Introduction to Contract Law for CORS

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Terminal Learning ObjectiveWe will address 10 legal areas that every Government COR should be familiar with in accomplishing the contracting mission consistent with the existing laws, rules and regulations.

#1 Enabling Learning ObjectiveTo provide a background to understanding how the Government operates and how the Government is able to enter into contracts.

Sources of the LawConstitutionExecutive LegislatureJudiciary

PresidentHouse SenateSupreme Court

DepartmentsGAOAppellate Courts & Agencies District & BCAs Specialty Courts

Sources of the LawStatutes / LegislatureActs (U.S. Codes)Opinions of the Comptroller GeneralExecutiveExecutive OrdersBCA RulingsAttorney GeneralRegulations (Code of Federal Regulations)Case Law Federal & Administrative

StatutesArmed Services Procurement Act of 1947 (ASPA)Covers the DOD, NASA, Coast Guard

Federal Property & Administrative Service Act of 1949 (FPASA)Covers non-DOD Federal agencies

Statutes (cont.)Contract Disputes Act of 1978 (CDA)Waived sovereign immunity for contract appeals to agency boards of contract appealsallowed direct access suits to the the U.S. Court of Federal ClaimsCovers claims process, certification, litigation, etc.

Statutes (cont.)Competition in Contracting Act of 1984 (CICA)Amended ASPA and FPASA to make both statutes identicalSubsequent changes to ASPA and FPASA have introduced some differences

Statutes (cont.)Federal Acquisition Streamlining Act of 1994 (FASA)Amended various sections of other statutes described above Eliminated some differences between ASPA and FPASA

RegulationsFederal Acquisition Regulations of 1984 (FAR)Located at 48 C.F.R. Ch. 1 et seq.Includes departmental and agency supplemental regulationsOrganizational System (8 subchapters and 53 Parts)

FAR Organizational SystemSubchapter A. GeneralSubchapter B. Acquisition PlanningSubchapter C. Contracting Methods & Contract TypesSubchapter D. Socioeconomic ProgramsSubchapter E. General Contracting RequirementsSubchapter F. Special Categories of ContractingSubchapter G. Contract ManagementSubchapter H. Clauses & Forms

Contracting EnvironmentOversight and GuidanceOMB-Office of Mgt & Budget, OFPP-Office of Federal Procurement Policy, ASBCA- Armed Services Board of Contract Appeals, ASPA- Armed Services Procurement Act, ASPR- Armed Services Procurement Regulation, DAR-Defense Acquisition Regulation FAR- Federal Acquisition Regulation, DFARS- Defense Federal Acquisition Regulation Supplement, FPASA- Federal Property & Administrative Services Act, FPR- Federal Procurement Regulation, FASA- Federal Acquisition Streamlining Act, GAO- General Accounting Office

#2 Enabling Learning ObjectiveTo help you understand the impact of any directions and guidance you give to a contractor and how that can potentially bind the Government, or worse, cause you personal liability.

Authority of Agencies

United States has inherent authority to contract and discharge governmental dutiesDuties must not be prohibited by law Constitutional exercise of appropriate power and duty

A relationship in which an entity known as the PRINCIPAL authorizes another, the AGENT, to act for and create legal obligations between the principal and third parties.

Examples of AgentsContracting Officers are agents of the US GovernmentInsurance Agents are agents of the companies for which they sell insurance or insurance productsThe clerk at Sears is an agent authorized to sell merchandise for Sears

Authority of Personnel

Contracting authority vested in the head of the agency (Secretary of the Navy)Head of Agency may establish subordinate contracting activities and delegate authority to heads of subordinate activities

Contracting EnvironmentFlow of AuthorityCONSTITUTIONPresidentHead ofAgencySenior ProcurementExecutiveHead of Contracting ActivityContracting Officer

Actual/Express Authority

Actual AuthorityGovernment bound only by agents acting within scope of their authority to actThose agents exceeding their authority do not bind the governmentThis may be an inadvertent exceeding of authority

Contracting officerContracting Officers (KO) enter, administer or terminate KsTerm includes authorized reps acting within limits of authority delegated by KOOnly KO may bind government only within limits of their authorityEnter into and sign Ks on behalf of government

Types of Contracting OfficersPCOACOTCOCradle-to-Grave CO

CORs AuthorityExtremely limited authority MUST BE delegated by Contracting Officer in writing.Assist with technical monitoring and administration of a contractServe as Technical liaison between Contractors management and Contracting OfficerMAY NOT: Make changes/agreements that result an increased cost to the Contractor or make any changes to terms of contract.

Exceptions to Express AuthorityOutside limits of warrantUnlawfulContrary to standard industry practice

Apparent AuthorityKTR bound by apparent authorityGovernment has been deemed justified in assuming the KTR representative has authority

Gov not bound by Apparent Authority

Theories binding the Government

General rule is that unauthorized acts of employees will not bind the government Courts and boards have permitted KTR to recover in spite of those unauthorized acts

1. EstoppelA concept that prohibits a party from escaping liability for statements, actions, or inactions if it has been relied on by the other party. The Government is held bound by estoppel, because it would be unfair not to do so even though the statement, action, or inaction would not be contractually binding.

Equitable EstoppelGovernment May Be Liable Under the Theory of Equitable EstoppelGovt knew the true factsGovt intended the Ktr to rely on its actionsKtr was ignorant of the facts; andThe Ktr relied, to its detrimentGov acting in proprietary, rather than sovereign, capacity; andWithin scope of agents authority.

2. Implied AuthorityImplied authorityIf questionable act, order or commitment is part of government employees assigned duty implied authority may be found

(Most Common Issue for CORs)

3. EmergenciesEmergenciesGovernment may be obligated if immediate action is necessary to save property or lives

4. Imputed KnowledgeImputed KnowledgeRelationship between the parties creates presumption that one would have informed KO of eventsIf found, boards have imputed knowledge of person making unauthorized commitment to KO

5. RatificationRatificationKO ratifies unauthorized commitment/binds governmentactual constructive knowledge of unauthorized commitment adopts expressly or impliedly the act as his/her ownFAR 1.602.3

Ratification (cont.)CO not required to ratify an unauthorized commitment. If not, then you can be held personally liable

Your PCO enters into a construction contract with Rice Company to replace and construct a hazardous operation support facility. In performing the work, you, the COR, asked Rice Company to do some additional integrity testing on the existing facility. Your PCO was on the telephone line when you gave Rice the instructions for additional testing. As a result of this additional testing, Rice requested an equitable adjustment. The PCO denies Rices request. Upon the Governments denial of the claim, Rice sues the Government for additional work performed and Government caused delay. What are the legal issues in this problem?What rules apply?What should the Governments course of action be?

The Rice Company, A Question of Authority

#3 Enabling Learning ObjectivesTo help you understand the big picture as to how a contract is formed and the legal issues involved in its formation, to be able to determine if there actually is a binding contract.

OfferAcceptanceCompetent Parties (Authority)ConsiderationLawful PurposeClear Terms

Void v. VoidableVoid Contract never existed. Court will not recognize any contract.Voidable can be voided by one of the parties due to the method in which it was entered into.

Capacity to ContractThose lacking legal capacity form voidable contractsEnforceable at option of person law seeks to protectVoid contracts not enforceable, do not existContract is enforceable against that individual not protected by the policy

Infants (under 18) may void contract at their optionInfant binds after reaching majority by ratifying contractPartial performance by infant will require disaffirmanceReturn consideration received and receive consideration givenIf consideration squandered, infant still entitled to his consideration tendered by him

Capacity to Contract Insane persons similar to infantsLegally adjudged insane, contract voidNot legally insane, voidable only if insanity existed at time of contract formationDrunkenness, voidable at drunks option Corporations must contract in accordance with their charters.

