MANAGING RELATIONSHIPS IN FEDERAL GOVERNMENT CONTRACTS
I.
GOVERNMENT CONTRACTING IS SERIOUS BUSINESS A.
B.
Prime Contractor Is Liable for Subcontractor’s Failures 1.
Prime Contractor is liable for total performance regardless of what is subcontracted [See FAR 9.604(3)]
2.
Subcontractor’s violation of laws or ethics can put Prime Contractor at Risk
Government’s Remedies 1.
2.
3.
4.
Contractual
a.
Reduce Payments (Deductions)
b.
Withhold Payments
c.
Deductive Change
d.
Termination for Convenience
e.
Termination for Default
Administrative
a.
Poor Contractor Performance Assessment Report (CPAR)
b.
Finding of Non-Responsibility
c.
Suspension
d.
Debarment
Civil Litigation
a.
Civil False Claims
b.
Contract Disputes Act
Criminal Litigation
a.
Monetary Fines
b.
Imprisonment
1
MANAGING RELATIONSHIPS IN FEDERAL GOVERNMENT CONTRACTS C.
II.
III.
Potential Penalties 1.
Company
2.
Individual
MAKE CAREFUL CHOICES UPFRONT A.
Find Out All You Can
B.
Do It Before Becoming “Wedded” to Partner
C.
What You Learn Could Affect 1.
Risks You Are Willing to Take
2.
Contract Terms You Are Willing to Accept
3.
Price You Quote (Commensurate with Risk)
4.
Personnel Assignments
a.
Qualities and Experience
b.
Staffing Levels
c.
Staffing Mix
ADVANTAGES TO PRIME OF COMPETING SUBCONTRACTS A.
Optimum Benefits from Competitive Negotiation 1.
Best Value
2.
Investment Required in Solicitation for Proposals
3.
a.
Complexity of Scope Guides RFP Requirements
b.
Only Ask for What You Are Prepared and Able to Evaluate
Entertain Discussions Wherever Appropriate
a.
Timing
b.
Resources
2
MANAGING RELATIONSHIPS IN FEDERAL GOVERNMENT CONTRACTS B.
C.
IV.
Introduction to New Companies 1.
Better Deal
2.
Challenge Incumbent Complacency
3.
Resource for Future Needs
4.
Keep Selected Source in Line
Learn About Improved Methods 1.
Seek Technical Proposals
2.
Encourage Innovation in Evaluation Factors
D.
Helps Ensure Competitive Pricing
E.
Creates Leverage for Acceptance of Favorable Contract Terms
DEVELOP EFFECTIVE CONTRACT DOCUMENTS A.
Beware of “Agreements to Agree” 1.
2.
Do You Have a Deal (or Only a Lawsuit?)
a.
Memorandum of Understanding
b.
Letter of Intent
c.
Teaming Agreement
Get Binding Agreements to Extent Possible
a.
b.
Essential Elements
(1)
Scope
(2)
Price
(3)
Term
Timing
(1)
Before Committing to Project
(2)
Before Agreeing on Price
3
MANAGING RELATIONSHIPS IN FEDERAL GOVERNMENT CONTRACTS (3)
3.
c.
Limitations on Promissory Estoppel (Detrimental Reliance)
d.
If Required, Make Agreement Subject to Conditions Objective
(2)
Few in Number
a.
Prevent Bid Shopping
b.
Advance Confidentiality Agreements
d.
B.
(1)
Subcontractor Protections of Data in Proposal
c.
4.
Before Getting Married
(1)
Intellectual Property
(2)
Technical Data
(3)
Pricing
(4)
Proprietary and Business Sensitive Information
Limited License
(1)
Quid Pro Quo for Award
(2)
Cannot Be Used to Subcontractor’s Disadvantage
Remedies
(1)
Injunction for Actual or Threatened Misappropriation
(2)
Damages
(3)
Royalties
Points Agreed upon Cannot Be Changed during Negotiations
a.
Seat at the Table
b.
Prior Written Authorization to Change
Focus on Key Provisions 1.
What Are You Going to Do? 4
MANAGING RELATIONSHIPS IN FEDERAL GOVERNMENT CONTRACTS 2.
How Are You Going to Do It?
3.
When and Under What Conditions Are You Going to Get Paid?
a.
b.
