Negligent Negotiations May be the Culprit

Since going in-house in 2010, I have published a number of posts on this blog about how in-house counsels can add value to their clients by handling certain matters themselves, rather than automatically turning to outside counsel.[i]  A recent Armed Services Board of Contract Appeals’ decision[ii] presents another opportunity for in-house counsels to capitalize on their unique roles in pre- and post-award contract processes by advocating a relatively unknown and underused ground for relief:  negligent negotiations.  Allow me to briefly set the scene–all too familiar to in-house counsel–where the facts may warrant such consideration:

After the euphoria of winning a government contract subsides, contractors find themselves in the position–often an unenviable one–of actually having to do what they promised to do.  Apropos is the idiom, “Be careful what you wish for.”  The business development and proposal team may have promised the world to the government, painting a lovely landscape of the contractor’s excellent performance and ability, but the operations’ team must deliver on the promises.  Unfortunately, too often this becomes a task fraught with challenges.  Contractors soon realize that, to their bewilderment, they cannot actually do what they said they could at the awarded cost, perhaps for a plethora of reasons: underestimations, faulty workload data, unavailability of key employees, or inability to enter into pivotal subcontracts.  It’s at this stage that contractors attempt to seek the culprit of their performance problems, and the government is often at the front of the line.  Accusations are slung:  “the Government should have known that we couldn’t perform at this price” or “the Government should have known that our estimates were too low” or “our price was too low.”  To minimize losses, Requests for Equitable Adjustments (REAs) and claims are submitted, harboring in the unwelcome and unending litigation phase of the contract.  In-house counsels are all too familiar with this pattern.

A recent decision by the Armed Services Board of Contract Appeals (Board) on a motion to dismiss, Chugach Federal Solutions, Inc., ASBCA No. 61320, May 16, 2019,[iii] may support a contractor’s contention that, well, the Government is in fact to blame for its performance problems.  On November 21, 2011, the Navy Facilities Engineering Command, Northwest Contacting Office (NAVFAC) released a Request for Proposal for a five-year base operations services and support contract (BOSS) for the West Sound Navy Base, which covered a broad range of services.  As with most BOSS contracts, offerors staffing level, direct labor hours, and full time equivalents were evaluated in order to demonstrate that the offeror understood the RFP requirements.  The genesis of Chugach’s performance issues occurred in the pre-award period.

From the RFP release date, the procurement took a convoluted path: proposal submissions; RFP amendments; evaluations; revised proposal submissions; Engineering Notices; a protest to the GAO; and final proposal submissions.  Furthermore, Chugach submitted a number of proposals, each with different staffing levels.  During evaluations, the Navy deemed Chugach’s staffing level as a “significant weakness.”  Chugach submitted its revised final proposal with its overall staffing level hours and FTEs even further reduced.  The Navy found that Chugach’s revised proposal had not ameliorated the significant weakness, but did not inform Chugach accordingly.  Instead, the Navy informed Chugach that its “overall recurring work FTEs [were] within an acceptable range,” and made award to Chugach.

From the get-go, Chugach struggled to perform the contract, experiencing manning shortfalls necessitating the hiring of additional staff and working significant overtime to maintain quality standards and stay within schedule.  Chugach suffered substantial losses.  At the Board, Chugach asserted, among other things, that the Navy engaged in “negligent negotiations” in the pre-award phase insofar as the Navy violated FAR 15.306 (d)–”Exchanges with offerors after establishment of the competitive range”–by informing Chugach that its staffing was “within an acceptable range,” when, in fact, the Navy knew that Chugach staffing level was “significantly low.”  The Navy, moving to dismiss, argued that the Board lacked jurisdiction as Chugach’s claim was nothing more than a pre-bid protest challenging the Navy’s evaluation of Chugach’s proposal, over which the Board lacked jurisdiction.

