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Smith, Currie & Hancock's Federal Government Construction Contracts. A Practical Guide for the Industry Professional. 2nd Edition

  • ID: 2244036
  • Book
  • April 2010
  • 736 Pages
  • John Wiley and Sons Ltd
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Federal Construction Law for Construction Professionals

Any firm intent on benefitting from the boom in federal government construction contracts must navigate an increasingly complicated and demanding set of laws, regulations, and practices that govern these projects and the contractors performing them. To help guide you through this maze, here is the updated edition of the easy–to–understand guide to the practical reality of these special requirements, and how managers and owners of construction industry firms can use them to effectively avoid pitfalls on current projects and compete successfully for new projects.

Smith, Currie & Hancock′s Federal Government Construction Contracts, Second Edition walks the reader through actual federal contracts, highlights critical clauses, and simplifies governmental and legal jargon to provide ease of use by the nonlawyer.

Updates to this Second Edition include:

  • Coverage of the newly enacted American Recovery and Reinvestment Act of 2009

  • Specifics of federal government grants to state and local public construction contracts

  • New insights on Design–Build, Early Contractor Involvement (ECI), BIM, Green Construction, and Web–based project management techniques used by the federal government

  • A revised look at the increasingly detailed business ethics and compliance program requirements for contractors and subcontractors as mandated by the federal government for its contractors

  • A unique Web site at [external URL] provides the user with a Table of Acronyms and Terms commonly found in federal government contracts, an extensive list of Web sites of interest to federal government construction contractors, checklists, sample forms, as well as specifications related to innovations in project delivery

By making transparent the many rights, risks, and legal responsibilities involved in a federal government construction project, Smith, Currie & Hancock′s Federal Government Construction Contracts, Second Edition provides construction industry professionals from general contractors, subcontractors, and designers to surety bond agents with the insight and understanding they need to avoid problems and run a successful project from start to finish.

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Foreword xix

Preface xxi

Introduction xxv

Author Biographies xxvi

1 Federal Government Contracts and Commercial Contracts: A Brief Comparison 1

I. Government Construction Contracting Process: An Overview 1

A. Introduction 1

B. Organization of This Book 2

C. Federal Agency Organization, Terminology, and Resources. 3

D. Terminology and Jargon 6

E. Internet–Based Resources 6

II. Relationship of Commercial and Government Contract Law 7

III. Sources of Federal Laws Affecting Government Construction Contracts 9

A. Contracts Awarded by Federal Agencies 9

B. Contracts Funded by Federal Grants 14

C. Effect of Statutes and Regulations on Contractors 14

IV. Procurement Integrity and Standards of Conduct 18

A. Importance of Certifi cations 18

B. Overview of Federal Laws Related to Procurement Integrity/Standards of Conduct 19

C. Civil False Claims Act Actions 22

D. Other Remedies for Prohibited Conduct 28

E. Contractor Business Ethics and Conduct 32

F. Contractor Self–Reporting/Hotline Requirements 36

G. Potential Nondisclosure Sanctions: Suspension and Debarment 37

H. Defense Contract Audit Agency Fraud Indicators 38

APPENDIX 1A: A Brief History of the Disputes Process in Government Contracts 41

2 Authority to Bind the Government, Contract Financing, and Payment 45

I. Authority of Government Employees or Agents 45

A. Contracting Offi cer Authority 46

B. Authority of Authorized Representatives 47

C. Actual versus Apparent Authority 50

D. Alternate Theories to Bind the Government 51

E. Presumption of Government Good Faith Immunity of Government Employees/Agents 56

II. Availability of Funding 59

A. Federal Budget Process and Contract Financing 59

B. Appropriations Process 60

C. Administering Appropriated Funds 61

D. Anti–Defi ciency Act 62

E. Multiyear or Incrementally Funded Contracts 64

III. Contract Payment Procedures 67

A. Invoicing 67

B. Payment 68

C. Prompt Payment Act 69

IV. Government Setoff/Debt Collection Rights 72

A. Government Setoff 73

B. Federal Claims Collection Act 73

V. Assignments/Novations 73

A. Assignments 73

B. Novations 74

Appendix 2A: Sample Letter to Contracting Offi cer Requesting Clarification on the Scope of an Authorized Representative s Authority 77