Mutual AssentOffer AcceptanceMeeting of the Minds

OfferProposal a contract be entered intoOfferee is person to whom offer is extendedAccepting and communicating acceptance to offeror will form contract Only intended offeree can accept offerAcceptance by someone else will not result in contractNumber of potential offerees may be unlimited

OfferOffer is open until its stated expiration termMay also expire after reasonable termMay also be dependent on the happenstance of a particular condition or nonconditionReasonable time of expiration dependent on circumstancesOffer may be recalled at any time before acceptance

AcceptedRejected RevokedExpireAfter a stated periodAfter a reasonable period

Counter OffersOffer may be rejected by counteroffer This may be as simple as varying of the termsOffer is terminatedCounteroffer becomes offerOriginal offeree becomes offeror

Rejects original offer

May lead to negotiation

Acceptance of the counteroffer will form a contract

AcceptanceMust be unequivocalCannot be hedging, doubtful or conditionalAcceptance in unilateral contracts may be done by completing act.In bilateral contracts, acceptance is absolutely necessary

Silence as AcceptanceSilence by itself is not acceptanceSilence coupled with conduct may do itusually coupled with past dealings, customs of trade, standards

Meeting of the MindsMutual understandingObjectively viewedSubjective misunderstanding not a way to terminateOnly if there is objective determination of ambiguity will contract be terminated

MistakeUnilateral mistake will not reform contractUnless one party knew other was mistakenClear cut arithmetical error or misreading of specs

Mutual MistakeSame essential facts must be mistakenMistakes of different natures by the parties treated as unilateral mistakesNo reformation here

ConsiderationValue given and receivedCan be an act, promise forbearance or a legal relationshipBilateral K, each party exchanges a promise for a promiseUnilateral K, one party promises and the other performs w/o a promise

Binding Promiselegally sufficient consideration legally detrimental to the one who gives itbenefit without detriment is not legally bindingno detriment where someone promises to do what they are already bound to do

Lawful PurposeIllegal Contracts will not be enforced--Contracts which violate a statute (law) will not be enforced;Contracts for drugs or killers will not be enforced in a court of law!!!!Contracts may not be against public policy

EnforcementLaw will not help perform illegal unperformed KIf executed, law will not help in recovery of what was given in performance

Form Provided by LawWritingStatute of FraudsOral modification of written K is unenforceable unless performedElectronic contracts?

#4 Enabling Learning ObjectivesAs a COR you will need to be able to recognize when a contract is being performed. Hence, you will need to know the various legal classifications of types of contracts.

Classification of ContractsUnilateral BilateralExpressImplied-in-fact Implied-in law

ExpressContract terms expressly arrived at, deliberately negotiated.

ImpliedIn Fact: Based upon facts and circumstancesIn Law: Quasi-Contract a non-contract legal fiction to prevent unjust enrichment

#5 Enabling Learning ObjectivesAs a COR, you might be making changes to a contract on behalf of your contracting officer, if you are so advised by the contracting officer. You need to understand the rules and limitations regarding obligating funds so as to avoid any personal liability on your behalf or on your contracting officers behalf. Working as a team involves looking out for all parties on that team.

Life CycleCostICEFiscalEnvironmentCostAnalysisEstimateAnnualFundingIncrementalFunding MFP POM BES Funding Policies Planning, Programming and Budgeting SystemPresidentsBudgetCommitment ReprogrammingBudget Authority Obligation OutlayCongressional EnactmentForce StructureModernizationOperational CapabilityReadinessSustainabilityBudgetResolution

Authorization & Appropriation LawsPOECCA SAC SASC SBC HAC HNSC HBC The Budget ProcessOperationalConceptORDMNSAoAMAAFeedbackCAIVMBIsFullFunding (Exceptions) FYDP DPG PDM PBDAPBFact-finding& PlanningJanuaryOctoberOMBOMBSenateHouse

FUNDING & FISCAL LAWDefinition of FiscalComes from the Latin fiscus the basket or moneybag; The emperors treasury

Appropriations for DoD5 broad categoriesPersonnelmaintenance and operationsmajor procurementR & DAcquisition and construction of real property

Appropriations Public funds may not be expended w/o authorization and appropriation from CongressVery specific language required for a payment of money

Authorizations Specific authorization required of the activity to spend money

Fiscal LawOMBDutiesReports to the PresidentPrepares the budgetApportions funds to agenciesAgency Comptrollers allocate to agency subdivisions

Fiscal LawGAO DutiesReports to CongressMonitors SpendingCharged with audit and settlement of accountsAdvisory Opinions

Fiscal LawAppropriation and Authorization by CongressUS Constitution; Article I, Section 9, Clause 7:

No money shall be drawn from the Treasury, but in consequence of Appropriations made by Law

AllocationsDoD Comptroller divides the apportioned funds to the different commands

ObligationsGovernment liability resulting from contract, purchase order or other debtObligation liquidated by payment to the contractor

CommitmentReservation of funds administratively for a future obligation on a contract

3 Types of Limitations of fundsAmountTimePurpose

Anti-Deficiency Act (Amount)

No Government employee or officer shall authorize or create an obligation, make expenditure in excess of an apportionment or appropriated funds.

Committing inadequate fundsObligating without adequate fundsSpending/changing/modifying without adequate funds

Antideficiency ActSanctions for ViolationsA. Suspension w/o pay and removalB. Good faith or mistake does not relieve an individual for responsibility;C. Criminal Penalties (If knowingly did)Class E felony--$5K fine; two years in prison, or both.

Example of ADA ViolationPROCUREMENT $$To BuyUsingMILITARY CONSTRUCTION11-5,6

Another ExampleFiscal Year 2002Fiscal Year 2003Using$$To Buy(Not yet appropriated)OPERATIONS AND MAINTENANCE (O&M) One-Year MoneySeptember 30, 200211-5,6

Time Limits on FundsLimit the time during which funds may be obligated or expended or bothAnnual funds obligated during year for which they are appropriatedTo be multi-year, the appropriation must explicitly state so

Time RestrictionsObligated but unexpended balances and unobligated balances retain their fiscal year identity for 5 years after their expiration date, but they may not be used for new obligations.

Bona Fide Needs RuleSupplies or services must be intended to serve a bona fide need in the fiscal year or to replace stock consumed in that fiscal yearAppropriations are available only to support the bona fide needs during that appropriations period of availability

Bona Fide Need Rule

Generally the $ must be spent for a bona fide need of the period in which they are needed or consumed EXCEPTIONS: Stock Level Exception Lead Time Exception Construction (If begins NLT 1 Jan FY+1)

BFN Services ContractsAgencies must obligate funds for entire non-severable services undertaking at time of K award (Services Presumed to be non-severable)Must use current funds to obtain current services DOD and CG may fund severable service Ks that cross fiscal years

Purpose FundingAppropriations only used for the purpose for which they were appropriatedSpecifies the particular project and amount

Categories of FundingO &MMilitary PayRDT&EProcurementMilitary Construction : Three types

Multi Year ContractingPeriod up to 5 yearsFunds may not be available to KO at time of K formationMay not be used for procurement financed with annual funds in the absence of special statutory authorization

The Your activity enters into a construction contract, to build 2 large office buildings. You are the COR at the site, overseeing the construction project. Because it is September and we have excess expiring funds on this contract so far, the contractor asks if we could modify the current construction contract to include desks and computers, which will be installed in the buildings after it is constructed. You agree to do this.What are the legal issues?What are the applicable rules?What should the Governments course of action be?

A Desk Too FAR!!!

#6 Enabling Learning ObjectiveTo assist you in recognizing potential ethical issues with the contractor and to ensure your conduct is consistent with the laws.

Ethics in Government Contracting

GOVERNMENT ETHICSSourceSelectionInformationGeneral Ethics Regulations

Post-Government Employment Restrictions

StatutesProcurement Integrity Act, 41 U.S.C. 42318 U.S. Code 201-209Joint Ethics Regulations, DODD 5500.7-RFederal Acquisition Regulations

Organizational Conflict of InterestOrganizational conflict refers to a situation which a person may be unable to provide impartial advice or assistance to the Government, or the persons objectivity in performing a contract may be impaired, or the person has an unfair competitive advantage because of that persons other activities of relationships.

Organizational Conflicts of Interest (FAR 9.5)Occurs usually in technical, management, consultant support services contracts:

Contractors conflicting roles might bias judgement,

Unfair competitive advantage obtained through access to proprietary/source selection information

Organizational Conflict of InterestSpecific FAR References---Systems engineering & technical direction 9.505-1Preparing specifications or work statements 9.505-2Providing evaluation services 9.505-3Examples of organizational conflicts 9.508

Corporate Self-Governance ProgramWritten code of ethicsPeriodic review of company practicesMechanism (such as a hotline) for reporting misconductInternal/external auditsDisciplinary action for improper conductTimely reporting to the GovernmentFull cooperation with Government investigations

GRATUITIESIs it worth over$20??

