Extraordinary Contractual Actions in Facilitation of the National Defense From a Department of Defense Attorney's Point of View

• Author: By Major Dulaney L. O'Roark, Jr.
• Pages: 02

The methods of adjusting contrncts for the benefit of both the Gweniment am! the contractor are cowrtd in this article. The author disclases at length the standmds for eealziating requests for adjustment. In conclusion. as throughout the entire article, it is emphasized that these WoceduTea are kewd to the nee& of the Government, and that zgmsts for adjustment must be framed accord-iIlglZl

1. ISTRODUCTION

As a general proposition most Department of Defense attorneys consider questions involving procurement law to be of concern solely to specialists in that field and something which can with a little luck be avoided almost entirely. One of the best illustration3 of the fallacy of this attitude is in the field of procurement la\%-concerning extraordinary contractual actions authorized by Public Law 83-804,' Department of Defense * attorneys may reasonably expect to encounter questions concerning P.L. 86-804 whether or not their agency is primarily involved in government procurement. Furthermore, the degree of difficulty of these questions is more often greater with seemingly simple or small dollar procurements than nith more sophisticated and involved procure-ments.8

* The opinione and eonelusione presented are those of the author and do not neeeraarily repreeent the ~lejils of The Judge Advocate General's School or any other governmental agency.

** JAGC US Army. Procurement Law Division Office of The Judge Advocate &nerd B.A.,'19Is, LL.B., 1960, University 'of Kentucky; admlrted to practice before the Kentueky Court of Appeals, the United States Court of Military Appeals, and the United States Court of Claims.

' 5 0 U.S C. 55 1431-36 11964) (hereafter referred TO and cited as P.L.

86.8043.'Hereafter referred to ai DOD.'P.L.

85-804 has frequently been referred to BJ B ~msll bueinesa oriented law became certain of the theories far eonrractuai adjustments ,as a practleal matter. are available only to Small firms. Furthermore, as B rule smaller firms are less soDhmticated ~n feimi of knowledge of defenee procurement procedures and, therefore, frequently are in a position where reiief in the form of extrsordrnary contractusi action under P.L. 88-804 is the oniy course of action open to them if they are ta reeovp certain I O ~ J suffered on

government contrsetn.

Thus, B DOD attorney whose scope of procurement practice barely extends beyond revieiving routine Support services con-trade (e.*, refuse removal) for his agency may be confronted with situations similar to the following case which occurred a ary installation not noted as a busy pra- ed to a local pig farmer under which the and remove all garbage generated by the installation The ccntract terms were based on estimated quantitie8 of parbage with no prorisian for fluctuations in quantities ac-tually generated. As a result of the Cuban crisis in October 1962 the installation was used as a staging area and the troop strength increased from 2,100 to over 20,000 men. This in turn increased the amount of garbage the farmer wan required to purchase and Yemore from three ii-gallon diuma daily to ninety 56-pallon drums daik

111 an effort to complr with the terms of the contract the iarmer purchased an additional truck, hired more personnel, and bought 681 more pips to consume the garbage. Even with this ef-fort about two-thirds of the garbage collected during November and December 1962 could not be consumed by the pigs and was buried bv the farmer. After the crisis the troops were immedihdrann and as a result of the decreased amount of garbage the farmer was left nith a surplus of pigs necessitating the purchase of feed or sale of the pips in a falling market. .4dditian-ally. the farmer awed the Government $1.800 for garbage collected during Sorember and December. The question raised for the DOD attoiney by the unamal circumstance of this case is whether there 1s a procedure to afford contractors such as the farmer relief ahen within the strict interpretation of the law the>- have no legal remedy and in the absencc of same act of grace on the part of the Gmernment will, as the result of a risk

*Reuben Btili. A r m ~ Contra~: Adjustmen: Board (hereafter referred ta

BP AC.%B) No 1063, 15 Apr. 1963

'KO legal remedy was arailable to the farmer to swld the 81,800 debt becaure rhe garbage had been removed and $1,600 YBJ due and orlng the Government. Contract niodifiLation at this paint in time ZBQ legally wes-tianable since It I- axiomatic that cantracring officers ma) not ialje a right veiied in the Gorernment under a contract without reeenmg eonlid-eratian in retuin. Simpion %. U S , li2 U S 372 (18991, 1s COXP GEN. 2: 11535), 40 Cohw GEU. 231 11960); 41 CODIP. GEX.

436 11962) Under the

eircumrtancei their w e nothing in the nay of acceptable eonaideratian that the farmer could pais to the Gorernment to iustify B contract rnodiflcatian e~neellinp the indebfednesi althn tiaditional legal rulei.

