Chapter 7
Contract Administration
Contracting is usually carried out in three stages—contract planning (pre-award and solicitation), contract formation (evaluation and award), and contract management (administration). Figure 6 shows the major phases of the entire contracting process. The COR or the COR nominee may become involved in all stages of this process. For example, even before the contracting officer prepares the letter of COR appointment or designation, a nominee may be asked to provide technical expertise to the pre-award/solicitation and the evaluation/award phases of the process. (Appendix 2 contains further discussion of a COR nominee's involvement in these two phases.) The third phase, contract administration, begins the official duties of a COR and is the focus of this chapter (see Figure 6).
Contract administration comprises the activities performed by government officials after a contract is awarded. It encompasses all dealings between the government and the contractor, from the award of the contract until the work is completed and accepted by the government, payment is made, and any disputes are resolved.
The focus of contract administration is on obtaining supplies and services of the required quality, on time and within the expected cost. Although the contract's legal requirements take precedence, the skill and judgment of the contracting officer and contracting officer's representative (COR) often are required to protect the government's interests during the contract administration process.
Contractor Responsibilities
Federal Acquisition Regulations (FAR) 46.105, Contractor Responsibilities, directs that the contractor be responsible, under the contract, for the following.
![Figure 6. Contracting Process Figure 6. Contracting Process](https://webarchive.library.unt.edu/web/20130303221624im_/https://acc.dau.mil/GetRichTextImage.aspx?id=475196&imageid=8b730711-0d7e-4d75-94c0-a72adc034e4d)
Figure 6. Contracting Process (above)
- Controlling the quality of supplies or services
- Tendering to the government supplies or services that conform to contract requirements
- Maintaining evidence that the supplies or services conform to required quality, are within the expected cost, and are delivered on time
- Furnishing such information to the government.
Post-Award Conference
Before a contractor begins working on the contract, the contracting officer must ensure that the contractor understands the following.
- Authority, responsibilities, and limitations of the COR
- Contract terms and conditions
- Security requirements
- Value engineering provisions
- Inspection, acceptance, and invoicing procedures
The best way to ensure that the contractor and the government have a complete understanding of their roles is for the contracting officer to hold a post-award conference. At this meeting, all interested parties, including the COR, discuss the contract and the statement of objectives (SOO)/ statement of work (SOW)/performance work statement (PWS). The discussion helps both the contractor and the government to (1) achieve a clear and mutual understanding of contract requirements, terms, and conditions and (2) identify and resolve potential or actual problems. However, the post-award conference is not a substitute for a contractor fully understanding the requirement, nor is it to be used to alter the final agreement arrived at in any negotiations leading to contract award.
Necessity of a Post-Award Conference
The decision to conduct a post-award conference is up to the contracting officer in accordance with FAR Part 42, Contract Administration. In some circumstances, a letter or other form of written communication to the contractor may be an adequate post-award orientation in lieu of a post-award conference. The letter should identify the government representative responsible for administering the contract and cite any unusual or significant contract requirements. In this case, the contracting officer may still want to convene a meeting of the multifunctional team to outline the members' roles and responsibilities, because they may have changed slightly since contract award.
Scheduling and Inviting Attendees to the Post-Award Conference
The meeting should be held as soon as possible after contract award and always prior to commencement of work. Normally, the meeting should be scheduled at the date and time acceptable to the contractor and then arranged with other attendees. Attendees usually include the contracting officer, functional director/functional commander, COR, ground safety representative, security forces, and contract administrator. In short, anyone who has a vested interest in the successful completion of the contract should be invited.
Topics for Discussion at the Post-Award Conference
The post-award conference gives everyone the opportunity to clear the air about any questions concerning the contract. A good meeting demonstrates to the contractor that the government expects to get what it contracted for, that the contractor is responsible for delivering that supply or service, and that the government will commit people and resources to ensure that result. After the meeting, the contractor prepares a report summarizing, for the record, the issues discussed. A Department of Defense (DD) Form 1484, Post-Award Conference Record, may be used for this record.
This meeting can also be used to ensure that everyone clearly understands the role and authority of all government participants during contract performance. For example, all personnel must understand that the contracting officer is the only individual authorized to make changes to the contract.
