Like most businesses, government contractors are in the customer service field and have been conditioned to operate by the old adage that the “The customer is always right.” After all, the customer pays the bills, right? As a general matter, this is true. Uncle Sam is responsible for paying the bills submitted by contractors and—most of the time—payment arrives without issue. That said, there are circumstances in which the government refuses to pay for work performed. One of the more common reasons for such nonpayment is the government’s contention that the work at issue was “not authorized” under the operative contract, notwithstanding the fact that the contracting officer’s representative (COR) was well aware of the work being performed. There are, in fact, many decades of decisional law emanating from courts and boards of contract appeals relating to the nuances of this precise issue. This means that an untold (but stratospherically high) number of frustrated contractors have suffered very expensive battle scars trying to litigate their way to payment by convincing judges that the work performed actually was authorized by the appropriate government personnel. A recent publication by the Department of Defense (DoD) provides contractors with an important reminder as to how to avoid this costly fate.
On October 17, 2022, the DoD issued an updated Department of Defense Contracting Officer Representative (COR) Guidebook. While the updates relate to many areas that do not concern the authority issue, the Guidebook also contains key takeaways that contractors can use to their advantage. Here they are:
- The Contracting Officer—and only the Contracting Officer—has the authority to change the contract.
- The COR must bring all issues and performance problems to the attention of the Contracting Officer. The COR does not have the authority to negotiate changes to any part of the contract, including schedule and cost.
- The COR must understand the limits of their authority. Although the Contracting Officer delegates certain responsibilities to the COR, authority to legally bind the government remains with the Contracting Officer.
- CORs do not have the authority to:
- Make any agreement with the contractor that obligates public funds.
- Make commitments that affect the price, quality, quantity, delivery, or any other term or condition of the contract.
- Encourage or permit the contractor to perform any work beyond or outside the scope of the contract.
- Interfere with the contractor’s management of its employees, including “supervising” or directing the work of the employees.
- Order or accept supplies or services not expressly required by the contract.
- Allow GFP [Government Furnished Property] accountable under one contract to be used under another contract.
- Discuss any information that may give one contractor an advantage in future procurements.
- Direct the contractor to begin work prior to the contract award date.
- Issue oral or written instructions to the contractor to start or stop work.
- Negotiate any change to the terms of the contract. Any change to price, quantity, or delivery schedule or location must be provided to the Contracting Officer.
While all of these rules are important and none of them are earth-shatteringly novel, the ones most commonly ignored by CORs involve the prohibition against encouraging the contractor to perform extra-contractual work and/or agreeing to deviate from contract terms and conditions. Contractors should thus be keenly aware of any express or implied direction by the COR (or anyone other than the Contracting Officer) to perform any work that is outside the scope of the contract and should refrain from agreeing to any material change to contract terms and conditions. If asked to do so, contractors should immediately (i) inform the appropriate Contracting Officer in writing and (ii) consult the underlying contract to provide requisite notice and requests for relief under operative provisions (e.g., the “changes” clause). If the Contracting Officer ultimately directs the contractor to proceed with excess work and/or otherwise attempts to modify a material contract provision, remember to track all cost and schedule impacts at a granular level because such evidence will form the nucleus of any future request for equitable adjustment (and/or downstream claim). At bottom, the key here is to avoid putting your company at risk by satisfying the unauthorized demands of unauthorized government program personnel.