General Ethics Regulations18 U.S. Code ProhibitionsUnlawful GratuitiesSec 201(c) prohibits public officials from soliciting or receiving anything of value for or because of an official actExceptionsDe Minimis $20/$50 ruleMeritorious achievement awards ($200)Ship launchings & aircraft rollouts ($100)Widely-attended gatherings ($250)Personal Relationship (ie. family)

What if You Receive an Unlawful Gratuity?Pay FMVReturn itCharitable ContributionDestroy itIf consumable, share it

Procurement Integrity ActWe will cover 2 areas:Non-Federal Employment Contacts while still working for the Government;Source Selection Sensitive Information

Non-Federal Employment ContactsAny Gov employee who is personally and substantially involved in a procurementIn a contract exceeding SATMust report any contractor contacts regarding potential employment contacts to supervisor and DAEO

PIA Restrictions on Non-Federal Employment Contacts (cont.)Personal and substantial participation means active and significant involvement in:drafting, reviewing, or approving a SOWpreparing or developing the solicitationevaluating bids or proposals or selecting a sourcenegotiating K price or terms and conditionsreviewing and approving the K award

PIA Restrictions on Non-Federal Employment Contacts (cont.)Personal and substantial participation does not include:certain agency level boards, panels, or advisory committeesgeneral, technical, engineering, or scientific effort not associated with a particular Kclerical functions; andfor OMB Cir. A-76 cost comparisons:participating in management studiespreparing in-house estimates and most effective organization (MEO) analyses; andfurnishing data or technical development support used to develop performance standards, SOWs, or specifications

If Contacted by ContractorThese are your options:Reject the job offer completely / immediately;Notify supervisor if going to discuss employment opportunity;Recuse yourself from any of that contractors contracts while discussing employment; orLeave Federal Service

PIA Special Rules for Procurement Officials

Report must be in writingReport must be made to supervisor and DAEOAgency official must eitherpromptly reject the employment offer, orrecuse him/herself from the procurement

Source Selection Sensitive Information

Laws Protecting Source Selection Sensitive InformationDealing With ContractorsConduct business in a manner that is above reproach, with complete impartiality, and with no preferential treatmentSome pre-contract contacts with industry are permissible:Current and future RDT&E requirementsUnsolicited proposalsMarket surveys

Laws Protecting Source Selection Sensitive Information (cont.)

General Limits on the Release of Acquisition InformationFurnish identical information to all prospective KTRsRelease information simultaneouslyDo not release advance information concerning future solicitations

Protection of Source Selection Sensitive Information Under the PIA (cont.)Nonreleasable Source Selection Information includes:bid prices before bid openingproposed costs or prices in negotiated procurementssource selection and technical evaluation planstechnical, cost, or price evaluations of proposalsranking of bids, proposals, or competitorsreports and evaluations of source selection panels, boards, or advisory counselsother source selection information that would jeopardize the integrity of the competition

Protection of Source Selection Sensitive Information Under the PIA (cont.)Penalties & SanctionsCriminal Penalties: 5 years + fineCivil Penalties: Up to $50K (individuals) and $500K (organizations) + double the amount of compensation received or offeredAgency must also consider cancellation of the procurement, K rescission, suspension or debarment, adverse personnel action, and recovery of money expended under the K

Protection of Source Selection Sensitive Information Under the PIA (cont.)

Penalties & Sanctions - KO mayGovernment may reduce K payments by the amount of profit or fee (FAR 52.203-10)KO may disqualify bidder for questionable record of integrityKTR may not file a protest alleging a PIA violation unless KTR first reports violation to agency within 14 days of discovery

Post Gov-Employment Representational Restrictions

Representational Restrictions of 18 U.S. Code 207 Applies to all former officers and civilian employeesIncludes employees on terminal leaveExcludes enlisted personnelImposes 3 Levels of RestrictionsLifetime Ban2-year Ban1-year No Contact Ban

Representational Restrictions of 18 U.S. Code 207Prohibits employees from switching sides after leaving government serviceDoes not prohibit employee from working for KTR, but restricts how the employee may workDoes not bar behind the scenes involvementFormer employee may:ask questions about the status of a particular matterrequest publicly available documentscommunicate factual information unrelated to an adversarial proceeding

PIA Post-Government Restriction (cont.)Ban does not prohibit former employee from working for a division or affiliate that does not produce the same or similar product or servicesAgency officials may request an ethics advisory opinion regarding whether they are precluded from accepting compensation from a particular KTR

Representational Restrictions of 18 U.S. Code 207 (cont.)Lifetime BanFormer employee is forever barred from communicating or appearing with the intent to influence concerning a particular matter on behalf of anyone other than the government if:The government is a party or has a direct and substantial interest:former employee participated personally and substantially in the matter; andSpecific parties other than the government were involved at the time of the participation

Representational Restrictions of 18 U.S. Code 207Two-Year BanFormer employees are prohibited for 2 years from communicating or appearing with the intent to influence a particular matter on behalf of anyone other than the government if:government has a direct and substantial interest; the matter was pending under the employees official responsibility during the 1 year period prior to leaving service; andspecific parties other than the government were involved at the time of the participation

Representational Restrictions of 18 U.S. Code 207One-Year No Contact BanProhibits former senior employees (> O-6/GS-15) from communicating or appearing with the intent to influence concerning a particular matter on behalf of anyone other than the government for 1 year if:the matter involves the department or agency the employee served with during his/her last year of federal service; andperson represented by the former employee seeks official departmental or agency action concerning the matter

Representational Restrictions of 18 U.S. Code 207 (cont.)Criminal prosecution of 18 U.S. Code 207 violations1 year and/or $10K fineWillful violations may increase penalty to 5 yearsCivil ActionsAtty Gen may recover the greater of the amount received or offered or $50K

EthicsEthical rules governing procurement officials are stricter than the general rules governing federal employees

Federal employees involved in the acquisition process must know the various ethical rules

Ethics CasePage 1-4

#7 Enabling Learning ObjectiveAs a delegated property manager, you will need to know the Governments legal rights and limitations regarding various types of property

PROPERTYGeneral CharacteristicsConcept collection or aggregate of rights guaranteed by the Government

Property rights express relationshipsProperty rights are exclusionary in nature Government recognizes and protects those relationships

Government Right to Inspect Government has the right to inspect all materials and workmanship at any time, place where work on a contract is being performedBasis of inspection clauses

Inspection types Visual dimensional checksexamination, personal judgmentreveals surface defects, missing pieces, parts out of alignmentConducting or witnessing physical or performance testsInvolves more objectivityChemical tests for composition Physical tests to determine hardness

Inspection Places For materials, inspection may be at subs plant or at primes receiving pointManufacturing processes may be inspected in the process itselfSubassemblies at accessible points to determine their characteristicsEnd item are completed suppliesContractors responsibility to complete all examinations and tests in specifications

All property owned by or leased to the Government or acquired by the Government under the terms of the contract. It includes Government Furnished Property (GFP) and Contractor Acquired Property (CAP).

1. To promote competition by reducing need for a large capital investment.2. Maintaining standardization.3. Broaden industrial base.4. Reduce contract price/cost.5. Security of classified equipment.6. Not available from any other source.

Property acquired or otherwise provided by the contractor for performing the contract and to which the Government has title.

FFP Contracts:

No progress payments: at deliveryProgress payments: vests when property is either:Paid for by the Government.Allocable to the contract under contractors normal accounting practices.Cost Contracts:

Vests when item becomes reimbursable.Received by contractor.Assigned to contract by contractor.

PROPERTYProperty InspectionsCategories--- RealPersonalMixed

Real PropertyRealtyland, buildings things permanently attached to or growing on landConcept includes area below surface of land, to center of earthRises above land to limit of property owners right to reasonable use of itair rights

Personal PropertyEverything else of value in which legal interests are heldTangiblephysical existence and can be moved and touchedincludes cars, clothes, furniture, jewelry, etc.Intangibleideas, creations, information contractual rights, stocks, bonds, copyrights, patents

FixturesItem of personal property which loses its identity as personal property when it is attached permanently to realty.Government Property does not lose its identity as personal property when attached to realty. (Gov Property FAR Clause)

Relating to Furnishing GFPGFP provided to the contractor in a timely manner.

GFP is suitable for its intended use.

The Government has a duty to furnish articles to the contractor, the use of which permits performance of the contract without unnecessary roadblocks to performance in the form of extra work and cost.

