Reaping the Rewards of the Federal Procurement Process
| Publication year | 1989 |
| Pages | 1903 |
| Citation | Vol. 10 No. 1989 Pg. 1903 |
1989, October, Pg. 1903. Reaping the Rewards of the Federal Procurement Process
Federal government contracting is big business. In fiscal year 1987 (the most recent year for which statistics were available), the government spent over 196 billion dollars on domestic purchasing, for everything from paper clips and pencils to sophisticated missiles, communications satellites and computers. Of this amount, businesses in Colorado received over 3.8 billion dollars, which obviously had a significant impact on Colorado's economy. Colorado received $1,172 per capita in federal procurement dollars, ranking eighth in the nation. In comparison, California ranked ninth in the nation, receiving $1,164 per capita.(fn1) Clearly, many Colorado businesses are involved in federal government contracting and, hopefully, more will be involved in the future.
The laws and rules which govern the federal government procurement system are much different from those which control private contracting relationships. Federal law, primarily statutes and regulations, exclusively governs the federal government's relationship with its contractors.(fn2) Beginning with the bidding and award process and ending with the procedures employed for the resolution of disputes, the rights and obligations of the parties are determined by a complex body of statutes and regulations which differ materially in substance from the common law and statutory provisions which control private contracts.
Because the government has the right to unilaterally terminate a contract without cause, along with other rights that a private party normally does not possess under a contract, actual and potential contractors often assume that they are at a disadvantage when dealing with the government. This is not true. Federal contract provisions and the case law interpreting them grant the contractor substantial rights for enforcement of contracts and payment for contract work often not provided in the private sector. However, protection and enforcement of these rights requires an understanding of the complex body of unique statutes and regulations which govern the contracts, as well as the specialized procedures and tribunals which have been established to resolve contract disputes.
The purpose of this article is to provide corporate counsel and private practitioners with an overview of the important legal aspects of the federal government procurement process to assist them in anticipating and recognizing problems before or as they arise.
The Contracting Officer ("CO") is the primary representative of the government
The CO must operate within the limits of applicable federal statutes and regulations and his or her own individual authority. The CO may not enter into a contract which obligates the government to expend an amount in excess of the available appropriations, must follow agency regulations and cannot waive a vested contract right. The burden is on the contractor to ascertain the actual authority that has been delegated to a CO or any other agent of the United States under a contract by obtaining copies of applicable warrants or delegations of authority and reviewing applicable statutes and regulations. Since estoppel does not generally apply against the government, there is no concept of implied or apparent authority of government agents.(fn4)
However, the doctrine of apparent authority does apply to government contractors in connection with actions taken and agreements made by their employees. This lack of mutuality has produced some harsh results. Perhaps in part to avoid such results, the courts have developed a number of doctrines to protect the contractor, including the doctrine of ratification.(fn5)
The need to ensure that government directives have been issued or approved by the CO is derived from the manner in which government contracts are administered. COs generally have extensive knowledge and training in contracting requirements, but often have limited technical and financial expertise. As a result, the CO relies on auditors, inspectors and Contracting Officers' Technical Representatives for assistance in these areas. These representatives often have more contact with the contractor in addressing technical and financial matters. However, these officials do not have the authority to bind the government. Therefore, to guard against misplaced reliance on opinions expressed by this group of support personnel, contractors should only rely on written decisions of the CO with respect to important matters of contract interpretation.
There are essentially four procurement procedures that are commonly used by federal government agencies: (1) small purchases of $25,000 or less; (2) sealed bidding, which is commenced with an Invitation for Bid ("IFB"); (3) competitive negotiated procurements, which are commenced with a Request for Proposal ("RFP") or Request for Quotation ("RFQ"); and (4) non-competitive proposals, which are commonly referred to as sole source procurements. The goal of the procurement process in each case is to obtain goods and services that meet the agency's legitimate needs at the least cost to the government while fostering maximum competition. Non-competitive procurements (category 4) are permitted only if the procuring agency can meet the requirements of one of seven exceptions enumerated in the statutes and regulations.(fn6)
Regardless of which method is used, procurements are governed by the Competition in Contracting Act ("CICA"),(fn7) which updated and combined two older acts.(fn8) CICA is implemented through the Federal Acquisition Regulations ("FAR"),(fn9) which were adopted on April 1, 1984, and supplements to the FAR which various government agencies have issued for application to their respective contracts. In essence, CICA requires that the government employ contracting methods which create "full and open" competition while ensuring that the government's needs are fulfilled.(fn10)
In all four selection methods, to qualify for award, a contractor must demonstrate through its bid that it is both responsive and responsible. To be responsive, a contractor must state in its bid how it will meet all of the government's price, performance and administrative requirements set out in the solicitation.(fn11) In contrast, to demonstrate responsibility, the contractor must
(a) Have adequate financial resources to perform the contract, or the ability to obtain them . . .;
(b) Be able to comply with the required or proposed delivery or performance schedule, taking into consideration all existing commercial and governmental business commitments;
(c) Have a satisfactory performance record . . .;
(d) Have a satisfactory record of integrity and business ethics;
(e) Have the necessary organization, experience, accounting and operational controls, and technical skills, or the ability to obtain them (including, as appropriate, such elements as production control procedures, property control systems, and quality assurance measures applicable to materials to be produced or services to be performed by the prospective contractor and subcontractors) . . .;
(f) Have the necessary production, construction, and technical equipment and facilities, or the ability to obtain them . . .; and
(g) Be otherwise qualified and eligible to receive an award under applicable laws and regulations.(fn12)
Thus, responsibility refers to the capability of the contractor perform and is not related to the technical acceptability of the product or service offered.
Simplified procedures can be used for procurement of supplies, nonpersonal services and construction from commercial sources if the aggregate amount of the purchase does not exceed $25,000. With certain limited exceptions, such "small purchases" are reserved exclusively for small business concerns. Small purchases may be made through a variety of methods, including a blanket purchase agreement, the fast payment procedure, an imprest fund and a purchase order. In essence, these purchasing methods allow the government to reduce administrative costs by purchasing certain supplies and services in limited quantities without going through formal solicitation and award procedures.(fn13)
The sealed bid solicitation and award process must be used if price and price-related factors will be the sole basis for the award.(fn14) When this procurement method is employed, the government agency requests sealed price quotations on products or services specifically defined in formal bid documents, i.e., an IFB. The IFB must provide all the information required by the...
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