Appendix 2B: Notifi cation of Potential Changes by a Contracting Officer s Representative or Other Government Representative 78

Appendix 2C: Limitation of Government s Obligation (May 2006) 79

3 Contract Formation 91

I. Basic Principles of Contract Formation 81

A. Offer Acceptance Consideration 81

B. Express Contracts 83

C. Implied Contracts 83

D. Ratifi cation of Unauthorized Agreements 84

II. The Government Procurement Process 85

III. Competing for the Award 87

A. Sealed Bids 87

B. Competitive Negotiation 88

C. Effect of Government Estimate on Authority to Award Contract 91

D. Prebid/Preproposal Clarifi cations 93

E. Electronic Bids and Reverse Bid Auctions 94

IV. Bid Guarantees (Bonds) 96

A. Requirement for Bid Guarantee 96

B. Purpose for Guarantee and Surety s Liability 97

C. Surety Defenses 98

V. Responsive Bids and Proposals 99

VI. The Evaluation Process 103

A. The Sealed Bid Evaluation Process 103

B. The Competitve Negotiation Evaluation Process 104

C. The Evaluation of Past Performance 105

D. Standards for Responsibility Determinations 115

E. Debarment and Suspension 117

VII. Late Bids and Proposals 119

VIII. Relief for Contractor Bid/Proposal Mistakes 121

A. Preaward 122

B. Postaward 123

IX. Bid Protests 124

A. Evolution of Bid Protest Rights and Procedures 124

B. Multiple Forums Basic Principles 126

C. Who May Protest: Standing 127

D. Federal Agency Protests 128

E. GAO Protests 131

F. Court of Federal Claims Protest Actions 134

G. Protests Related to Socioeconomic Preference Programs 136

H. Recovery of Attorney s Fees and Expenses in Bid Protests 137

4 Contract Types 143

I. Introduction 143

II. Organization of a Typical Construction Contract 144

III. Project Delivery Categories 144

A. Design–Bid–Build Contracts 145

B. Design–Build Contracts 146

C. Construction Management Contracts 149

D. Early Contractor Involvement Contracts 150

IV. Indefi nite Delivery Contracts 154

A. Defi nite Quantity Contracts FAR § 16.502 155

B. Requirements Contracts FAR § 16.503 155

C. Indefi nite Delivery/Indefi nite Quantity

Contracts FAR § 16.504 156

D. Multiple–Task Order Contracts/Single–Task

Order Contracts 157

V. Pricing Categories 159

A. Fixed–Price Contracts FAR Subpart 16.2 159

B. Cost–Reimbursement Contracts FAR Subpart 16.3 163

C. Incentive–Type Contracts FAR Subpart 16.4 164

VI. Options 167

A. Exercising Options 167

B. Total Contract Duration with Options 168

VII. Project Delivery and Contract–Type Risk Analysis 169

VIII. Building Information Modeling 169

5 Socioeconomic Policies 177

I. Introduction 177

II. Small Business Contracting Programs 178

A. Overview of Policies and Programs 178

B. Eligibility and Size Determinations 180

C. SBC Restricted Procurements (Set–asides) 183

D. Small Business Subcontracting Plans 192

E. SBC Self–Certifi cation of Status 193

F. Mentor–Protégé Agreements 195

G. Limitations on Subcontracting and Joint Ventures 196

H. Certifi cates of Competency and Responsibility Determinations 197

III. Equal Employment Opportunity and Affi rmative Action Programs 198

A. Offi ce of Federal Contract Compliance Programs 198

B. Executive Order No
11246 199

C. Vietnam Era Veterans Readjustment Assistance Act of 1974 199

D. Rehabilitation Act of 1973 200

E. Executive Order No
11141 200

IV. Buy American Act 200

A. Exceptions to Domestic Purchasing Requirements 201

B. Differentiating between End Products and Construction Materials 202

C. Government Remedies 204

V. Labor Standards 204

A. Basic Labor Laws 204

B. Davis–Bacon Act 207

C. Service Contract Act 211

D. E–Verify 211

VI. Environmental Laws 212

A. Energy Effi ciency and Sustainable Design 212

B. Recovered Materials 213

C. National Environmental Policy Act 213

D. Leadership in Energy and Environmental Design 214

VII. Employee Safety and the Occupational Safety and Health Act 214

A. Occupation Safety and Health Act 214