Government PropertyScrap---Belongs to the Government unless the contract provides otherwise

Intellectual PropertyPatentsCopyrights TrademarksTrade Secrets

Patents Incentive to inventorsGrant to an inventor the privilege of preventing others from making, using, or selling his creation, without his permissionStatutory monopolylimited timegranted by governmentopportunity to enforce control by court actionpatent expires after 20 years

Novelty

Utility

Reduced to Practice

Non-obvious

Patent ProcedureTwenty months to processComposed of grant, abstract, introduction, specifications, claims and illustrationsMust be obvious from specifications and drawings how to build the itemCosts range from $2000 to more than $10,00 for complex items

Patent RightsIssued to inventor onlyCompany or Government cannot receive a patentOnly inventor may sell or assign his patent to a company or GovernmentMay retain title but grant or sell license to manufacture or sell

Further Protection of PatentAfter 20 years, public is free to useImprovements in technology, also patented, may provide 20 more years of protection on improvement

Trademarks---Different than patentsRegistered with the Federal GovernmentExampleXerox, KleenexTrademarks and Trade Names protected so long as they do not become part of ordinary speech. Example---the word Zipper was once a trademark.

Trade Secrets and Technical DataThere is no registration of Trade Secrets with the Government!!!!

Trade SecretsExamples of Trade SecretsCoca Cola formulaRecipe for Kentucky Fried ChickenBushs Baked Beans

Confidential or secret business information.Examples: trade secrets, cost/price information, technical data.Stamped with a restrictive marking.Any marking evidencing limited disclosure is sufficient.

Recorded data of a technical or scientific nature regardless of form.

Examples: research data, engineering data, repair manuals, operating manuals, installation instructions, inspection and testing data.

Not technical data:Administrative and managerial information (e.g. accounting data)Computer software

Handling Technical DataA contractors technical data is proprietary data and must be protected from disclosure to non-authorized individuals!!!

Handling Technical DataRestrictive Legends Often Identify Proprietary Materials!Restrictive Legends Are Used By the Contractor to Warn Against Unauthorized Disclosure!!

Funding ImportantUNLIMITED RIGHTS: Government funded effort.May be used for any purpose by Government.LIMITED/RESTRICTED RIGHTS: Contractor funded effort. Used for contract purposes only. No disclosure outside of Government.GOVERNMENT PURPOSE RIGHTS: Government fully/partially funded effort. Government may use for Government purposes (including future procurements) but not allowed commercial disclosure or use.

#8 Enabling Learning ObjectiveAs eyes and ears for Government, need to understand the labor laws and be aware of any potential violations, and know your role in the event of a contractors labor dispute.

LABOR POLICYLabor Policy Peculiar to Contracting--Davis-Bacon Act--Copeland Anti-Kickback--Walsh-Healy Public Contracts Act--Fair Labor Standards Act--Contract Work and Safety Standards Act--Service Contract Act

Davis-Bacon Act All government contracts over $2000 for construction, alterations, repair includes painting and decoratingMinimum wages for laborers and mechanics in construction workMaintain wage levels and the economy Pay prevailing area wage rates to workers employed on Government construction contractsBreach could result in contractor placed on debarred list

Hard Hats Bring Home the BaconApplies to construction contractsOver $2,000Prevailing Wage Rates

Applies to laborers and mechanics

WALSH-HEALY PUBLIC CONTRACTS ACTProtects employees of contractors who sell supplies;Contract >$10,000Pay minimum wagesOvertime for excess of 40 hoursEmploy no minors or convictsNo work in unsanitary, hazardous or dangerous conditions

Service Contract Act Applies to workers on Government contracts for ServicesPrinciple purpose is to furnish services through service employeesContractors must observeMinimum wage safety and health standardsA contractor on services contract for $2500 or less must pay no less than the currently prevailing minimum wageContracts for greater amount require that workers be paid the prevailing area wage rate

Dual Coverage IssuesPrincipal Purpose requirementIf 30% of K is for services then SCA appliesIf at least $2,000 worth of brick and mortar work then DBA applies

Governments ResponsibilityCO initial investigationLabor / personnel interviewsReview certified payrollsIf problem verified, contact DOL as wellCO can withhold $ to correct violationsCO can T4D violators

Suspension, Debarment, Ineligibility

Withhold monies payable under contract to compensate unpaid employees

Termination for default

MILLER ACTPrivate SectorMechanics LienPayment Bondprotect subcontractorsPerformance Bondguarantees performance; an alternative to termination for default;CO authorized to waive requirement overseasPerformance bond should cover taxes

Construction contracts over $100,000Requires Payment BondProtects laborers, mechanics & subsFor portion of contract priceRequires Performance BondProtects GovernmentEntire contract amountSuit in Federal District CourtOne Year Rule

Miller Act Subcontractors lack privity to claim directly against Government if prime fails to pay subcontractorProtects persons who furnish labor or materials on a government construction contract over $2000

When to sue under Miller ActIf not paid within 90 days after performing last of the labor or supplying last of the material, Surety may be sued on the payment bondPrivity with first tier sub- contractor even with no direct relationship to prime also have right of action under payment bondMust give written notice to contractorOne year statute of limitationsU.S. not liable for any costs or expenses of such lawsuits

Performance BondsTells Government that surety is liable for any additional cost of completion over the original contract priceSurety could take over the project itself and become a contractorGovernment does not have to allow takeoverIf takeover is accomplished surety inherits all rights of contractor including right to file claims If no takeover, surety may pay for contract damages or litigate original termination

Insolvent SuretyIf insolvent and unable to pay, supplier may have right of equitable lien on money the Government retained from the prime which would be paid the primeRights could be decided in Federal District Court upon legal action

LABOR CONSIDERATIONSRole of Contracting Officer/AdministratorImpartialityAvoid inadvertent involvement in non-governmental labor disputes

LABOR CONSIDERATIONSResponsibilities of CO/CABe alert to possible labor disputesPrepare to locate alternate source of supply or servicesShould GFE be returned?

#9 Enabling Learning ObjectivesBeing in the contractors plant, you will need to recognize if there are any potential problems with non-domestic purchases of components or end items

BUY AMERICAN ACTPreference for USA made goods and services in purchasing exceeding micro purchase levelAn area is changing due to treaties etc.---NAFTA---Caribbean Basin Recovery Act

Review this requirement with agency counsel!

Protects American IndustryRequires use of domestic (United States) materials and products

What does that mean?

DOMESTIC DEFINEDManufactured domestic end product1. manufactured in the U.S. , ANDCompletion of the article for use (Final Assembly)2. MORE THAN 50% domestic componentsfor DOD, domestic or qualifying country content qualifiesUnmanufactured domestic end productsmined or produced in the U.S.

Buy American Act Buy American ActGeneral RuleAgencies may only acquire domestic end itemsExceptionsproduct not available in sufficient commercial quantitiesdomestic preference inconsistent with public interestproduct for use outside of U.S.cost of domestic product unreasonableproduct is for commissary resaleTrade agreements Act and NAFTA may also provide exceptions

#10 Enabling Learning ObjectiveTo assist you in being aware of fraudulent conduct committed by contractor and your responsibilities if such conduct is identified.

PROCUREMENT FRAUDFraud Indicators-Falsification of Documents-Charging personal expenses to Govt. Ks-Bribery-Loss of Documents

PROCUREMENT FRAUDRemedies for Fraud-Criminal False Claims Act (Beyond reasonable doubt)-Civil False Claims Act (Preponderance of the evidence)Qui tam feature of Civil False ClaimsRevocation of Acceptance By Contracting Officer

Criminal False Claims ActCovers almost any fraudulent claim paid from the Treasury of the U.S. to a contractorAmount claimed not relevantSeries of small claims may be prosecuted on each small claimNot more than 5 years and not more than $10,000

Civil False Claims ActCivil counterpart of the criminal actCan be taken in addition to the criminal actLiability of $5000-10000 and 3x amount of damages Government incurs

Knowingly SubmittedActual knowledge claim is falseActs in deliberate ignorance of whether it is true or falseActs in reckless disregard of truth or falsity

Uses of False Claims ActUsed against contractors who bill the Government for nonexistent or worthless goods or attempt to defraud the Government

Forfeiture of Claims Act Once fraud under a government contract implemented and proven all claims under the K are forfeited, even those not related to fraud

FRAUD INDICATORSProduct SubstitutionCost MischargingDefective PricingProgress Payment FraudFast Payment FraudFalse Certification or Representation Key to Offenses

Bribery of Public Official Anyone corruptly offering or giving something of value to a public officialPublic Official = federal employeeTo influence an official to commit fraud on the U.S. or refrain from doing a legal dutyBoth offeror and acceptor violate this law

ConspiracyTwo or more in an agreement to commit an illegal act against the Government;Conspiracy is a separate and distinct crime from the crime being plotted; There must be some overt act involved in the planning.$10,000 fine and/or 5 years in prison

Governments ResponsibilityDo NOT inform contractor of fraud investigationNotify one of the DoD investigative services of potential fraud