Finally, the post-award conference is an ideal setting to discuss formal or informal partnering agreements, the use of contractor metrics, and the importance and use of past performance information. The contractor must understand that it is part of the multifunctional team and that it has roles and responsibilities just like any other member of the team.
Contractor and System Compliance
In preparation for the contract monitoring phase, the COR must be aware of the contract requirements and regulatory standards related to the supply or service being acquired.
Contractor Accountability through the SPOT Database
In accordance with Department of Defense Instruction 3020.41, Contractor Personnel Authorized to Accompany US [United State] Armed Forces and Deputy Under Secretary of Defense, Logistics and Materiel Readiness and Personnel and Readiness memo dated 25 January 2007, all contractors authorized to accompany the force must be entered into the SPOT database. This Web-based Joint database is used for tracking contractor personnel who accompany the US Armed Forces. More specifically, the SPOT database is the current system mandated for use in tracking contractor personnel movements within the forward area and for validating individual contractor personnel associated with specific contracts, their authorization for access to specific DoD facilities, and their individual eligibility for specific DoD support services. In short, the SPOT database is the authoritative source for near real-time reporting on globally deployed individuals, by name, by location, and by contract. It also provides for tracking the use of and accountability for DoD equipment in the custody of contractors. Contractors not authorized to accompany the force also may be entered into the SPOT database. Contract companies are responsible for entering employee data. CORs should request SPOT access via the SPOT Web site (https://spot.altess.army.mil).
The database continues to evolve and, ultimately, will incorporate secure functionality and Web services with additional authoritative data sources. New SPOT capabilities will include the following.
- Generate letters of authorization (LOA) with a unique SPOT barcode compatible with DoD scanning technologies. LOAs are digitally signed by the appropriate government agency's contracting officer or COR (if authorized by the contracting officer). LOAs can be retrieved and printed in portable document format (PDF). LOAs are supplied to contingency contractor personnel to be carried and presented for obtaining government-furnished services within the area of operations to which they are assigned. Official identification must be presented with the LOA. Appendix 1 provides a sample LOA.
- Leverage a DoD system to scan credentialed barcodes.
- Obtain data from other authoritative data sources.
- Provide by-name historical and current information, including the contract company and contract number, the requiring unit, the contact information of individuals and the locations to which they were assigned and tracked.
- Provide SPOT data to customers based on their requirements.
- Identify a specific contingency contractor on a particular defense contract.
- Work with DoD and the Department of State (DoS) to provide means to uniquely identify third country nationals.
Currently, SPOT is used in Iraq and Afghanistan by DoD, DoS, and the US Agency for International Development. Examples of the users from these entities are listed below.
- Government offices that are responsible for planning or reporting the number of friendly forces, including contractors, working for the US government in active operations
- Combatant commanders who are accountable for individuals in their area of operations and who must therefore have visibility into contractor operations
- Agencies and logisticians that plan and execute operations and associated logistics efforts
- Business managers who ensure that appropriate funding is available and evaluate how funds are being expended
- Contracting officers who are monitoring active contracts that include deployment
- Government offices with missions that require deployment of contractors, including access by their CORs
- Contractors with government contracts requiring their personnel to deploy
Performance Monitoring
The COR must document contractor performance, review and evaluate progress reports, review invoices, and perform site visits. Chapter 8 contains a detailed discussion of this topic.
Contract Modifications
Many things can affect a contract once it has been awarded (this is common in a deployed environment). The requiring unit may need to reduce or increase the quantities of supplies or services, the requirement could disappear, performance levels could change, or any number of unanticipated events may occur. A contract modification is any written change in the terms of the contract. Only contracting officers acting within the scope of their authority can execute contract modifications on behalf of the government.
Under contracts in the private sector, a company may be bound by the acts of agents with apparent authority. In federal procurement, the government may be bound only by the actions of employees with actual authority. Often, disputes between the government and the contractor occur when the government representative who ordered the change did not have the authority to do so. This places the burden on the contractor to ensure that the person ordering the change has actual authority.
Much litigation involving changes concerns the authority of government employees who are not contracting officers to commit the government legally to contract changes. Generally, personnel who are not contracting officers have only limited authority to represent the contracting officer (to inspect the services being provided to the government). Government employees who are not contracting officers do not have the authority to order or authorize changes.
