by those provisions would be under the Christian Doctrine. Because it is sometimes difficult to determine if the Christian criteria have been met in a particular transaction, it looks like Home Depot is adopting a bright-line rule so it won't have to worry about the problem. Seems like overkill to me, but then again I don't know all the considerations that went into the decision.

By Larry Edwards on Tuesday, June 18, 2002 - 09:25 am:

The problem may be related to excessive paperwork requirements of the Department of Labor.
http://www.govexec.com/dailyfed/0602/060502lj1.htm

By joel hoffman on Tuesday, June 18, 2002 - 09:44 am:

Larry, are there any DOL reporting requirements for suppliers, regardless of the type of contract they are providing materials for? I'm not aware of any labor or labor reporting requirements for suppliers on construction contracts. Do service contracts have more pervasive labor requirements, which extend to suppliers?? happy sails! joel

By Questioner on Tuesday, June 18, 2002 - 11:40 am:

I think you are all so far missing the point. There is no question that a company entering into an explicit contract with the government takes on these burdens referenced. That is willing with full knowledge and acceptance of the terms by both the seller and buyer.

The issue here is whether an ordinary commercial retail sale, conducted under exactly the same terms offered to the homeowner, a business without government ties or any other walk-in customer can become a "government contract." Would you argue that a hotel knowing an average 10% of its guest are military and government employees, offering a government rate as a sales promotion without any agreement with the government becomes burdened as a contractor in addition to general law on accomodation?

Yes, government contracting is commercial, but it is exceptional to ordinary commercial practice. Yes, when you persent $1.75 for ice cream in the shopping mall you are forming a "contract" for delivery of the cone. That is the type transaction this issue is about, not "government contracting."

By Larry Edwards on Tuesday, June 18, 2002 - 11:41 am:

Good question, Joel. Here is what the relevant portion of the clause “Notice of Requirement for Affirmative Action to Ensure Equal Employment Opportunity for Construction” says:
(d) The Contractor shall provide written notification to the Deputy Assistant Secretary for Federal Contract Compliance, U.S. Department of Labor, within 10 working days following award of any construction subcontract in excess of $10,000 at any tier for construction work under the contract resulting from this solicitation. The notification shall list the --
(1) Name, address, and telephone number of the subcontractor;
(2) Employer's identification number of the subcontractor;
(3) Estimated dollar amount of the subcontract;
(4) Estimated starting and completion dates of the subcontract; and
(5) Geographical area in which the subcontract is to be performed.

Is a supplier a subcontractor if you buy more than $10,000 of construction material from him? I don’t know how OFCCP views it. “At any tier” may be a clue that it is inclusive.

By joel hoffman on Tuesday, June 18, 2002 - 12:04 pm:

Larry, according to our guidance furnishing supplies isn't considered to be "construction" for purposes of the labor provisions.

The purpose of the notification is to administer the labor provisions for construction, acording to our guidance. (FAR Clause 52.222-23 applies to "construction" subcontracts)happy sails! joel

By Larry Edwards on Tuesday, June 18, 2002 - 12:18 pm:

I agree with you that furnishing supplies is not what I would consider a construction contract. Common sense prevails. However, here is the definition from the OFCCP web site. It looks pretty inclusive:

http://www.dol.gov/esa/regs/compliance/ofccp/how2/ofcpch1.htm
Subcontract
Any agreement or arrangement between a contractor and any person (in which the parties do not stand in the relationship of an employer and an employee):
(a) for the furnishing of supplies or services or for the use of real or personal property, including lease arrangements, which, in whole or in part, is necessary to the performance of any one or more Government contracts; or
(b) under which any portion of the contractor's obligation under one or more Government contracts is performed, undertaken or assumed. See 41 CFR 60-1.3.
Subcontractor
Any person holding a subcontract, or for enforcement purposes any person who has held a subcontract, subject to the Executive Order, Section 503 or 38 U.S.C. 4212. See definition of "Subcontract."