HOT LINESGAOuses FraudNet Send allegations to fraudnet@gao.gov Or fax to FraudNet at 202-512-3086Mail to: GAO FraudNet 441 G Street NW Washington, DC 20548DOD number is 1-800-424-9098/703-693-5080

Another Hotline OptionHotline@dodig.osd.mil

INVESTIGATIVE AGENCIESWho ya Gonna Call? DCIS: Defense Criminal Investigative ServiceCID: Army Criminal Investigation DivisionNCIS: Naval Criminal Investigative ServiceOSI: Air Force Office of Special InvestigationsFBI: Federal Bureau of InvestigationIG: Agency Inspector GeneralDCAA: Defense Contract Audit AgencyDOJ: Department of Justice

Over Bearing Fraud Case:Aero contracted to sell 300 master rod bearings to the Navy. The specifications called for new, unused bearings to be subjected to 100% final inspection. While you are observing the manufacturing process you notice nothing wrong. However, Aero has used bearings, which to the naked eye were indiscernible from new bearings, which the Navy failed to inspect at the 100% inspection rate. Aeros program manager, who had signed the original bid submitted by Aero, also requisitioned the rebuilt bearings. Furthermore, Aero can show that within the industry the reworked bearing is considered the equivalent of the new bearing. Would the program manager be likely to be found civilly liable under the FalseClaims Act? What rules apply?What should the Governments course of action be?

Disputes TO PROVIDE AN ADMINISTRATIVE LEGAL REMEDY FOR DECIDING CONTRACTUAL ISSUES BROUGHT ABOUT BY DISAGREEMENT BETWEEN THE CONTRACTING OFFICER AND THE CONTRACTOR, WHILE CONTRACTRACTUAL PERFORMANCE CONTINUES

DISPUTES POLICYResolve by mutual agreement at the lowest level without litigation

Contractor submits request for equitable adjustment

ConclusionAs the COR, you must understand how various aspects of the contractors conduct and your own conduct can effect the legal rights of the parties involved. Any legal concerns, contact your local legal counsel and/or Contracting Officer.

COR PLAN OF INSTRUCTIONTitle of Lesson: Introduction To Contract Law, Chapter 1Proposed Lesson Length: 6 hours Day 1Terminal Learning Objective: This Chapter is designed to address 10 different legal areas that each and every Government COR should be aware of. The point of this chapter is to assist you in accomplishing the contracting mission consistent with the existing laws, rules and regulations. Hopefully, when you are through with this chapter, you will be more aware of legal obligations and potential liabilities you can face as a Government COR. .Enabling Learning Objective: #1. Enabling Learning Objective (ELO) (AKA WHY should I read this section?) To provide you with the back ground to understanding how the U.S. Government operates, how laws are created, and how the Government is able to enter into contracts.#2 ELO- As the COR, you are going to be out in the field, directing and advising contractors. You need to understand the impact of any directions and guidance given to a contractor and how that can potentially bind the Government. You also need to know when you are acting outside the scope of your authority, to avoid any potential personal liability for your actions. #3 ELO - This section will help you, as the COR, understand the big picture of how a contract is formed, what legal issues are considered in its formation, and whether or not there actually is a binding Government contract. #4 ELO - As a COR you will need to be able to recognize when a contract isbeing performed. Hence, you will need to know the various legal classifications of types of contracts.

Next 4 slides covers the TLO and ELOs. ELOs are disbursed throughout the slide presentation based on topics.#5 ELO - As a COR, you might be making changes to a contract on behalf of your contracting officer, if you are so advised by the contracting officer. You need to understand the rules and limitations regarding obligating funds so as to avoid any personal liability on your behalf or on your contracting officers behalf. Working as a team involves looking out for all parties on that team. #6 ELO - To assist you in recognizing potential ethical issues, and ensure that your conduct as a COR is consistent with the laws. Being the eyes and ears for the Government, as a COR, you also need to be aware of any potential ethical problems in a contractors facility regarding these laws.#7 ELO - As a COR, you will sometimes be delegated the responsibility for handling Government Furnished Property at any given contractors site. You need to understand the Governments legal rights to that property and our legal limitations on the use of other types of property, to include our rights in technical data on R&D contracts. #8 ELO - As the eyes and ears for the Government, you need to understand the labor laws and be aware of any potential violation of such laws being committed by the contractor. You also need to know our role when a contractors labor force is having a dispute with the contractors management. #9 ELO - As a COR, you will be out in the contractors plant and need to be able to recognize if there are any potential problems with non-domestic purchases of components and/or end items. You can do this by understanding the requirements of the Buy American Act and its exceptions.

#10 ELO - As the Governments eyes and ears, you will need to be aware of potential fraudulent conduct on behalf of the contractor or other government employees. You will also need to know your responsibilities as a Government agent with regard to any suspected fraud.

Learning Methods: Participative Lecture/discussionAssessment Methods: Case study analysisOutside of Class Student Preparation: None

This a large chapter. It contains information useful to understanding what impacts the responsiblities of the COR.We are going to cover each ELO in order as they appear.We will cover the foundation of Government contract law, the constitution and support laws and statutes.The basic principles on which American law is based are set forth in the U.S. and individual state constitutions. The law is found primarily in statutes, regulations, and case decisions, which originate from an overlapping system of federal, state, county and municipal jurisdictions. Law developed by judges in cases and not governed by statutes makes up a large part of this body of law, and is referred to as common law.

Cover the constitution as needed to show the relationship to contracting authority.Discuss check and balances within the three branches of the Federal Government.

Discuss the balance of power and cooperation between the branches.

See next three slides on GAO and ASBCA

Your personal notes:As the head of the General Accounting Office, the Comptroller General of the United States is the "watchdog" charged with making certain that appropriated funds are spent in accordance with the law. Since nearly all procurement involves appropriated funds, the Comptroller General's authority extends to nearly all areas of procurement law. The Comptroller General's more important decisions are published periodically in a set of books entitled "Decisions of the Comptroller General. These decisions are cited by referring to the volume and page number; e.g., 21 Comp. Gen. 324. His unpublished decisions are referred to by their individual case numbers and dates.Reports called blue books. Can find them on the internet at this address. These are open to the public.Testimony directly and personally report to Congress on an significant and or high visibility issue when called.Letters only of limited interest and no recommendations are included.Legal Opinions the lawyers are always working! Probably already know GAO hears bid protests which may personally affect your worklives. But legal opinions are also given on a lot of other issues affecting federal funds and other similar issues. The GAO also works on new legislations laws.Financial Data keeps Congress up to date on accounting principles and standards and acts as advisor to other federal agencies on audits and money issues.Resolution of Protests During competitive acquisitions, dissatisfied offerors or bidders can send protests to the CO, Agency, or GAO. GAO hears and reviews the issues and issues a decision.

Attorney General The Attorney General of the United States renders opinions interpreting statutes governing procurement matters. They are published in a series of bound volumes entitled "Opinions of Attorney General" published from 1852 to date and containing opinions from 1791. These are cited, for example, as 20 Ops. Atty. Gen. 105. The Attorney General's opinions are advisory to the Executive Branch, and they are relied on by the Executive Branch, but they are not "decisions" because they are issued without hearing the arguments of actual adverse parties. Thus they do not purport to bind private parties. Nonetheless, members of the Executive Branch will generally comply with them, and the courts often find them persuasive. Armed Services Board of Contract Appeals (ASBCA) The Armed Services Board of Contract Appeals, established by charter within the Department of Defense, is a single Board consisting of civilian attorneys. Its function is to decide contract disputes (usually relating to contract performance or termination) under the Contract Disputes Act of 1978. Civilian agency disputes are heard by similar boards in the various agencies. These boards furnish the greatest number of procurement law decisions, and their decisions are binding unless overturned by the Court of Appeals for the Federal Circuit or the U.S. Supreme Court.2. What is the function of the ASBCA? Page 1-1

Courts and Boards Federal court decisions are published in bound form in one of several reporting series. Case citations are frequently found in case decisions and legal authority. Components of a standard federal case citation are the parties, volume, reporter (publication), start page, court, and year, e.g. Hardaway Co. v. Corps of Engineers, 980 F.2d 1415 (11th Cir. 1993). Citations for the Board of Contract Appeals are different and would appear as Ordnance Devices, Inc., ASBCA No. 42709, 93-2 BCA 25,794. Regulations It is important to note that the decision-making processes of Government agencies are governed by regulations.

The next slides cover important statutes that impact contracting. Provide a quick overview of each, outline its importance to the contracting process.