The Changes Clause
The Changes clause distinguishes government contracts from other contracts. It lets the procuring contracting officer order a change within the general scope of the contract in the areas of 1) specifications (for supplies) or description of required services (for service contracts), 2) place of delivery or performance, or 3) method of shipment, packing (for supplies), or time of performance (for services). Legally, a change outside the scope of the contract is a new procurement that the contracting officer is not authorized to execute under the Changes clause and that the contractor is not obligated to perform.
Note: CORs who were "following the commander's orders" are the primary source of unauthorized commitments or constructive changes. CORs are not authorized to amend, solicit, or modify a contract. The government is not liable for unauthorized acts of its employees.
Contractual changes permitted under the Changes clause (FAR 52.2431 through -4) vary by contract type and category. Under a fixed-price contract for supplies, the following changes are allowed.
- Drawings, designs, or specifications when the supplies are specially manufactured for the government
- Method of shipment or packing
- Place of delivery
Reasons for Modifications
If the contract is a fixed-price contract for services, the following changes are allowed.
- Description of the services to be performed
- Time of performance (hours of the day, days of the week)
- Place of performance
Types of Contract Modifications
A contract may need to be modified to do the following.
- Add or remove funding
- Change a delivery or period of performance date
- Change any of the terms and conditions in any part of the contract (including attachments)
- Change what is needed or where it is needed (incorporate new requirements)
- Correct a mistake
- Exercise an option
- Suspend the work or partially terminate it
- Add work
The contracting officer must make contract modifications in writing, using Standard Form 30, Amendment of Solicitation/Modification of Contract, to preclude any misunderstanding between the parties.
There are two types of contract modifications.
- Unilateral Modification. A unilateral contract modification is official upon signature by the contracting officer; it does not require the contractor's signature or assent. Examples of unilateral changes are administrative changes, change orders, incremental funding actions, and terms or conditions previously authorized in the contract (exercise of options, stop work orders, termination). Administrative changes are simple changes to the contract that have no impact on the terms and conditions or price of the work, for example, changing the name of the contracting officer or COR, updating a payment office, or correcting a fund citation.
- Bilateral Modification. A bilateral contract modification is signed first by the contractor and then by the contracting officer. It is used to make negotiated equitable adjustments resulting from the issuance of a change order and reflect other agreements of the parties modifying the terms and conditions of contracts. A bilateral modification may be used to do the following.
- Change the terms and conditions of a contract
- Negotiate equitable adjustments
- Execute a supplemental agreement that reflects other agreements between the parties modifying the terms1
- Definitize change orders
Constructive Changes
Statements, acts, or inaction by employees who are not authorized to make contractual changes may be deemed constructive changes that nevertheless can contractually bind the government if the result is that the contractor performs work beyond that required by the contract. A constructive change is an oral or written act or failure to act by the government official (in position of authority) that is construed by the contractor as having the same effect as a written change order.
Constructive changes lead from situations such as the following.
- Inadequate or defective requirements documents
- Disagreement over contract requirements
- Failure of the government to cooperate during contract performance (not responding in a timely manner to requests, or not being present to receive a service)
- Defective or improperly interpreted specifications and misleading information
- Overly strict inspection
- Failure to recognize government-caused delays
- Improper technical direction
- Acceleration of contract performance to finish sooner than what is stated in the contract schedule
The first step in avoiding constructive changes is careful preparation of the initial contract (for example, removing ambiguities or inconsistencies from the specifications), as well as any modifications. The government must consider the magnitude of the effect a modification will have on the contractor. For example, after negotiating an equitable adjustment, the government must allow the contractor enough additional time to perform.
The second step in avoiding constructive changes is to know what the contract requires. Both erroneous interpretation of specifications and overly strict inspection tend to result from a failure of the parties to read the contract carefully. When decisions are based on what everybody knows the specifications ought to say, rather than on what the specifications really do say, claims frequently result.
Note: Always eliminate ambiguities prior to award of the contract.
The COR plays a vital role in helping the contracting officer resolve a constructive change by taking the following steps.