'Under 31 T.S C. 8 71 (15641. the General Accounting Office has authority to ietcle all claims and demandr in which the Government is concerned.

EXTRAORDIKARY CONTRACTS

not contemplated by either party tc the contract, suffer a severe financial setback

Stating the problem in its broadest context, government procurement in wpport of the national defense effort inherently exposes government cartractors to dramatically changing circumstances, which frequently result in lasses, because risks were not foreseen and therefore not covered in the contract. Furthermore, since numerous government agents ar? involved in most procure-ment, errors often occur when a contractor accepts instructions from a government agent who has exceeded his actual authority. This usually results in loss to the contractor because the apparent authority doctrine is not applicable to government agents and, even though the Government received a direct benefit, the contractor has no legal remedy.

From the Government's point of view the urgency of procuring for national defense coupled with strict procurement regulations often create a need for extraordinary procedures to assure that rupplies are delivered on time or are produced by particular contractor with the necessary expertise. These problems arise most frequently when a vitally needed small contractor is faced with financial losses on B government contract, which threaten his continued operation. Unless relief is obtained, the Government will not receive urgently needed supplies because of either loss of the endangered contractor's special skills, or insufficient time to reprocure the supplies from another contractor.

P.L. S5-EO4 is intended to provide DOD with a solution to these and certain other procurement prablems by allowing a P.exibility in government contracting that procurement regulations and law do not permit.' The purpose of this article is to Drovide DOD at- either a8 a debtor or creditor. This avthnrlty on oecaemn has been used to forgive contract debts when the equities so dictated. This, however, is a blow proeees and as a result is not B satisfactory method of handling situation. where quick wtion is required. See General Amounting Office Paiiey and Procedures Manual far Guidance of Federal Agencies, Titie 4, Cbims-General (1 No". 1967). Additionally, under The Fedma1 Claims Cailectm Act of 1866 (80 Stat. 308). a farm of grace 1s feasible when B eontraeto? 18 indebted to the Government and it appears that no person liable on the claim han the present or pm8pectm financial ability to pay any signlfieant portion of the amount due, OT the east of the claim is likely to exceed the amount of recovery. See Armed Servieea Proe~remenf Reg. (hereafter referred to and cited as ASPR), Appendix E-025 (1 Jan. 1968).

.See W.S. DEP'T OF ARMY, PAMPHLET

KO. 27-153. PROCIAEMEXT

LAW 16 (2d ed.

' P.L. S5-804, in addhion to pmvidmg far extraordinary contractual BC.

time, ala0 is used as authority for entering into indemnlfiertm agreements when B procurement invol~es nuclear or Ynusualiy hazardom risk (ASPR 0

(1961); R. NABH & J. COIWIC, FEDERAL PROCL'REMEFT

1869).

LAW 18

tomeys operating at the Head of Procuring Actix7ity (HPA) level with a discussion of this unusual law oriented to problem8 that they may expect to be called upon to answer.'c This will necessarily involve Some consideration of the administration of P.L. 8LS01 at higher levels but an exhaustive treatment of this aspect of P.L.

8:-801 1s not intendd'l A collateral objective is to give civilian attorneys an opportunity to observe the techniques used by DOD attorneya in administerine P.L. 85-804, thereby hapefullr assisting them in preparing government contractors' requests for extraordinary contractual adjustment.

are Important, from the practicing attorney's paint of view the implementing departmental iegulations are the key to under-ctandnig how extraordinary contractual actions are taken. Furthermore, as a result of the requirement in Executive Order 1Oi89 that all other executive agencies' regulations be ad similar as practicable to DOD regulations, The Amwd Seruicss Pioeure-men? Regiila?inii (hereafter referred to as ASPR), Section XVII, "Extraordinar)- Contractual Actions To Facilitate the Tational

J the authoritative regulation to stud>-." 4s a practical ce DOD 1s the government agency most likelr to have a need for takins extraordinary contractual action to facilitate the national defense, 11 will be unusual for a DOD or civilian attorney to haw occasmn to consult regulations other than the ASPR. Therefore, the foIloi5ing discussion of the key provisions of ASPR Section XVII is offered as the most authoritative descrip-tion of how estraordinary contractual actions are taken under P.L.

85-801.'- 1. Types o i Co?iti.netiinl Adjustmmts."

ASPR provides for four categories of extraordinary contractual actions. They aye amendments without consideration," mistakes.?' formalizarinn of informal commitments.:' and other e a ~ s

"The best example of another regulation implementing Pi,

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