StatutesActs of Congress are codified under general topics in the United States Code (U.S.C). For example, those laws relating specifically to the armed forces are found in Title 10 of the Code. References to the Code are by title and section number, e.g., 10 U.S.C. 2304(a). Some Acts are not codified and are referred to only by their public law number and the number of the Congress which enacted themThese uncodified Acts are generally appropriation acts, legislation too recent to have been published in the Code, or temporary laws.Executive OrdersAdministrative directives are issued by the President, frequently implementing authority provided by Congress. These orders are referred to by numbers and dates; e.g., Executive Order No. 9859, May 21, 1947.

Review the order of the U.S.C. highlighting key statutory areas.

Point out that USCs are found in the FAR Identify three sources of procurement law? Page 1-1

In 1947, Congress passed the Armed Services Procurement Act, which established a comprehensive set of procurement regulations for military procurements know as the Armed Services Procurement Regulation (ASPR).

The Federal Property and Administrative Services Act of 1949 established comprehensive procurement regulations for civilian agencies. Established the Federal Procurement Regulations

Sovereignty means autonomy, or existence without external control. Although the Government is sovereign, it permits itself to appear nonsovereign, as situations require.The Supreme Court of the United States has said that when the Government descends from its position of sovereignty and enters the arena of commerce, it submits itself to the same laws that govern individuals. However, the Government never fully "steps down" from its position as the sovereign, and the Constitution itself prevents a complete stepping down. Actually, the Government never gives up its role as the sovereign unless it does so voluntarily, and this can be done only to the extent that the Constitution either expressly or implicitly authorizes.

The CDA is one of these positions. It allows contractors to file claims, file suit and litigation.

Also review full and open competition.Content: In October 1994, Congress enacted Public Law 103-355, the "Federal Acquisition Streamlining act of 1994 (FASA). In February 1996, Congress enacted Public Law 104-106, the National Defense Authorization Act for Fiscal Year 1996. Division D of the Act was titled the Federal Acquisition Reform act of 1996 (FARA). These acts aimed to increase the efficiency of the procurement system by utilizing commercial practices and simplifying the procurement process.As you will recall the Federal Acquisition Regulation (FAR) was issued in accordance with the Office of Federal Procurement Policy Act as the single governing regulation for federal procurement. It established a Government-wide procurement system, subject to discretion accorded by statute to specific Departments or agencies. The FAR unifies the implementation of the exercise of the authority by subordinate officers and agents, and specifies the duties, responsibilities and express authority of agents contracting for the benefit of the Government. Thus, it can be readily seen that the Constitution, statutes, and executive department regulations provide a framework within which the concept of authority is applied. As previously discussed, contracting authority starts with the constitution and follows an organized and deliberate flow to law and implementation. The Congress passes the legislation or makes the laws that are implemented to the federal workforce through the FAR. The path of public policy and law flows through a formal route from conception to final implementation. Revisions to the FAR are the responsibility of two councils; the Defense Acquisition Regulations (DAR) Council and the Civilian Agency Acquisition (CAA) Council; representing defense and civilian agencies respectively.Council membership is comprised of some of the most experienced and accomplished personnel in federal contracting. All final revisions to the FAR are published in the Federal Register.The Department of Defense supplements and implements the FAR in the Defense Federal Acquisition Regulations Supplement (DFARS).3. What is the purpose of the Federal Acquisition Regulation? Page 1-1

Review the general concept of the FAR Organizational System.We will cover law of agency.the Concept of AuthorityThe role of the Contracting Officer or agent is important in forming contracts. Since the agent exercises certain powers, his actions are crucial to the legal relations between the principal and the third party. Principal-Agent Relationship What a person can do himself, he can generally appoint someone else to do for him. In many cases it is not only permissible for one to act for another, but absolutely necessary. This is true in situations where the one who must perform an action is not an actual person, but either a corporate or governmental entity. The U.S. Government can act only through agents. For example, the Government cannot sign a contract; only a person can do that. An agent can be defined as one who represents another person, called a principal, in contractual matters. The relationship created by the association of a principal and agent is called agency. The agency relationship arises when the principal authorizes the agent to act as his representative with respect to another person (a "third party") and the agent consents to do so.

Review examples.Motivation Statement Authority to contract is an inherent power of the Federal Government. This power, or authority, can be delegated and follows a formalized flow of authority. Content One of the most important clauses in the Constitution (Section 8, Article 18) authorizes the Congress To make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Office thereof. This necessary and proper clause, supplies the constitutional power for the Government to enter into contracts. Authority to Contract flows from the constitution, through the President to agencies of the federal government. This authority is in turn delegable to the senior executives of defense and civilian agencies, referred to as Head of Agency (HoA). The HoA designates and delegates broad authority to the Head of Contracting Activity (HCA). The HCA has overall responsibility for managing the contracting activity. The HCA authorizes the Director of Contracting to appoint contracting officers as agents of the Government to enter into contracts and obligate taxpayer money. These contracting officers serve as agents of the federal government.Contracting officer appointments are made in writing via a document called a warrant. A warrant is an official document (Standard Form 1402), which designates an individual as a contracting officer. The warrant designates the appointee as an authorized agent and states the dollar limits of the contracting officers authority.

Express agency or authority is, as the name indicates, created by explicit language either in writing or orally. Agency created by spoken words is generally as binding as agency created by a writing. However, it is sometimes more difficult to prove. Where authority is given in writing, the writing itself ordinarily supplies the element of proof necessary where a dispute arises concerning the agency relationship. In those cases where the writing is ambiguous, "parol" or oral evidence may be used to prove the existence and limits of the authority, subject to the rule that oral evidence may not be used to contradict the plain and clear meaning of writing. A Contracting Officers authority is derived from a warrant. Only a Contracting Officer can negotiate a contract with industry and contractually bind the Government. This warrant may give the individual unlimited authority or may limit one to a certain dollar threshold and/or commodity. Contracting Officers must display this document in a conspicuous place to inform everyone of their express authority. What type of authority does the CO have? Where is that authority derived from? Page 1-1

There are 4 types of Contracting Officers: General responsibilities of the CO.1.1. Procuring Contracting Officer (PCO) is responsible for all contractual activities from receipt of the initial procurement package, preparing and issuing the Request for Proposal, participating in the source selection process, to awarding the contract;2. Administrative Contracting Officer (ACO) assumes the responsibility for administering the day-to-day contractual activities after an award has been made. The FAR delineates specific functions to be performed only by the ACO;3. Termination Contracting Officer (TCO) is responsible for negotiating any termination settlements (terminations for convenience/terminations for default) with the contractor; 4. Cradle-to-Grave Contracting Officer is responsible for the entire process, from the initial procurement package to termination.

5. Identify the types of Cos and explain their responsibilities. Page 1-1The Secretary of Defense, through the DFARS, confers authority on Contracting Officers to designate Contracting Officer Representatives. The DFARS gives express authority to Contracting Officers to designate CORs. This authority is extremely limited. CORs cannot change price, quantity, delivery or any other terms or conditions of the contract and cannot delegate their authority to another individual. The COR designation must be in writing. The COR is designated in the letter of delegation stipulating the express authority given to that particular individual for a specific contract. The COR is designated by the Contracting Officer to perform technical liaison between the contractors management and the Contracting Officer in routine technical matters constituting general program direction within the scope of the contract. Under no circumstances is the COR authorized to effect any changes in the work required under the contract or enter into any agreement that has the effect of changing the terms and conditions of the contract or causes the contractor to incur costs. The COR shall not supervise, direct or control contractor employees.

6. Does the DFARs gives the CO express authority to designate CORs Page 1-1There are three exceptions to the express authority rule: A contracting officer can only operate within the limits of his warrant, ie. dollar amount and transaction type; A contracting officer may never act in violation of law or regulation; and a contracting officer does not have authority to enter into contracts that contradict standard industry practice. Apparent authority is not real or actual authority, but is invoked by the courts on equitable grounds. The purpose in finding such authority is to prevent unjust injury of a third party that relies on the appearance, created by the principal, that the agent is authorized to act for the principal. Certain elements must be found before apparent authority becomes effective to bind the principal. First, it is only when the appearance that the agent has authority is created by the principals statements or actions, and not the agent's own action, that the courts will bind the principal on the basis of apparent authority. Secondly, the appearance created by the principal must be such that the third partys reliance on it was reasonable. Thirdly, this reasonable reliance must have resulted in some detriment (injury) to the third party. There are numerous situations wherein agency by apparent authority can be found. One of the most frequent areas is where the principal puts someone in charge of property or of a business where ordinarily the person in such a position is given certain authority. Thus, where a store owner asks a friend to "mind the store but don't sell anything or take any orders" and a customer then buys an article under circumstances where the customer could not but believe that the friend was in fact a sales clerk, the friend will be found to have had the necessary authority to make the sale under the theory of apparent authority. Other cases arise where there is an actual agency relationship between the principal and his agent, but the agent is given less authority than is usually vested in agents in similar positions. Where a third party justifiably relies to his detriment on the usual authority of such persons in similar positions, and the agent exceeds his actual authority, the principal will be bound as a result of the doctrine of apparent authority. The existence of apparent authority is determined on the basis of the particular facts in each case. Apparent authority has sometimes been called "agency by estoppel" because it is based on the principal's representation to the third party that the agent has authority.There are a number of exceptions to the rule that the Government is not bound by Apparent Authority. Those exceptions include, estoppel, implied authority, imputed knowledge, ratifications and waiver. None of these exceptions give the Gov actual authority, they simply provide an exception to the apparent authority rule.