B. Agency Safety Requirements 215

Appendix 5A: SBA Program Requirements for Joint Ventures and Subcontracting 219

6 Government Contract Interpretation 221

I. Importance of Contract Interpretation 221

II. Goal of Contract Interpretation 221

A. Reasonable and Logical Meaning 222

B. Contract Interpreted as a Whole 222

C. Confl icts Avoided 223

D. Normal and Ordinary Meaning 223

E. Party–Defi ned Terms 224

F. Status of Mandatory FAR Clauses 224

III. Circumstances Surrounding Contract Interpretation 225

A. Discussions and Conduct 225

B. Parties Prior Dealings 227

C. Custom and Usage 229

IV. Resolving Ambiguities 230

A. Order of Precedence 230

B. Duty to Seek Clarifi cation 232

C. Construction against the Drafter 233

V. Allocation of Risks and Obligations 234

A. Implied Duties 234

B. Impracticability/Impossibility of Performance 241

C. Superior Knowledge 242

D. Assumption of Risk 242

E. Risk Allocation in Design–Build Contracts 243

VI. Standard FAR Clauses Affecting Allocation of Risks and Contract Interpretation 244

A. FAR § 52.236–7 Permits and Responsibilities Clause 244

B. FAR § 52.236–5 Material and Workmanship Clause 245

C. FAR § 52.236–21 Specifi cations and Drawings for Construction Clause 246

VII. Interpretation of Subcontracts under Federal Contracts 247

Appendix 6A: Sample Table of FAR Clauses with Flow–down Requirements 251

7 Differing Site Conditions 255

I. Historical Overview 255

A. Introduction 255

B. Differing Site Condition Defi ned 256

C. Responsibility for Differing Site Conditions 256

II. Federal Government Contract Clause 257

A. Types of Conditions Covered 258

B. Type I and Type II Changed Conditions 258

C. Notice Requirements 258

D. Operation of the Differing Site Conditions Clause 259

III. Recovery for a Type I Changed Condition 259

A. Type I Defi ned 259

B. Type I Examples 260

IV. Recovery for a Type II Changed Condition 262

A. Type II Defi ned 262

B. Type II Examples 262

V. Other Conditions: Weather and Quantity Variations 265

A. Weather and Site Conditions 265

B. Quantity Variations and Site Conditions 267

VI. Factors Affecting Recovery 268

A. Site Investigations 268

B. Exculpatory and Risk Shifting Provisions 271

C. Notice Requirements 274

D. Record–keeping Requirements: Proving Damages 275

Appendix 7A: Site Investigation Checklist 278

8 Contract Changes 281

I Purpose of the Changes Clause 281

A. Historical Perspective 281

B. Departure from Common Law Principles 281

C. Evolution of the Changes Clause 282

II. FAR Changes Clause 283

A. Basic Clause 283

B. Permissible Changes 285

C. Possible Impermissible Changes 285

D. Determining if a Change Is Permissible 288

E. Subcontracting Considerations and Checklist 288

III. Authority to Issue Changes 290

A. Contracting Offi cer 290

B. Authorized Representatives 291

C. Exceptions to the Strict Authority Rule 293

IV. Express Changes: Bilateral and Unilateral 295

A. Signifi cance of Standard Form 30 295

B. Direction to the Contractor 297

V. Constructive Changes 299

A. Origin of Concept 299

B. Applications of the Doctrine 301

VI. Cardinal Changes 306

A. Overview 306

B. Types of Possible Cardinal Changes 308

VII. Value Engineering Changes 309

A. Purpose of VE Changes 309

B. Construction VE Clause 309

C. Key Issues for Contractors 309

VIII. Prerequisites to Recovery 312

A. Duty to Proceed 312

B. Notice Requirements 312

C. Release/Reservation of Rights 314

D. Documenting the Changed Work 320

IX. Novations 322

Appendix 8A: Value Engineering Construction (Sept. 2006) 324

9 Delays, Suspension, and Acceleration 329

I. Types of Delay: Basic Principles 329

A. Excusable versus Nonexcusable 329

B. Compensable 331

C. Unforeseeable 331

D. No Contractor Fault or Negligence 332

E. Role of Subcontractors and Suppliers in Project Delay 332

II. Causes of Excusable Delay 333

A. Weather 333

B. Acts of God 334

C. Labor Problems/Strikes 335

D. Material Shortages 336