By Anonymous on Tuesday, June 18, 2002 - 01:32 pm:

Questioner, I don't think we are missing the point. If the federal requirements are not expressly incorporated into the transaction -- be it a sale of $1 million of building materials or a $1.75 ice cream cone -- then the company/contractor is bound by whatever requirements (1) are incorporated into the contract by operation of law (under the Christian Doctrine), or (2) that apply independently and irrespective of the fact that a federal procurement is involved (such as various civil rights laws). Your focus on the term "retail" sale doesn't end the matter; the company might call it a retail sale but if the government is the buyer it is a government contract and therefore subject to federal procurement regulations.

Frankly, I'm not sure I understand the reason for your outrage. Companies that sell to the government realize (or should realize) that doing so subjects them to a variety of rules that don't apply to purely commercial transactions. If a company doesn't want to comply with these rules (or with the paperwork burdens relating thereto), they can avoid them by not selling to the government, as Home Depot seems to be doing. For many companies, however, the burden of compliance is outweighed by the benefits of federal dollars that are paid on time.

And I'm not sure your hypo about the hotel owner is on point. Even if renting a hotel room to a government employee is considered to be a procurement by the federal government -- and I have my doubts that it is -- what procurement-related burdens are placed on the hotel owner as a result of this transaction that are different from the regulatory burdens that already apply to the hotel owner under non-procurement laws, such as civil rights and accomodation laws?

By anon334 on Tuesday, June 18, 2002 - 01:52 pm:

Rental of a hotel room is a transaction between the employee and the establishment, not between the establishment and the Government. However, I don't know if the hotel makes some type of agreement with the Government, when establishing the rates. Many hotels' Government rates are the same as their commercial rates - depending upon the location.

By Vern Edwards on Tuesday, June 18, 2002 - 01:54 pm:

Questioner:

You said: "The issue here is whether an ordinary commercial retail sale, conducted under exactly the same terms offered to the homeowner, a business without government ties or any other walk-in customer can become a 'government contract.'"

I'm not sure what you consider to be an "ordinary commercial retail sale," but a sale to the government is always a government contract. The issue is what laws and regulations apply to any particular sale to the government. The answer depends on several things, including the dollar value of the transaction and the nature of the purchase (e.g., whether it is for goods or services). The same rules do not apply to a $50 sale that apply to a $3,000 sale. The same rules do not apply to a $3,000 sale that apply to a $30,000 sale. The same rules do not apply to a $30,000 sale of supplies that apply to a $30,000 sale of services. Yet to some firms a $30,000 sale might well be an "ordinary commercial retail sale." There are watches that cost $30,000 and that can be bought across the counter.

When a firm sells to the government that firm must know the rules, including what laws and regulations apply. For example, if a contracting officer goofs and leaves a required clause out of a purchase order, it might apply anyway, by operation of law. That may be why Home Depot doesn't want to do business with the government. I can easily see some military base buying $15,000 worth of supplies from a Home Depot retail outlet. That purchase may well obligate the entire company to do something that it doesn't want to do or doesn't know it has to do. The company may find itself bound by rules the violation of which might have serious consequences. Companies like Home Depot aren't organized to deal with a buyer like the government, with all its procurement laws and regulations.

By joel hoffman on Tuesday, June 18, 2002 - 02:18 pm:

Thanks for the website address, Larry.

Well, I called the DOL's Office of Federal Contract Compliance at their toll free number (888-376-3227). The person I spoke with said that suppliers ARE generally considered subcontractors for application of the EEO and Affirmative Action Clauses (subcontracts over $10k) and that the prime SHALL report supply subcontracts over $10k to OFCCP. I guess that pretty well explains the basis of Home Depot's policy. happy sails! joel

By Anonymous on Tuesday, June 18, 2002 - 02:43 pm:

There is a similiar reporting requirement at 52-222-37.This one is unrelated to type of item acquired. It occurred to me that if HD treated the government as a single buyer and its stores as a single company they may have come to believe that they might be required to comply with any number of Federal labor and employment provisions (when you add everything up): in addition many of the federal provisions require not only reporting but specific actions that companies need take. On a theoritical basis they may feel compelled to hire a sixty five year old to meet the Vietnam vets assistance program ..the result of accepting many,many purchase card transactions. I am not saying they are correct in their thinking but I sorta understand why they might think it.

