Attorneys and contracts professionals from the private sector are shocked to learn how different government contracts are from commercial agreements.
Reactions of surprise and disbelief are completely understandable. Government contracts have some very strange rules! Make sure you understand these unorthodox rules to avoid major contracting problems when dealing with government contracts.
Why is government contracting different?
The United States of America is the largest client in history. Uncle Sam spends about a trillion dollars each year on government contracts and grants. That fact is the good part. The bad part is the government has a tremendous advantage in government contracts. The specialized rules weigh heavily in favor the government, and these rules are strikingly different from normal contract law.
Strange rule #1: The Termination for Convenience clause means your client has a permanent target on its back.
The government can terminate your contract at any time for almost any reason by using the Termination for Convenience clause. Your company will not be compensated for the loss of future revenue; you cannot sue for expectation damages.
The government can break its contracts with your company with no significant repercussions to itself. Government contractors must factor this immense risk into their pricing and operations. While your company risks an embarrassing and costly default for breaking a government contract, every day the sun rises is another day your federal client can choose to abruptly “show you the door.” Plan accordingly!
Strange rule #2: The Christian doctrine means that contractors can be forced to follow clauses that are not actually in the contract!
The Christian doctrine is almost unbelievable. In some cases, the government can force your company to follow clauses that were never inserted into the signed contract!
First, the Christian doctrine has nothing to do with Jesus Christ, Christianity, or theology. The Christian doctrine is called a doctrine because a judge created it in a court of law. The name “Christian” comes from a famous court case involving a government contractor called G.L. Christian & Associates.
This rule says that certain clauses are so important that the court will pretend as though these clauses are in your government contract, even if the clauses are not actually in the contract you signed! Not only can they (big daddy government) add clauses, they can remove clauses, and change clauses. Luckily, the doctrine applies only to certain clauses (that judges pick). If the Christian doctrine sounds unfair to you, you are paying attention.
Remember the scary Termination for Convenience clause, that allows the government to fire your company at any time with virtually no repercussions? Yes, you guessed correctly. The Christian doctrine applies to the Termination for Convenience clause.
After you painstakingly review your government contract, you may be thrilled to verify the absence of that dangerous termination clause in the signed contract. However, due to the Christian doctrine, the Termination for Convenience clause can be enforced against your company, even though that clause is not actually in the contract!
The good news for your client is that if a contracting officer brings up the Christian doctrine (because they forgot to include an important clause), they’re mostly bluffing. Remind the contracting officer that they have to (a) get to court and (b) persuade the judge to apply the rule to magically insert the clause. So, it’s not a trump card if you’re savvy enough to push back.
Strange rule #3: The government is bound only by actual authority, not by apparent authority.
Contracting officers are federal employees who have actual authority to sign, modify, and terminate contracts on behalf of the federal government. These contracting officers derive their authority from a warrant that usually states a dollar limitation. For example, one contracting officer may hold a warrant limited to contracts up to $100 million, while another may hold an unlimited dollar value warrant.
What you need to understand is that only contracting officers can contractually bind the government. The doctrine of apparent authority does not apply to the US government, so even the federal employee who seems like she has authority—and leads your client to believe so—cannot contractually bind the government without a warrant.
Therefore, be extremely careful when anybody other than a warranted contracting officer goads your company into performing more work or changing contractual requirements. Just because the big-shot program manager—who may have apparent authority, but not actual authority—requests a change does not mean your company is contractually bound!
Keep track of who is a contracting officer and what each warrant allows in terms of contractual authority. Your mission is to ensure that any contractual changes are funneled back to a contracting officer who executes a written change to the contract. Otherwise, your company risks working for free or violating the contract terms.
Strange rule #4: Government contracts use cookie-cutter clauses from the Federal Acquisition Regulation.
Government contracting officers have very little discretion in drafting contracts. Instead, they use cookie-cutter clauses found in the Federal Acquisition Regulation (FAR).
These FAR clauses—and the instructions to contracting officers for how to use them—are rarely written with clarity or simplicity. The complexity of the FAR is a huge barrier to entry, which is one reason why I wrote Federal Acquisition Regulation in Plain English. If the FAR is not confusing enough, many federal agencies have their own FAR supplements, which they use in combination with the FAR! For example, the Department of Defense has the Defense FAR Supplement. There are more than 20 different FAR supplements for various federal agencies.
Christoph Mlinarchik is the owner of Christoph LLC, providing expert advice in government contracts: consulting, training, and expert witness services. Christoph is the author of The Government Contracts in Plain English Series of bestselling books.