- Provide all pertinent documentation to the contracting officer
- Identify the actual changes to the contract that have occurred
- Prepare a technical analysis/evaluation, if the contractor submits a proposal based on the change
- Assist the contracting officer with negotiations
- Educate the contractor regarding the proper notification and handling of changes
Unauthorized Commitments
FAR 1.602-3(a), Ratification of Unauthorized Commitments, defines an unauthorized commitment as "an agreement that is not binding solely because the government representative who made it lacked the authority to enter into that agreement on behalf of the government." Unauthorized commitments violate federal law, federal regulations, the government-wide Standards of Conduct for Federal Employees, and the Defense Federal Acquisition Regulation Supplement (DFARS).
Note: The pressures to meet mission requirements can be intense in a contingency contracting environment. If a COR is not vigilant, these pressures can cloud his or her judgment as to the right way to represent the United States and DoD. CORs must educate their leadership on how to avoid unauthorized commitments.
The following are examples of unauthorized commitments.
- Someone not named on a purchase card orders supplies or services.
- A contractor starts work before the contracting officer issues the contract document.
- A purchase cardholder exceeds his or her single purchase limitation without proper authorization or delegation of authority.
- A contractor is instructed to borrow a cherry picker from another contractor because the government is supposed to supply the equipment but did not have it available.
- Someone from the command group asks to have the grass mowed before a big event, but the contractor has already mowed the grass to specification for the period.
- A contract on a copy machine has expired, and a new unit has been delivered. The contractor is told to leave the old copier in place, because it is important to the mission.
The COR may be the first to recognize the occurrence of an unauthorized commitment. He or she should report any perceived unauthorized commitments immediately to the contracting officer. At the same time, CORs themselves must take great care not to instruct a contractor to perform a task that may be outside the scope of the contract.
Oftentimes, the first indicator that an unauthorized commitment has been made is when an invoice is received from a contractor, but no purchase order or contract exists for the items or work described in the invoice. Contractors who act on unauthorized commitments do so at their own risk. Contractors are not entitled to consideration (money) unless and until an unauthorized commitment is ratified. Therefore, if the action is not ratified or costs are not recognized, payment can be substantially delayed or may not be forthcoming at all.
If a COR exceeds his or her authority, the circumstances of the action and the procedures in FAR 1.602-3, Ratification of Unauthorized Commitments, concerning ratification will dictate what action should be taken. In cases of gross abuse, the contracting officer may decide to revoke the COR's appointment or designation. If so, the contracting officer will indicate the revocation in writing, including a list of all the contracts for which the revocation applies, and include a copy of the revocation in each applicable contract file and provide each contractor a copy. The COR's letter of appointment or designation will immediately be returned to the contracting officer. Additionally, the contracting officer will take any other actions required by law or regulation.
Ratification of Unauthorized Commitments
In some cases, an unauthorized commitment may be subsequently adopted, or ratified (see FAR 1.602-3). This long and time-consuming process involves, among other things, preparing statements and summaries of facts and investigating relevant documents, recommendations, and approvals, in accordance with individual agency procedures.2
As the first step in the ratification process, the individual responsible for making an unauthorized commitment must draft a detailed statement detailing the circumstances and addressing, at a minimum, the following questions.
- Why were normal procedures not followed?
- Did the government have a bona fide need for the supply or service?
- Did or will the government receive benefit?
- Was money available at the time of the action?
Next, the contracting officer, legal counsel, and potentially even the senior agency leader must review the statement. The senior leader's involvement typically depends on the dollar value of the unauthorized commitment and usually results in a thorough investigation. The senior leader must send a formal memorandum to the contracting officer with recommendations for further action.
- Concurrence that the commitment should be ratified
- Steps to be taken to prevent recurrence
- Complete purchase description and funding for the ratification
- Description of disciplinary action taken or reasons why none was taken
The contracting officer must then write a determination and findings (D&F) stating the following.
- The commitment was not made to evade normal statutes or regulations, but was the result of an urgent requirement or a mistake of fact by government personnel.
- The contractor reasonably relied on apparent authority.
- The contractor has no other remedy to obtain relief.
- The contract would otherwise be proper (funds are available, and the requirement is legitimate).
- The contract price was fair and reasonable.
Only an action that would otherwise be proper can be ratified. In fact, an unauthorized commitment could potentially also involve an Antideficiency Act3 violation, if it turns out that funds were not available at the time of the action. If the price is determined not to be fair and reasonable, then the price must be renegotiated.