By joel hoffman on Tuesday, June 18, 2002 - 03:19 pm:

Anon, the EEO clause, at 52.222-26, says that the requirements apply to a contract, if, "during any 12 month period (including the 12 months preceding the award of this contract)..." , the contractor has been awarded non-exempt Federal contracts and/or subcontracts that have an aggregate value in excess of $10,000. Part 13 doesn't exempt simplified acquisitions from executive order 11246 (EEO). Exemptions are listed in FAR 22.807.

So, it could be interpreted that an aggregate of $10k in direct credit card purchases would subject a firm to all the EEO requirements and $50k for AA requirements (The limit for AA is apparently $50k per year, per the AA clause, at 52.222-27). happy sails! joel

By Anonymous on Tuesday, June 18, 2002 - 03:46 pm:

I agree,I was just providing another example of a compliance requirement.

By joel hoffman on Tuesday, June 18, 2002 - 04:18 pm:

Anon, I should have addressed my comment to "Questioner".

Questioner, it appears that routine commercial business transactions with the Federal Government or its contractors bind a business to Federal contractor obligations beyond those normal in ordinary commerce. See above, where EEO and AA compliance and reporting, etc. are applicable, when aggregate sales to the Government, as a prime or sub (including as a supplier),kick-in the Federal provisions! Does that answer your question? happy sails! joel hoffman

By Questioner on Tuesday, June 18, 2002 - 04:40 pm:

I should have bound the question to cash and card purchases under $2,500. Those are the ones I would indeed be outraged to find bind a merchant to subcontractor reporting requirements. I would be just as outraged to find that any number of these purchases aggregate to bind a chain as a subcontractor or contractor.

Why? Contracting basics and simple belief our government should not engage in stealthy, outrageous practices. Home Depot and others offer the merchandise under the most basic commercial terms. That is the offer. There is no negotiation, no written acceptance and no intent to do otherwise. If a government employee or contractor presents cash or plastic for such an over the counter item it is unconscionable for the government to then claim it had a different agreement. There was no meeting of minds in offer and acceptance. No agreement. In effect you have a government wolf masquerading as a simple sheep in checkout. Instead there is gotcha.

Using Home Depot as an example I'll stipulate presenting a purchase order for a large order is a horse of a different color. There terms are clearly separate from the customer stream at checkout. I've been at the "other" counter and gone over all the terms and conditions for a large order. I used my VISA, but someone next to me was using a builder's account form. If the PO had several pages of uncustomary terms and conditions the company has ample opportunity to tell the person what they can do with the special terms.

If Congress really wants to make use of commercial practices for small purchases it needs to put the proverbial 2 X 4 between the rule making and acquisition community's eyes on this matter. Perhaps they need to also hit themselves for sending mixed messages. Otherwise expect an outbreak of similar actions in chains and stores around the nation. Yes, I am outraged if these small, supposedly streamlined, purchases can impose burdensome reporting on businesses with no intent of being government contractors or subcontractors in the specialized sense.

By joel hoffman on Tuesday, June 18, 2002 - 05:03 pm:

Questioner, I don't disagree with you.

I can't find anywhere in Part 13 indicating that credit card purchases are exempt from the Executive Order for EEO compliance or an exemption for the AA requirements.

Apparently, cumulative sales to a Government contractor or to the Government, even by credit card, exceeding the applicable thresholds, will subject a firm to the Government's non commercial requirements.

Part 12 isn't applicable to micropurchases or Form 44 purchases. The EEO and AA requirements aren't exempt under Parts 12, 13, or 22. happy sails! joel

By Anonymous on Tuesday, June 18, 2002 - 06:04 pm:

Questioner, although it's tough to follow your train of thought, it sounds like your main gripe is this: when a company sells to another company who then resells to the government, it's not fair that the first company becomes subject, as a subcontractor under a federal prime contract, to a number of reporting and compliance requirements that they never had any clue they would be subject to.

I agree that this sounds unfair, but I disagree that it happens this way very often. I have been in this business for a while, and I have never heard of any government agency taking the position that a commercial entity who sells to another commercial entity with no notice that its customer would resell the item to the feds becomes subject to the federal procurement rules. (If anyone has ever heard of this happening, I'd like to know about it.) And if the commercial customer (who was the prime contractor) demands reams of data from the ignorant sub, I don't see where the sub would have an obligation to comply, because the rules shouldn't apply to sellers who had neither actual nor constructive notice that the transaction was under a federal prime contract.