III. Causes of Compensable Delay 336

A. Delayed Notice to Proceed 336

B. Failure to Furnish Adequate Plans and Specifi cations 337

C. Failure to Provide Access 337

D. Failure to Coordinate Multiple Prime Contractors 337

E. Failure to Timely Provide Government Furnished Property 338

F. Failure to Timely Approve Shop Drawings/Submittals 338

G. Failure to Provide Timely Direction 338

H. Failure to Timely Inspect/Accept Work 339

I. Failure to Make Timely Payments 339

J. Suspensions 339

IV. Scheduling and Delays 341

A. Types of Project Schedules 341

B. Use of Schedules to Establish Cause of Delay 341

V. Right to Complete Early 343

VI. Concurrent Delay 345

VII. Suspension of Work 346

A. Effect of No Contract Clause 346

B. Suspension of Work Clause 346

C. Ordered Suspensions of Work 347

D. Constructive Suspensions of Work 348

E. Reasonable versus Unreasonable Delays 349

F. Preaward Delays 349

G. Sovereign Acts 349

VIII. Time Extensions 350

A. Notice 350

B. Documentation of Delay 351

C. Measuring Delay 353

D. Burden of Proof 355

IX. Relationship of Delay Remedies under the Suspension of

Work and Changes Clauses 355

X. Acceleration 356

A. Directed Acceleration 356

B. Constructive Acceleration 357

Appendix 9A: Suspension of Work (Apr. 1984) 362

10 Inspection, Acceptance, Commissioning, and Warranties 363

I. FAR Clauses Affecting Inspection and Acceptance 364

A. Standard Inspection Clause 364

B. Other FAR Clauses 366

II. Contractor Quality Control Systems 366

A. A Contractor s Basic Obligations 366

B. Contractor CQC Staffi ng Requirements 367

III. Strict Compliance versus Substantial Compliance 369

IV. Government s Right to Inspect 371

A. No Duty to Inspect 371

B. Effect of Government s Failure to Inspect 371

V. Limits on Government s Inspection Rights 372

A. Different Standards of Performance 372

B. Rejection of Acceptable Work 373

C. Delay and Disruption 374

VI. Cost of Inspection 375

A. Contractor Duty to Assist Government Inspection 375

B. Reinspection Costs 375

C. Tearing Out Completed Work 375

D. Safety Inspections 376

VII. Acceptance 377

A. Types of Acceptance: Formal versus Constructive 377

B. Limitations on Finality of Acceptance 379

C. Substantial Completion 379

D. Final Completion 379

E. Setting Aside Final Acceptance 381

VIII. Project Commissioning 382

A. Introduction 382

B. Commissioning Required on Federal Projects 383

C. Industry Commissioning Standards 384

D. Summary 385

IX. Warranties 386

A. Contractual Warranties 386

B. Implied Warranties 387

C. Government Remedies 388

Appendix 10A: Use and Possession prior to Completion (Apr. 1984) 391

Appendix 10B: Warranty of Construction (Mar. 1994) 392

Appendix 10C: Whole Building Design Guide 394

Section 01 91 00 (Section 01810) Commissioning 394

Part 1. General 394

Part 2. Products 399

Part 3. Execution 400

11 Contract Terminations 407

I. Introduction 407

II. Terminations for Default 407

A. Standard FAR Clause 408

B. Grounds for Default Termination 410

C. Termination Process 417

D. Limitations on Termination Rights 421

E. Waiver of Right to Terminate 423

F. Assignment of Subcontracts to Surety 426

III. Government Damages 427

A. Overview 427

B. Completion/Reprocurement Costs 428

C. Surety s Obligations and Rights 430

D. Liquidated Damages 432

IV. Terminations for Convenience 438

A. Broad Termination Rights 439

B. Limits on Termination Rights 440

C. Standard FAR Clause 441

D. Partial Termination or Deductive Change Order 442

E. Subcontract Termination Issues 444

V. Constructive Terminations 445

A. Wrongful Termination for Default 446

B. Failure to Order under Requirements, Multiyear, or ID/IQ Contracts 446

C. Wrongful Cancellation of Award 448

VI. Termination Settlements 448

A. Timing Requirements 448

B. Calculating the Settlement Amount 449

C. Loss Contracts 451

Appendix 11A: Termination for Convenience of the Government (Fixed–Price)