Note: An unauthorized commitment could potentially be an Antideficiency Act violation, if funds were not available at the time of the action.4
The contracting officer includes on the D&F the recommend resolution of the unauthorized commitment and then submits the D&F to the ratifying official. Based on the recommendation of the ratifying official, the ratification action and subsequent contract action can be completed. Only an action that would otherwise be proper can be ratified. If the price is determined not to be fair and reasonable, then the price must be renegotiated. The contracting officer cannot execute a contract modification that causes an increase in funds required for performance without having first obtained a certification of funds availability.
Cases that are not ratifiable under FAR 1.602-3 may be subject to resolution as authorized by FAR Part 50, Extraordinary Contractual Actions and the Safety Act. Such procedures often require high-level approval, which is discretionary. If the approval official does not elect to use his or her discretion to reimburse the contractor for acts exceeding the COR's authority, the COR may be held personally liable for any costs or damages incurred by the contractor or the government. In fact, the consequences for all parties involved with an unauthorized commitment are severe. Regardless of dollar amounts involved, unauthorized commitments may result in disciplinary or administrative action against the individual making the unauthorized commitment, especially if the violations are flagrant or repetitive.
Technical Evaluation
Upon reviewing the contractor's proposal for a modification, the COR prepares a documented analysis called the technical evaluation. This document is used by the contracting officer to support negotiations and documentation of the change to the contract. It helps the contracting officer to assess the benefit and impact of the change on the outcome desired by the government.
When performing a technical evaluation, the COR should do the following.
- Determine the technical validity of the change:
- Necessary and appropriate solution (in scope)
- Technical merit that will meet the government's requirement
- Cost and delivery implications versus technical merit (impact)
- Review the proposed basis of estimate
- Labor type, profile, and amount proposed
- Other direct costs (travel, materials)
- Conduct a tradeoff analysis to evaluate technical merit versus proposed costs
Contract Options
Options provide the government with the ability to order additional quantities of supplies or additional periods of service beyond those established in the initial contract. Normally, contract options establish the quantity, price, and delivery schedule for these additional supplies or services. The government uses options when (1) there is a defined quantity, quantity range, or additional requirement for the supplies or services beyond what is being purchased on the basic contract, and when (2) such additional requirement may be finalized and funded during the performance period of the basic contract. Options are executed by unilateral modification. Contract options may be exercised in the following circumstances.
- After the contractor is notified of the government's intent to exercise the option
- Only by modification by contracting officer
- When the option fulfills an existing need, already priced on the contract
- When funds are available
- When exercising the option is advantageous to the government
The COR's role with options is to make the need for them known prior to contract award. When exercising an option, the COR assists the contracting officer with drafting the required D&F by assessing the available options, determining the continuing need, determining whether the option is in the government's best interests, and conducting complete market research on current pricing.
Correspondence and Notifications
The COR must sign all correspondence, reports, findings, recommendations, and other documents using name and title, followed by "Contracting Officer's Representative." The COR should communicate with the contractor, contracting officer, disbursing officer, and others directly concerned with contract performance. All correspondence must reference the contract number.
Correspondence with the Contractor
The COR must forward to the contracting officer a copy of any correspondence to the contractor along with an explanation if not apparent from the text. The COR must also forward to the contracting officer the original of the correspondence received from the contractor. In addition, the COR should coordinate with the contracting officer on the content of any contractually significant correspondence to the contractor in order to prevent possible misunderstandings or the creation of a condition that may be the basis of a later claim. The contracting officer will advise the COR of the appropriate mail system to be used.
Notifications to the Contracting Officer
The COR must promptly inform the contracting officer of the following.
- The exact date the contractor began performance. According to FAR 52.211-10, Commencement, Prosecution, and Completion of Work, only the contracting officer may issue the Notice to Proceed.
- Incidents of unsatisfactory performance by the contractor. The COR should specify the applicable paragraph of the contract that has been violated by the contractor and the circumstances surrounding the violation, including names, dates and places, and estimated damages that have been incurred by the government.
- Delays in the contractor's progress due to the fault of the government. The COR should include recommendations regarding any extension of the contract completion date.
- According to FAR 52.242-14, Suspension of Work, only the contracting officer may issue Suspension of Work orders.
- Any discrepancy between actual conditions and those represented in the contract provisions, specifications, or drawings.