But when a company knows that its items are destined for the federal government's ultimate use, your "intent" and "offer and acceptance" objections vanish. The federal compliance and reporting requirements are written in black and white and published in the Federal Register and Code of Federal Regulations, and commercial sellers are on notice of them. The expression "ignorance of the law is no excuse" is true and it applies here. And if the federal requirements were limited to only apply to prime contractors (which may sound more fair), companies who wanted to sell to the feds could evade nondiscrimination (and other) rules simply by using a third party as a conduit for the sale -- something that Congress and the agencies tend to frown on in many contexts, not just procurement law.

By the way, if you think it's bad now, you should have seen it in the early 90s when lots more requirements applied to sellers of "commercial" items than is the case today.

By Vern Edwards on Tuesday, June 18, 2002 - 06:48 pm:

Suppose that different government employees scattered around the U.S. who are unknown to each other make individual purchase card buys of less than $500 each at various Home Depot stores that aggregate to $12,000 in course of a six month period.

According to FAR 22.807(b)(1), "Individual prime contracts and subcontracts of $10,000 or less are exempt from application of the Equal Opportunity clause, unless the aggregate value of all prime contracts or subcontracts awarded to a contractor in any 12-month period exceeds, or can reasonably be expected to exceed, $10,000."

However, FAR 13.201(d) says, "Micro-purchases do not require provisions or clauses, except as provided at 32.1110. This paragraph takes precedence over any other FAR requirement to the contrary, but does not prohibit the use of any clause."

(FAR 32.1110 has to do with payment through EFT.)

So, in this scenario, does the EEO clause apply to Home Depot? And, if so, how does the government apply it?

By joel hoffman on Tuesday, June 18, 2002 - 08:38 pm:

Vern, good question. The Executive Order applies to all Government purchases, except those specifically excepted. The exceptions are listed in FAR 22.807. Micro purchases aren't excepted from what I read. So, if various Gov't buyers acquire a cumulative total of $10k in a year... I don't know. Apparently, Home Depot doesn't intend to play the game, or has been burned.
happy sails! joel

By Vern Edwards on Tuesday, June 18, 2002 - 09:24 pm:

Joel:

It gets better.

Subparagraphs (b)(10) and (11) of the EEO clause say:

"(10) The Contractor shall include the terms and conditions of subparagraphs (b)(1) through (11) of this clause in every subcontract or purchase order that is not exempted by the rules, regulations, or orders of the Secretary of Labor issued under Executive Order 11246, as amended, so that these terms and conditions will be binding upon each subcontractor or vendor.

(11) The Contractor shall take such action with respect to any subcontract or purchase order as the contracting officer may direct as a means of enforcing these terms and conditions, including sanctions for noncompliance; provided, that if the Contractor becomes involved in, or is threatened with, litigation with a subcontractor or vendor as a result of any direction, the Contractor may request the United States to enter into the litigation to protect the interests of the United States."

Is it any wonder that Home Depot doesn't want the government's business? They weren't set up to deal with this kind of thing.

I don't know whether or not the clause would apply to Home Depot under the scenario that I've proposed. I think that it would, based on my reading of the FAR, but I've been around long enough to know that there may be more to this. But I've seen enough to understand Home Depot's concerns.

Questioner makes some sense.

By Questioner on Wednesday, June 19, 2002 - 12:54 pm:

Vern Edwards gets to the issue in his June 18, 2002, 6:48 pm comments. It is apparently not entirely clear that what appears to be a private sector retail transaction could burden a business with designated contractor or subcontractor reporting requirements. Most private sector businesses are not set up to deal with that unique market. Many want no part of that market.

It is particularly offensive, downright outrageous in fact, that they could be essentially entrapped into that status. Apparently this can be done by simply allowing customers, acting as if they were private sector, but really "bearing gifts" of requirements that are not explicitly part of the transaction, to make purchases along with anyone else. Those individuals could be wearing military uniforms, suits or jeans. They could be soldiers, government employees or XYZ Corporation people. The very idea that business will have to become vigilant for stealthy government and corporate customers, wolves in sheep's clothing so to speak, carrying this "virus" will backfire on government politically.