(Alternate I) (Sep. 1996) 454

Appendix 11B: Checklist: Potential Default Termination 458

12 Payment and Performance Bonds 463

I. Introduction 463

II. Miller Act Payment Bonds 464

A. Introduction 464

B. Parties Covered under the Miller Act 464

C. Claims Covered 467

D. Surety Defenses 469

E. Notice 470

F. Time for Enforcement 471

G. Waiver of Bond Rights 472

III. Miller Act Performance Bonds 472

A. Declaration of Default 472

B. Sureties Options upon Default 474

C. Takeover Agreements 474

D. Damages Available 475

E. Surety Defenses 476

Appendix 12A

Standard Form 25 Payment Bond 479

Appendix 12B

Standard Form 25 Performance Bond 481

13 Equitable Adjustments and Costs 483

I. Overview 483

II. Equitable Adjustment Theory 485

A. Basic Concept 485

B. Equitable Adjustments versus Damages for Breach of Contract 487

C. Cost Recovery Criteria The Cost Principles 489

D. Specifi c Elements of Recovery 493

III. Methods of Pricing Equitable Adjustments and Claims 508

A. Actual Cost Method 508

B. Total Cost Method 510

C. Modifi ed Total Cost Method 511

D. Jury Verdict Recovery 512

IV. Cost and Pricing Data 513

A. Basic Concepts of Cost and Pricing Data 513

B. Absence of Adequate Price Competition 516

C. Role of the Defense Contract Audit Agency and Other Audit Agencies 517

D. Fraud Indicators 517

14 Project Documentation Techniques 523

I Documentation Generally 523

II. Notice Obligations in Government Contracts 524

A. Changes Clause 524

B. Differing Site Conditions Clause 526

C. Suspension of Work Clause 527

D. Terminations 528

E. Notice of Claims 530

F. Notice Checklists 530

III. Notice to Representatives/Agents of Contracting Offi cer 531

IV. Written versus Alternative Forms of Notice 533

A. General Considerations 533

B. Alternative Notice under the Changes Clause 533

C. Alternative Notice under the Differing Site Conditions Clause 534

D. Alternative Notice under the Suspension of Work Clause 537

V. Failure to Give Notice Consequences 538

A. Lack of Notice: Potential Adverse Consequences 538

VI. Coordinating Notice Requirements in Subcontracts and Purchase Orders 540

A. General Considerations 540

B. Flow–down Clause 540

C. Clauses Relating to Changes, Extras, Differing Site Conditions, Work Suspensions, and Claim Presentation 541

D. Effect of a Subcontractor s Failure to Give Proper Notice/Waiver of Notice by the Contractor 542

E. Notice of Claims 543

VII. Documentation Recommendations 543

A. Proper Documentation Starts with Implementing Appropriate Project Controls and Procedures 543

B. Types of Project Documentation 545

C. Documenting Disputes 555

D. Evaluating the Project Documentation System and Retaining Records 555

VIII. Documenting with Project Management Software 557

A. General Considerations 557

B. Software Documentation Capabilities 558

