Government Contracts Contractor Established Existence of Contract
Monday, September 9, 2019

Contractor Established Existence of Contract

By Government Contracts Editorial Staff

An appeal seeking incurred costs for providing direct current motors was sustained by the Armed Services Board of Contract Appeals because the contractor established the government terminated an existing contract. The contractor submitted a proposal in response to a solicitation for a small business set-aside for a firm-fixed-price, indefinite-delivery, indefinite-quantity contract. A contract specialist with no authority to bind the government sent the contractor a contract and delivery order, which identified the contracting officer, but the documents were unsigned. Another CO reviewed the order and signed a final price negotiation memorandum. After determining it needed to receive the motors in a shorter time, the government amended the solicitation and informed the contractor it had to submit a proposal for an urgent and compelling procurement. The contractor then submitted a claim for performance costs incurred between the date of putative contract award and the date it stopped working. On appeal, the government argued that no contract existed. The elements of proof to establish a valid contract with the government are: “(1) mutuality of intent to contract; (2) lack of ambiguity in offer and acceptance; (3) consideration; and (4) a government representative having actual authority to bind the United States in contract” (see 37 CCF ¶76,044).

Valid Contract. With regard to mutuality of intent to contract, the record showed the contractor offered to sell the government 200 motors at a specific price and with a specified delivery date, which was an unambiguous offer. The contract specialist sent the contractor a document entitled “Award/Contract,” which mirrored the contractor’s offer and manifested the government’s assent to the proposed bargain. Accordingly, there was no ambiguity in the offer and acceptance. For there to be consideration, the parties must bargain for a performance or a return promise. Here, the contractor promised to deliver a specific number of motors for a price that the government agreed to pay. As for a government official’s authority to contract, it was uncontroverted that the contract specialist had no authority to bind the government. However, “the shadow of the CO loom[ed] large over every exchange with [the contractor].” The CO prepared the FPNM, which mirrored the terms of the contractor’s offer and the award document, and signed the FPNM on the same date the contractor signed the contract. Also, the CO prepared and signed the contract clearance request, which incorporated the terms of the FPNM. Moreover, the CO was aware of the technical questions the contractor posed so it could order the correct product, that the contractor had signed the contract, and that the contractor was operating under a tight schedule. The CO’s involvement was significant enough to support a finding that she directed the award to the contractor, and the contract specialist only acted in the limited capacity of conveying information. (Potomac Electric Corp., ASBCA, ¶95,838)

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