If any of you still find "outrage" puzzling I suspect you have been too buried in government "business" far to long. Outrage? Wait till the small business community learns that perhaps ten such customers appearing in its two retail locations over a year, each making a $1,000.14 purchase, burdens them with peculiar government subcontractor/contractor reporting requirements when they were simply offering these items for sale under entirely different terms. Federal Register? Ignorance of the law? These citizens will rightly be ready with tar and feathers! That simple market Congress wants you to use for some office supplies, a scanner or printer, lumber and supplies for a display and other small incidentals will dry up and become openly hostile. Perversely, this may require the private sector to become discriminatory in a way offensive to other law that deals with serving all without discrimination in places open to the general public.

All I have to go on so far are the news stories and one comment makes it clear to me that at least one government official is just as puzzled as I am. The St. Louis Dispatch article quotes "Susan McIver, director of the GSA's Services Acquisition Center" indicating to me this official is also as surprised as I am.

"Home Depot has not contacted us, so I've got no idea what their problem is. We are checking with the other federal agencies to see what they are encountering and then will call the company." A later quote follows the comment that Home Depot's concern is the application of specific contract law that is above and beyond general law dealing with discrimination. It is obvious to me that it is the reporting that the company objects to here. Susan McIver's comment that "We are going to the agencies who issued those three laws they mentioned and try to determine whether those laws would have some kind of impact on Home Depot which might explain its actions" indicates to me that a fairly high level GSA official is surprised to find VISA/MasterCard type cards, mandatory for purchases under $2,500, can make an accepting company liable for full subcontractor/contractor reporting requirements.

On a different level I find the contract aspect intriguing. For example, in something of an eulogy for the judge who outlined the Christian Doctrine, "Time to remember a judge who cast a long shadow", a quote from Judge Oscar H. Davis' WPC Enterprises Inc. vs. United States: "This is a study in the toils of ambiguity. The parties put their names to a contract which, on the point crucial to this lawsuit, could reasonably be read in two conflicting fashions. Each signatory seized in its own mind upon a different one of these contradictory versions. … The impasse became unmistakably plain when it was too late. Our task is to determine on whom should fall the risk of such mutually reinforced obscurity."

This is worse than any such case of an explicit contract. We have two individuals operating on entirely different business models. The retail businessman, with no intention of becoming a "government contractor," offers wares to one and all without regard to race, sex, creed or employment. Despite all the comment that any purchase by the government is a government contract there is a contract question. Can contractual requirements not even entirely clear to the government, never mentioned at the time of transaction, not in any written record of the transaction and not a part of any understanding - in fact a distinct non meeting of minds - form a valid contract? Remember, we are talking of specific contractor requirements here, not a merchant's following and even going beyond general law on discrimination.

By Anonymous on Wednesday, June 19, 2002 - 01:00 pm:

And now we know why the price for Govt hammers exceeds the price Josie Homeowner pays at Home Depot for weekend repairs....

By Anonymous on Wednesday, June 19, 2002 - 01:23 pm:

Yes, government hammers are wrapped safely in mounds of paper.

By Anon on Wednesday, June 19, 2002 - 01:30 pm:

Those weren't hammers, they were "centrifugal impact devices" per MIL SPEC....... (ad infinitum).

By Anonymous on Wednesday, June 19, 2002 - 01:55 pm:

Hand operated too....slightly off topic Questioner 6-18--11-40 AM--mentions hotel in the writing--ever heard of the Hotel/Motel Fire Safety Act of 1990?

By Ron Vogt on Thursday, June 20, 2002 - 01:24 pm:

Some of the issues being raised in this thread are similar to those raised in an earlier thread concerning the definition of a subcontract. The FAR definition could be interpreted as including everything a prime contractor buys that is used in performing its prime contract -- including utilities, phone service, janitorial services, etc. Some ACOs took this literally, and required primes to obtain reps and certs from utility companies, as well as flowing down subcontract clauses.