Appendix 14A: Notice Checklist 562

Appendix 14B: Sample (Partial) Notice Checklist: Federal

Government Construction Contracts 564

Appendix 14C: Forms 566

15 Contract Claims and Disputes 571

I. Introduction 571

II. The Contract Disputes Act 571

III. Contractor Claims under the CDA 574

A. Types of CDA Claims: Monetary and Nonmonetary 574

B. CDA Claims Distinguished from Requests for an Equitable Adjustment/Change Order or Settlement Proposals 575

C. CDA Claim Submissions 578

D. Certifi cation Requirements 591

E. P.L
85 804 Relief Distinguished from CDA Claims 599

IV. Subcontractors and the CDA Claims Process 602

A. Standing to Pursue a Claim 602

B. Pass–through Agreements 603

C. Certifi cation of Subcontractor Claims 605

V. Government Claims 605

VI. Contracting Offi cer s Decision 607

A. Contracting Offi cer s Decisions on Claims and Appeals Therefrom 607

B. Appeal Deadlines 612

C. Contractor s Choice of Forum 615

D. Status of the Contracting Offi cer s Decision on Appeal 617

VII. Contract Disputes and Alternative Dispute Resolution 618

VIII. Recovery of Attorneys Fees in Government Contract Claims 620

Appendix 15A: Sample Freedom of Information Act Letter 624

16 Federal Grants Funding Construction Contracts 627

I. Overview 627

II. Role of Federal Agencies in Grant–Funded Contracting 628

A. Federal Grant and Cooperative Agreement Act 628

B. Grants Management Common Rule and Other Government–wide Grants Requirements 628

C. Sources of Grant Authority 629

D. Specifi c Agency Programs 633

III. Administration and Interpretation of Grant–Funded Contracts 634

A. State and Local Government Procurement

Procedures and the Model Procurement Code 635

B. Mandatory Contract Clauses 636

C. Anti–Fraud and Criminal Statutes 639

D. Interpretation of Contracts 641

17 The American Recovery and Reinvestment Act and

Government Construction Projects 643

I Overview 643

A. Purpose of Legislation 643

B. Application to New and Existing Contracts 644

II. Registration and Reporting Requirements 647

III. Buy American Requirements 650

A. International Trade Agreements 651

B. Defi ning the Regulated Materials 651

C. Exceptions 652

D. Noncompliance 653

E. Modifi cation of Existing Non–ARRA Contracts 653

IV. Accountability and Ethics 654

A. Oversight: Government Access to Records and Employees 654

B. Duty to Report Misconduct 655

C. Whistleblower Protection 655

V. Wage–Rate Requirements 657

Appendix A: Internet–Based Resources Applicable to

Government Contracting 659

Appendix B: Glossary of Terms and Acronyms 665

Index 673

Note: Product cover images may vary from those shown
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Thomas J. Kelleher Jr.
Thomas E. Abernathy IV
Hubert J. Bell Jr.
Steven L Reed
Smith, Currie & Hancock LLP
Note: Product cover images may vary from those shown