Prime Contractor: Pay If Paid
(1)
Only What Government Pays
(2)
Only If Government Pays
Subcontractor: “X” Days after Invoice
(1)
Prime Must Pay Even If Government Hasn’t (or Won’t)
(2)
Not Subject to Problems Caused by Others
(3) 4.
(a)
Timing
(b)
Amounts
Pay When Paid
Who Has What Risks?
a.
b.
Risk Shifting Provisions
(1)
Flow Down Clause
(2)
“Remedy” Granting Clauses
(3)
Disputes
(a)
Forum
(b)
Duty to Proceed
(c)
Recovery Limitations
Risk Mitigation/Protections
(1)
Insurance
(2)
Indemnity
(3)
Bonds or Other Guarantees
5
MANAGING RELATIONSHIPS IN FEDERAL GOVERNMENT CONTRACTS V.
ABILITYONE CONSIDERATIONS A.
B.
VI.
Prime Contract 1.
Educate Government Early
2.
Incorporate Protections into Prime Contract
Subcontracting Procurement List Services 1.
Preserve Committee Jurisdiction
2.
Protect AbilityOne Program Structure
3.
Provisions for AbilityOne Workers
4.
Subcontract Modifications Subject to Committee Approval
5.
Restrictions on “Adverse Action”
6.
Limitations on Incorporation by Reference
7.
Special Disputes Procedures
8.
Limitation on Forum Selection Clause
APPRECIATE LIMITATIONS ON AUTHORITY A.
Contracting Officer 1.
All Powerful
2.
Sole Authority
3.
a.
Changes
b.
Suspension of Work
c.
Stop Work
d.
Terminations
(1)
Convenience
(2)
Default
Warrant Limitations
6
MANAGING RELATIONSHIPS IN FEDERAL GOVERNMENT CONTRACTS 4.
B.
C.
VII.
Subject to Availability of Funds
a.
Anti-Deficiency Act
b.
Appropriation Data on Documents
Contracting Officer’s Representative 1.
Authority Limited by Letter of Appointment
2.
Scope of Authority Specified
a.
What COR Can Order
b.
Dollar Limit
Commanders, Technical Advisors, Inspectors 1.
Tend to Want to Run the Show
2.
No Authority to Go Outside Contract
MAINTAIN POSITIVE, REGULAR COMMUNICATIONS DURING PERFORMANCE A.
Make “Marriage” Work 1.
Work on Relationship
a.
b.
Hallmarks of Good Relationship
(1)
Candor
(2)
Trust
(3)
Mutual Respect
(4)
Politeness
(5)
Cooperation
(6)
Positive Attitude
(7)
“Collegeality”
Partnering Principles
(1)
Goals Are the Same 7
MANAGING RELATIONSHIPS IN FEDERAL GOVERNMENT CONTRACTS
(2)
(a)
Efficient Performance
(b)
Good Results
(c)
Minimum Problems
Problems Are Inevitable
(a)
Strike Quickly
(b)
Lowest Levels First
(c)
Elevate as Needed
(d)
Inherent Government Limitations 1.
Authority
2.
Notice Requirements
3.
Lesson: Pick Your Spots
B.
No Surprises!
C.
Trust, But Verify (Ronald Reagan)
D.
Nip It in the Bud (Barney Fife) 1.
Problems Seldom Get Better Over Time
2.
Early Recognition Systems
a.
3.
Develop Disclosure Culture
(1)
Performance Problems
(2)
Dividends for Ethics Problems
b.
Quality Assurance Inspections
c.
Frequent Meetings
d.
Open Dialogue with Upstream and Downstream Partners
Deal with Problems Promptly and Effectively
a.
Solve Problems Rather than Fix Blame 8
MANAGING RELATIONSHIPS IN FEDERAL GOVERNMENT CONTRACTS
E.
F.
b.
Cure Causes as Well as Symptoms
c.
Devote Appropriate Resources
d.
Follow the Contract
Art of Giving Effective Notice 1.
Factual
2.
Timely
3.
Compliance with Contract
4.
“I expect you to pay for it”
Top-Down Commitment 1.
If Top Management Does Not Believe in It, Success Is Unlikely
2.
Make Employee Acceptance a Priority
9