The same seems to be happening here: Home Depot, by selling to government purchase card users, finds itself being labeled a government contractor (or by selling to prime contractor buyers, becomes a subcontractor), with all the attendant requirements and problems.

I'm not ready to comment on the first debate -- whether Home Depot enters into a government contract by selling to a government card holder. However, the answer to the subcontract issue seems to be a revision of the definition of a subcontract. Part of the revision should be to limit subcontracts to contracts that are for a portion of the work that the prime is required to deliver to the government. This would eliminate utilities, janitorial work, etc.

Another part would be to make a distinction between selling ordinary parts and supplies to a prime vs. providing a component or sub-assembly for the end item. Home Depot was in the former position, and found itself labeled a government subcontractor. The actual dividing line will be difficult to draw, but a nuts and bolts supplier at the fifth tier should not be considered a government subcontractor.

By John Ford on Thursday, June 20, 2002 - 06:38 pm:

The air conditioner in the command suite at Ft.Route Step goes on the fritz. SGT Snuffy goes to his commander and suggests that Snuffy go to Home Depot and purchase a fan with his own funds and then get reimbursed from the imprest fund. Neither Snuff nor the commander, who is not the HCA, is a contracting officer. The commander OKs the idea and Snuffy goes off, uses his personal Discover card at Home Depot, presents his receipt to the imprest fund custodian with the commander's endorsement for buying the fan and gets reimbursed. Where is the contract and who are the contracting parties?
I would appreciate it if someone could clarify the mechanics of the use of a government credit card. I am sure the government has a contract with some company to operate the card system. Does it work like a standard Visa or MC account in that the vendor bills the card company who then bills the customer? If so, who is the customer that gets the bill? If a contract requires mutuality of consideration, what is the exchange of consideration between the government and the merchant in a government credit card transaction?

By Anonymous8 on Thursday, June 20, 2002 - 08:44 pm:

I am a card holder.

Question 1: Yes, vendor bills bank who then bills the Government.

Question 2: Gosh - the consideration is payment, but your point I guess is that the payment is indirect, through a third party. Makes it interesting in any financial system that tracks actual payment (to the bank) rather than the vendor, who is the "contractor".

- When I get a request with funding from the person needing the supply / item, I call the vendor and order item. (Skipping steps here related to mandatory sources, checking around for prices, ensuring firm is not debarred)

- Vendor bills the bank when the item is shipped. (Alternatively, I tell them when they are authorized to bill)

- Bank pays vendor

- Bank sends me a summary of charges same time each month, near the end of the month. I reconcile, pass up to my AO (higher level person) who checks paperwork / statment and certifies it, then sends to payment office where it is paid.

- Government pays bank to make a PC buy, ask if he accepts card.

By Vern Edwards on Friday, June 21, 2002 - 07:00 am:

Anonymous8 has it right. For the official description of how payment by Governmentwide purchase card works, see FAR § 32.1108(a).

By Questioner on Friday, June 21, 2002 - 12:02 pm:

Ron, I vaguely remember that issue with utilities. Do you remember the thread's title or other hints to where it might be? If I recall I did some head shaking and muttering about foolish extremist and zealots.

I do think a fairly bright line can be drawn on the issue. It would lie between those knowingly and intentionally entering into an agreement with the government or its contractors to furnish specified goods and services and those simply offering those to the general public among whom may be buyers for the government and its contractors. I believe the public would support, indeed demand when informed, that government behave as any other customer when otherwise acting as one.

Now I think people are getting the point. In John Ford's example SGT Snuffy is appearing just as would Harry Homeowner. I believe it is nearly the same if Lt. Doe enters Home Depot with Sgt. Sam, load carts, and present a VISA/MasterCard at checkout for the $2,155.78 bill. It would be unconscionable for that to somehow translate into a government contract status upon the vendor. It is, in effect, government committing a fraud upon the vendor. Compounding the case by the government "aggregating" thousands of SGT Snuffys in multiple locations only makes it worse. I would be surprised to see courts support such an argument. I go back to Judge Oscar H. Davis' comment about "Our task is to determine on whom should fall the risk of such mutually reinforced obscurity" except I would rephrase to "Our task is to determine on whom should fall the risk of one party's disguising intentions."