7. Define apparent authority? Why is it important for the COR to know this? Page 1-1Exemption of the Government from application of the doctrine of apparent authority may have harsh consequences for a contractor who relies in good faith on the Government's representations. One basis for holding the Government liable for the results of its incorrect representations is the doctrine of equitable estoppel. Where a Government agent makes false (presumably mistaken) representations in an area where he is authorized to make representations, the Government will generally be bound by such misrepresentations. A more difficult problem arises where the agent either exercises authority that he does not have, although the department which he represents does in fact have such authority, or acts in excess of his actual authority. In either of these cases it is possible that the Government will be estopped from asserting that the agent lacked the authority that he exercised.

The second type of actual agency or authority is implied authority. Usually this term means incidental authority. It frequently happens that an agent is expressly assigned a task to accomplish, but the minor details are not spelled out in the oral or written authority given to him. It can be safely assumed that the agent has implied authority to do what must be done in order to accomplish the purpose of the express agency. This implied authority is usually defined in general terms to include authority to do what is "usual, customary and necessary." A delegation of authority may be implied not by the terms of an express authority relationship, but by the conduct of the parties (sometimes called an implied delegation of authority). For example, if a sales agent offers price discounts to customers and the sales manager is aware of that practice but does not object, then a court could conclude from their conduct that the agent actually had authority to offer discounts even if his employment agreement did not say so. It should be emphasized that implied authority is actual authority, and its existence is not based on the third partys knowledge or state of mind.

Probably the most outstanding characteristics of the relationship, as it affects third parties, is the imputation to the principal of knowledge acquired by the agent. Any knowledge acquired by the agent, within the scope of his duties, must be relayed to his principal; if the agent either does not relay the information, or does so belatedly, the principal may suffer injury as a result. The rationale for imputing the agent's knowledge to the principal is that as to third parties, the agent is identical to the principal for purposes falling within the scope of his agency.There are several exceptions to this rule that relieves the principal of liability for knowledge not communicated to him by his agent. First, where the agent acquires knowledge from a source that requires that he keep it confidential, such knowledge will not be imputed to the principal. Secondly, where the agent and the third party collude to cheat or injure the principal, the knowledge of the agent will not be imputed to the principal. Thirdly, where the agent acquired knowledge in some capacity other than as the principal's agent, such knowledge will not be imputed to the principal.

7. Define an unauthorized act? Page 1-1Ratification means the act of approving an unauthorized commitment by an official who has the authority to do so. Far 1.602-3 Ratification of unauthorized commitments states that although procedures are provided for ratification of unauthorized commitments, these procedures may not be used in a manner that encourages such commitments being made by Government personnel. Ratification authority may be exercised only when: Supplies or services have been provided to and accepted by the Government, or the Government otherwise has obtained or will obtain a benefit resulting from performance of the unauthorized commitment; The ratifying official has the authority to enter into a contractual commitment; The resulting agreement would otherwise have been proper if made by an appropriate contracting officer; The contracting officer reviewing the unauthorized commitment determines the price to be fair and reasonable. The contracting officer recommends payment and legal counsel concurs in the recommendation, unless agency procedures expresslydo not require such concurrence. Funds are available and were available at the time the unauthorized commitment was made; The ratification is in accordance with any other limitations prescribed under agency procedures.9. What is the purpose of the ratification? Page 1-1What are the legal issues in this problem?

COR did not have the authority to request the additional work.Unauthorized commitment

What rules apply?

What should the Governments course of action be?

Process as an Unauthorized Commitment - RatificationIn order for our legal system to enforce agreements as contracts, certain essential elements must be present. There must be at least two persons, each of whom has legal capacity to act. The parties to the contract must, by offer and acceptance, manifest assent to the terms of the contract

The parties must each give something of value, called "consideration. The terms of the agreement must be clear and certain. The agreement must not require the performance of an act that has been declared illegal, either by statute or by special rules of the common law. Finally, to be enforceable, the agreement must be in the form required by law, i.e., it must be written when required by the Statute of Frauds. Definition of a contractA promise or a set of promises that either something shall happen or thatsomething shall not happen in the future, for the breach of which the law gives a remedy or the performance of which the law in some way recognizes as a duty.

10. What is the legal definition of a contract? Page 1-2

Contract Elements: All contracts will have the following six elements: Capacity Mutual Assent Consideration Lawful Purpose Certainty of Terms Form Provided by Law

11. Identify and explain the six elements of a contract? Page 1-2

A void contract is one that never existed because an essential element was lacking. A Contracting Officer can void a contract if a determination that a material misrepresentation of fact by the offeror occurred. For example: If a business represented itself as a small business under a Small Business Set-aside and was found to be a large business, the Contracting Officer would declare the contract void as a result of this misrepresentation. A voidable contract is one in which only one of the parties is bound to the terms of the contract while the other party may withdraw from the contract if he or she decides to do so. Examples of voidable contracts are those with infants or minors and contracts induced by fraud. A minor child who enters into a contract is under no legal obligation to fulfill the terms and conditions of the contract. A minor may either avoid or ratify his or her contracts. No particular language or conduct is required to disaffirm an agreement. If a person is induced by fraud to make a promise, he or she may elect, if fraud is proven, not to be bound by that contract.

Capacity: Contractual capacity refers to the power that a person normally has to enter into a contract. Occasionally, however, a person is either totally or (as is more often the case) partially incapacitated (i.e., without the power to contract). For example, a person who is so infirm or disabled that he or she cannot understand the nature of an agreement is totally incapacitated, as is a mentally disturbed person whose affairs are handled by a court appointed guardian. Any agreement entered into by a totally incapacitated person is void. The agreement of an infant, on the other hand, is not void but voidable. The infant is partially incapacitated. The chief characteristic of legal infancy or minority is that a minor has no contractual capacity.

Review following pages for definitions of the above terms.An offer is defined as a manifestation of assent to enter into a bargain. Reduced to its simplest components, a contract is formed by acceptance of an offer. An offer is a proposal by a person, referred to as the offeror that a contract is entered into. The person to whom the offer is extended is called the offeree. When the offeree intends to accept the offer and communicates this acceptance to the offeror, a contract is formed. Acceptance must be unconditional and unequivocal. If the purported acceptance is conditional it is viewed as a counter-offer. If the purported acceptance is equivocal, it is not a valid acceptance. Unless otherwise indicated by the offeror or by the circumstances, an acceptance must be communicated in order to become effective and bind the parties in contract. Acceptance of an offer comes about by the offeree expressing in so many words that he accepts the proposal put forth by the offeror. The general rule, that silence alone is not acceptance, is universally followed. But silence coupled with something else, such as past dealings, or the circumstances surrounding the particular offer, may constitute acceptance. The formation of contracts through silent acceptance is rare.

Contract formation involves a manifestation of mutual assent by at least two persons. It is sometimes said that in order for there to be a contract there must be a "meeting of the minds" of the parties.The minds need not "meet" in a subjective sense; it is sufficient that the parties manifest mutual assent in an objective sense. Where the offeree misunderstands what the offeror meant, his subjective understanding is material only if the offeror's words could have had two or more meanings.Situations involving mistake are categorized as involving either a unilateral mistake or a mutual mistake. A unilateral mistake occurs where one party misunderstands either a term of the contract or some essential fact concerning the basis of the contract; a mutual mistake occurs where the parties share an erroneous belief concerning the basis for the contract. Whether the mistake was unilateral or mutual can determine whether an enforceable contract exists.