Although the Board agreed with the Navy that bid protest challenges are not claims under the Contract Disputes Act, it nevertheless held that it had jurisdiction because Chugach was before the Board as an awardee of a contract under the CDA and not, in fact, as a disappointed bidder in a bid protest.  Additionally, the Board held that FAR 15.306(d) existed for the benefit of the contractor and required the contracting officer to discuss deficiencies and significant weaknesses with offerors.  Consequently, the Board held that the first count of Chugach’s complaint sufficiently precluded dismissal by summary judgment.

Although the Board’s ruling is not a decision on the merits, Chugach’s “negligent negotiations” withstood the Navy’s motion to dismiss, allowing the case to proceed forward.  This in and of itself is a victory for contractors inasmuch as it allows a cause of action under the CDA for pre-contract award irregularities.  Admittedly, I have focused on only one specific issue of the decision, but I encourage the reader to digest the entire opinion.  The take-away, however, is that the Government may not be able to shield itself under the general proposition that Boards lack jurisdiction over pre-award bid protest matters if these deficiencies and weaknesses impact the awardee’s ability to perform the contract during contract performance when: (1) the Government awards a contract (2) with knowledge that the awardee’s proposal contains deficiencies or weaknesses, (3) and does not inform the awardee accordingly.[iv]

As I mentioned above, here is another situation where in-house counsel are uniquely situated to spot the issue of negligent negotiations.  As vital members of a contractor’s pre-award and post-award efforts, in-house counsels review RFPs, participate in various color-teams, review ENs and responses thereto, and attend debriefings.  After contract award, in-house counsels serve on teams seeking to determine the genesis of performance problems.  In many companies, in-house even draft REAs and claims.  With their knowledge and understanding of the entire procurement process generally–and perhaps personal involvement on a particular contract award specifically–in-house counsel should be able to determine whether the government’s pre-award negotiation efforts contributed to the contractor’s performance problems, and whether “negligent negotiations” is a viable cause of action.

In-house counsels consistently have to strive to add value to their employer.  After all, we do not, for the most part, generate revenue.  Instead, our value is providing sage legal advice and counsel that ensures that our clients legally and profitably accomplish their missions.  To do so, we must stay abreast of current developments in the law.  In-house counsel must advise their contract managers, operators, and leadership about the availability of the “negligent negotiations” as a course of action where the particular facts warrant such.


[i] David Newsome, Saving Cost and Adding Value to the Company: A Brief Note on Having In-House Counsel Move to Have the Government File Complaints Before the Boards of Contract Appeals, Public Contracting Institute (Jun 23, 2014), https://publiccontractinginstitute.com/saving-cost-and-adding-value-to-the-company-a-brief-note-on-having-in-house-counsel-move-to-have-the-government-file-complaints-before-the-boards-of-contract-appeals.

David Newsome, A Brief Note on the Government’s Duty of Good Faith and Fair Dealing: An In-House Counsel Update, Public Contracting Institute Blog (Mar 3, 2014), https://publiccontractinginstitute.com/a-brief-note-on-the-governments-duty-of-good-faith-and-fair-dealing-an-in-house-counsel-update.

David Newsome, Adding Value to the Company: Moving to Dismiss Claims Under the Contract Disputes Act for Statute of Limitation Violations, Public Contracting Institute Blog (Jul 9, 2013), https://publiccontractinginstitute.com/adding-value-to-the-company-moving-to-dismiss-claims-under-the-contract-disputes-act-for-statute-of-limitation-violations.

[ii] Chugach Federal Solutions, Inc., ASBCA No. 61320, May 16, 2019

[iii] This particular appeal has been before the Board on three occasions thus far.  See, Appeal of Chugach Fed. Sols., Inc., ASBCA No. 61320, July 16, 2018 (granting the Navy’s motion for leave to amend its answer to assert the affirmative defenses of estoppel and waiver) and Appeal of Chugach Fed. Sols., Inc., ASBCA No. 61320, May 16, 2019 (denying the Navy’s motion for partial summary judgment and granting Chugach’s cross-motion for partial summary judgment).

[iv] Interesting, but not discussed here, is that the Government was cognizant of Chugach’s staffing weaknesses and nonetheless awarded Chugach the contract.

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