In my opinion it is entirely different if Lt. Doe enters with a PO for $5,000 in goods, seeks out the contractor desk and wants to begin "negotiations" for delivery and then informs the store that this is a government order with conditions. I would have fewer problems with that sort of transaction being considered more formally a government contract. He is alerting the store that he is "procuring" (Some businesses might have an interesting comment to make on that!). He can, and often would, be told to take his PO elsewhere.

Put simply, when the government acts as any other customer ordinary commercial rules should apply. When it acts as a "special" customer then its rules should apply. If the card limit rises to $25,000 I believe the same applies even if that opens a floodgate of exceptions. It is really a matter of principle - not conducting "government business" by stealth.

By Anonymous on Monday, June 24, 2002 - 12:22 pm:

There is an editorial on this subject in todays Las Vegas Review Journal,

By Kennedy How on Monday, June 24, 2002 - 12:29 pm:

I tried posting last week, but I got a note saying the topic was closed by the moderator. But, I'll try again.

My feeling is that if you are using a Govt CC for a purchase, you are using it in an official capacity, as authorized by you being a cardholder. If you are doing that, then the question becomes whether your use of the card on official business constitutes a contract between the parties (you as an authorized cardholder NOT a Contracting Officer, but authorized to purchase on behalf of the Government), and the seller.

If we can accept that reasoning (which is debateable), then contractual regulations will apply, unless the FEDERAL regulations exempt this sort of purchase from the glut of contracting regulations.

It's been said a lot that the Federal Govt is the Federal Govt., and isn't limited to the cardholder's own little sphere of activity. For a small business somewhere, with one location, it isn't much. But, if you're a big corporation like a Home Depot, then it all adds up very fast. And I can easily accept that on an aggregate basis, every store adds to the total, just like each cardholder is an element that makes up the Federal Government.

Kennedy

By joel hoffman on Monday, June 24, 2002 - 02:00 pm:

Kennedy, purchasing goods or services, using a Gov't issued credit card, where the Gov't pays the invoice from the card company, is a commercial transaction between the Government and the seller. As a buyer, the cardholder is an authorized agent of the Government. Is that debatable? happy sails! joel

By Vern Edwards on Monday, June 24, 2002 - 02:41 pm:

Here's the link to the Review Journal editorial:

http://www.lvrj.com/lvrj_home/2002/Jun-24-Mon-2002/opinion/19013126.html

By Vern Edwards on Monday, June 24, 2002 - 03:33 pm:

Here's a link to another Home Depot story:

http://www.businesstoday.com/business/business/home06212002.htm

By Kennedy How on Tuesday, June 25, 2002 - 12:26 pm:

Joel,

I threw that out as a point of discussion. I remember when the VISA card program came about, it was to be used IN LIEU OF normal purchasing procedures. As in, rather than our "Local Procurement" office generating a PO to a local firm for office supplies, the actual end user cardholder could order the supplies themselves.

So, instead of sending over a purchase description for office supplies to the local 1102 Buyer/Contracting Officer to buy this stuff, the cardholder now can call Office Depot direct, and get the stuff we want now.

Given that kind of mentality, I can see that a cardholder purchase, which is made INSTEAD of the standard PO, can be lumped into the "Government Contracting" pool. Especially if there isn't any policy/regulations stating otherwise. Somebody has to make a decision one way or another, because absent any kind of relief, either position could be valid.

Kennedy

By Questioner on Tuesday, June 25, 2002 - 12:28 pm:

You can see my prediction forming in the Las Vegas Review-Journal article's final paragraph:

"Rather than reviling this private firm for trying to steer clear of the federal Charybdis, the correct step is to reform (and downsize) the federal government till it no longer constitutes a regulatory monster away from which any honest businessmen must run -- not walk -- to protect his purse, his cashier and his daughters."

Expect the outrage to grow as this percolates down in the business world.

One can also see my concern of a downside for Home Depot, made in the other discussion, forming in the Business Today article. Personally I'd bet that Home Depot can do a better job of explaining to the public that it is in compliance with all general labor and equal opportunity laws. It just does not want to be classed as a Federal Contractor with all that silly paperwork "those people in Washington" like to impose on contractors. See how silly and grabby those pointy headed regulatory monsters are? I fear over reaching on this front, extending contracting requirements onto unintended "contractors," will damage legitimate regulation.