Consideration: Consideration as an element required for a valid contract derives from the common law notion that not all promises should be legally enforceable. There must be something accompanying the promise that justifies enforcement. This something is called consideration and is based on the bargain theory requiring two things:The consideration given for the promise must be bargained for between the parties, i.e., the consideration must be the motive for the promise and the promise must be the motive for the considerations. The consideration given for the promise must be legally sufficient. Often consideration has no economic value but is still legally sufficient. All that is needed is a commitment by the promisee to do something or refrain from doing something that he or she is not already obligated to do or to refrain from doing. The fairness or adequacy of the consideration for the promise or the promise for the consideration is generally not relevant to the question of whether the consideration is legally sufficient. A mere promised change of positions by the parties will do so long as there results a benefit to the promissor or a detriment to the promisee.

Lawful Purpose: Even where mutual assent, consideration, and contractual capacity are present, there may still be no contract because the subject matter of the agreement is illegal as per statute or public policy. When there is an absence of legality, the contract is void because an essential element legal purpose is absent.

We will review the various types of contracts.An offer that asks for a promise in return as the agreed exchange for a promise is an offer to enter a bilateral contract. In such a contract each party is both a promisor and a promisee. Probably the majority of contracts are of this type. On the other hand, an offer that looks forward to an act as the agreed exchange is an offer to enter a unilateral contract

12. Explain what is a bilateral and unilateral contract? Page 1-2

There are express contracts, which are contracts that have been deliberately negotiated, whether in writing or orally and subsequently reduced to writing. There are two kinds of implied contracts: "implied in fact contracts and implied in law contracts. The latter are sometimes called quasi-contracts. Express and implied in fact contracts are both based on actual agreement between the parties. In express contracts, the parties manifest their intention to be bound by the use of oral or written words or by other signs or symbols that have specified meanings. In the implied in fact contract; the parties manifest their assent by conduct rather than by such words or other symbols. Express/Implied Contracts: An express contract is one that is an actual agreement, the terms for which are in distinct and explicit language, either orally or in writing.An implied contract is one that is not created by explicit terms but by the conduct or actions of the parties

We will now cover some financial terms that apply to the COR.Content - The differences between money in the private sector and Government have their origin in how we get our fundsfrom Congress through the budget process. The differences depicted on this slide are taken from the laws that govern how Government agencies can spend money.You might ask what we mean when we say that all money is green. Generally, we mean all money is the same, one dollar is the same as any other dollar, and, aside from inflationary impacts or other unusual occurrences such as the retirement of a type of currency, a dollar you have in your wallet today can be used a year or two years from todayit never expires and becomes unusable.You might also expect money would be handled in the same way by the Government. However, while we sometimes wish it were that easy, the answer is noa dollar given to us by Congress to buy a fighter jet cannot be used to buy a ship. We need to use the right color dollar (or several billion dollars) to buy a ship. We also have to be careful to use dollars only within the time period Congress has authorized. Each color of money has its own timeframe within which it can be spent.

Content - Once again, these time limits are set forth in the fiscal laws but can also be found in the DoD Financial Management Regulation. But first, lets talk a little bit about terminology. Defense Appropriations refers to specific purposes for which the DoD can spend money. The most common purposes are listed on the slide. Procurement refers to buying large items such as ships, planes, tanks, and trucks. O&M refers to buying everyday-type items such as small tools and supplies or base services such as trash hauling or maintenance services. The other categories are self-explanatory.The term obligation refers to actually placing money on a contract or promising that the Government will pay a contractor for goods and services that have been ordered. You can think of it as making a credit card purchase. You place an order for an item and promise to pay the bill when you get it from the credit card company. You have obligated yourself to pay.The time periods limit how long a period we have to use a particular appropriation to buy things. For example, for RDT&E, if we are given money this year, we can use it to buy RDT&E this year and next year. For Operations and Maintenance, we can only use the money for one year.These limitations are established by Congress to ensure they can exercise proper oversight and control. Remember that Congress has the power of the purse and is the branch of Government authorized by the Constitution to appropriate monies.

The appropriation of public funds by the Congress and the use of such funds by the Departments of Government for the procurement of supplies and services under contract, points out an interesting relationship: the separation of powers between two branches of the Government -- the Legislative and the Executive. Congress authorizes the Departments of Government to expend specific amounts of money for specific purposes, and appropriates funds for those purposes. The Departments obligate and expend these funds within the authorizations and limitations imposed by the Congress. The General Accounting Office, responsible to Congress, watches over expenditures to insure compliance with the restrictions placed by Congress on the use of the funds.

Control of the funds made available by the Congress starts with the OMB and extends to the office, which ultimately makes a payment from these funds. Even after an appropriation act has been passed by Congress and signed by the President, funds are not available to a Government agency, such as DOD, until funds are released in an "apportionment" from OMB. This is OMB's executive-level budgetary control made on a periodic basis. By statute, OMB apportions funds on the basis of time periods, projects, or both. After the scheduled rate of obligation has been approved, the DOD comptroller then divides the apportioned amount into allocations to make the funds available to the Military Departments, which in turn make the funds available by allotment to their subdivisions such as the Navy Commands, Army Commands, and Air Force Commands. Depending on how much control is to be exercised, the Departmental subdivisions may make allocations directly available for obligation and spending, or there may be further subdivision into suballocations and suballotments. An "obligation" is a Government liability resulting from a contract, purchase order or similar document. A legal duty is incurred to pay the amount due. When a contractor has delivered the supplies or services and the Government has accepted them, the obligation is liquidated by payment to the contractor.

13. Explain the financial terms obligation and commitment of funds?

A "commitment" is an administrative reservation of funds against a future obligation on a contract, such as the "earmarking" of funds when the agency solicits offers.

Anti-Deficiency Act 31 U.S.C. sections 1341) --Appropriated funds may not be spent in excess of apportionment or administrative allocations. Once money has been appropriated, the appropriations are subject to apportionment by departmental and agency officials. Such funds may not be used except for the purpose for which they were appropriated. Before a Contracting Officer executes a contract or modification to a contract (supplemental agreement), he or she must determine that sufficient appropriated funds are available. This determination must be certified in writing by a certified financial officer. An obligation without this certification may subject the Contracting Officer to a violation of the Anti-deficiency law. This is a very serious offence and is punishable by fine not to exceed $5000 and imprisonment not to exceed two years or both, 31 U.S.C. section 1342.Contracting Officers Representatives must be vigilant to avoid appearing to have authority to make changes which could increase the Governments cost under a contract. As an agent of the Government, he or she can be held personally liable for such actions which place the Government in the position of violating the anti-deficiency law.

15. The Anti-Deficiency Act prohibits Government employees from?

This is what is known as a purpose violation. Funds have been used for the wrong purpose. Although Congress intended the money to be used to buy aircraft, it was used instead to buy construction.You will always know for what purpose the money can be used. Every time the funds holder sends money to a buyer, it comes with what is known as a long line of accountinga series of numbers that can be quite long. The type of money, which designates what purpose the money can be used, is clearly designated in that line of accounting. The year of the funds, as well as additional information, is also designated in the line of accounting. As you begin to work on contracting actions, you will become quite familiar with lines of accounting.

This represents a time violationusing money before it is available. Remember too, time violations can also occur if you use money after it has expired. So a time violation can occur whenever you use money outside its window of availability.These are just two very simple examples. The real point is to learn as much as you can about the laws and regulations regarding the use of money. It will help you a lot during your career if you become a money expert.

With regard to annual funds, another requirement is that the supplies and services contracted for are intended to serve a bona fide (good faith) need within the fiscal year or to replace stock used in that fiscal year. Where changes to a contract being funded by an annual appropriation are "inseverable" from the underlying work, and cannot be completed within the fiscal year, the changes are funded out of the same annual appropriation, which supports the basic contract, even though the change occurs during a different fiscal period. Other exceptions are made for items which require a long lead time to obtain; items which are needed to maintain historic inventory levels, even though they will not be consumed within the year; and items purchased promptly in a reprocurement contract after a termination for default. For the maintenance of tools and facilities along with real property leases, there is also a 12-month period of availability of current FY funds beginning at any time during the fiscal year. (DFARS 37.106). Pursuant to 10 USC 2410a, services are presumed to be non-severable for a 12-month period, regardless of whether they cross fiscal years or not.

Appropriations can only be used for the purpose for which they were appropriated. Congress accomplishes this by creating sub-accounts such as O&M and RDT&E. Specific items can also be designated in subject matter restrictions for such things as building a post office at a specific location, or erecting a dam, or building a ship. The appropriation specifies the particular project and the amount of money. Execution of the project requires strict administration, with no latitude on the use of the funds. As previously mentioned, the DOD has been required by law since 1949 to prepare its budget estimate a