By joel hoffman on Tuesday, June 25, 2002 - 01:56 pm:

I agree. I don't think it is either reasonable or necessary to reach that far, with reporting requirements. happy sails! joel

By Eric Ottinger on Tuesday, June 25, 2002 - 02:28 pm:

I remember trying to buy an utterly commercial item of software from a very small business circa 1986. By the time that I had put in all of the clauses needed to satisfy my GC, the contractor was disgusted, I was disgusted, and the contract was probably more trouble than it was worth for either party.

One good effect of acquisition reform was to strip almost all of the government unique requirements out of these strictly commercial contracts.

The few clauses that remain are evidently considered to be essential by Congress.

As a general rule, we should buy strictly commercial products in a strictly commercial manner.

However, I respect Congress. (Congress is the boss.)

And I respect Home Depot’s right to choose whether they want to do business on our terms or not.

Eric

By Anonymous on Tuesday, June 25, 2002 - 03:43 pm:

The clauses that Home Depot was concerned about are not required by statute but by executive order. Even if we do respect Congress or the president it is good to criticize them when they promulgate poor policies

By Eric Ottinger on Tuesday, June 25, 2002 - 04:19 pm:

Anon,

Thanks for the correction. I would say that the President is also the boss.

I presume Congress could override an executive order if they chose, by passing legislation to the effect that these requirements should not apply to strictly commercial buys. Congress has made a decision, even if it is a decision not to do anything.

I meant to indicate that these issues are essentially political issues. I might criticize them as a private citizen.

As a federal employee my job is to implement laws and executive orders, even if I don't entirely agree.

That may seem like a fine distinction, but that was the distinction that I intended.

Essentially, these are political questions. How much of a price do we as a society want to pay, to achieve certain worthy ends.

The procurement question is how to implement in the best manner.

Eric

By anon21.5 on Tuesday, June 25, 2002 - 04:36 pm:

The "far" reach of the FAR/DOL/etc. into commerce is overwhelming. Really, are the onerous reporting requirements for such things as EEO/AA/Veteran employment necessary or reasonable?

By Vern Edwards on Wednesday, June 26, 2002 - 08:20 am:

As I understand it, Home Depot's policy reflects its concerns about some of the requirements set forth in FAR Subpart 22.8, Equal Employment Opportunity. The key feature of that subpart is the requirement to comply with the clause at FAR § 52.222-26, Equal Opportunity, which FAR §§ 22.802(a)(1) and 22.810(e) require to be included in all contracts, unless exempt. FAR § 22.807(b)(1) exempts contracts of $10,000 or less, unless the aggregate value of all prime contracts or subcontracts awarded to a contractor in any 12-month period exceeds $10,000.

Now, if a contractor accepts a purchase order that includes the clause, then I don't think it has any ground for complaint. But I don't think it's fair to apply the clause through purchase card or cash transactions. Does anyone believe that the clause somehow applies when aggregate micro-purchases made by purchase card or cash in any 12-month period exceed $10,000?

If you think that the clause applies to such aggregate purchases, and if the contractor did not receive any written purchase orders that included the clause, then how did the government communicate the requirements of the clause to the contractor, and how can it prove that the contractor assented to the terms of the clause?

By Anonymous on Wednesday, June 26, 2002 - 08:46 am:

Can't a seller tell by looking at the purchase card that it's a government purchase? If so, and if the EO requirements apply to purchase card transactions (as Vern's earlier analysis of relevant FAR provisions indicates, this is apparently an unclear legal question), then I don't think any assent is required. The requirements would be incorporated into each transaction by operation of law. Failure to assent has never been grounds for not applying the Christian doctrine.

If the EO requirements do apply to accumulated purchase card purchases exceeding $10,000, do you see any reason why the Christian doctrine should not apply here? EO requirements surely reflect important and well-ingrained federal policies.

By Anon on Wednesday, June 26, 2002 - 09:14 am:

I was always under the impression that the Christian doctrine applied to clauses required by statute/law. Does an EO rise to the level of operation by law?