The COR must establish a suspense system to advise the contracting officer of the contractor's failure to complete performance or delivery in accordance with the contract schedule. Reporting of contractor failures should not be held for the monthly report.
Completion, Payment, and Closeout
Acceptance
Acceptance is the responsibility of the contracting officer, but he or she may delegate the responsibility to the COR. Acceptance can take place before, at the time of, or after delivery. However, supplies or services ordinarily should not be accepted before completion of government contract quality assurance actions. Before services or supplies furnished by the contractor can be accepted, the COR must determine acceptability by review or inspection. Final acceptance by the contracting officer of supplies received or services rendered concludes performance by the contractor, except for administrative details relating to contract closeout. After final acceptance, the contractor can no longer be held responsible for unsatisfactory effort unless otherwise specified in the contract. Therefore, the COR must ensure that the work performed under the contract is measured against the contract terms and quality requirements. If performance does not meet contract quality requirements, it is incumbent upon the COR to identify deficiencies and to advise the contracting officer. Acceptance is evidenced by execution of an acceptance certificate on an inspection or receiving report form or on a commercial shipping document or packing list.
Exceptions to final acceptance include the following.
- Latent defects
- Fraud
- Gross mistakes amounting to fraud
A latent defect is one that is not readily noticeable upon reasonable inspection at the time of acceptance. The burden is on the government to prove that defective material and workmanship was the probable cause of product failure. Latent defects can also apply to design and manufacture contracts; in those cases, the contractor may have to replace the designed product at no charge to the government. The contractor's latent defect responsibility is prorated over the life of the product because the contractor is responsible for latent defects any time after final acceptance.
Documenting Acceptance
CORs are often the designated officials authorized to accept supplies or services for the government (see COR delegation letter for delegated duties and authorities). Acceptance prior to payment is accomplished in one of three ways.
- COR signature on DD 250, Material Inspection and Receiving Report (discussed, with other forms, in Chapter 10)
- COR signature on SF 1449, Solicitation/Contract/Order for Commercial Items (discussed, with other forms, in Chapter 10)
- COR electronic signature in the Wide Area Workflow (WAWF) system.
Wide Area Workflow
The WAWF system (accessible at https://wawf.eb.mil) is a secure, Web-based system developed by the Defense Contract Management Agency for government contractors and authorized DoD users to generate, capture, and process receipt and payment documents. It enables electronic submission of contractor invoices and of government inspection and acceptance documents.
The WAWF system creates a virtual folder to combine the three documents required to pay a contractor: the contract, the invoice, and the receiving report. Authorized DoD users are notified of pending actions by e-mail and are presented with a collection of documents required to process the contracting or financial action.
The National Defense Authorization Act of Fiscal Year 2001 established the requirement that all contract invoicing must be done electronically. In March 2003, DoD implemented this requirement via DFARS 252.232-7003, Electronic Submission of Payment Requests and Receiving Report. WAWF is envisioned to ultimately be the single DoD system for all contractor invoicing and government acceptance actions (where required). Processing invoices electronically will reduce the likelihood that the government will have to pay an interest penalty; however, it is still important for the COR to understand his or her role in processing these invoices.
Nonconformance
Nonconformance occurs when the contractor presents a deliverable to the government that does not conform to the contract requirements. Only the contracting officer can authorize acceptance of noncompliant or deficient items. The government may deal with noncompliance in one of three ways.
- The first (and most preferable) action is to require the contractor to correct the noncomplying or deficient items or services.
- The second most preferable action is to accept the defective items. This is useful only if the deficiencies are minor. Remember—the COR cannot accept any deficient items; only the contracting officer can make this decision. Although a contractual right of the government cannot be waived, nor may a contract be modified for the convenience of a contractor, it may be in the best interest of the government not to reject the materials or services because of the following.
- The urgency of the need for the supplies or services and the period of time required to obtain them from other sources, as compared with the time delivery could be obtained from the contractor.
- The availability of the supplies or services from other sources.
- Any other pertinent facts and circumstances.
If it is desired to accept work that essentially meets the needs of the government but does not conform to the requirements of the contract, the COR must furnish the contracting officer with a documented recommendation to accept the work, a description of all points in which the work fails to meet contract requirements, and an estimate of the time required for the contractor to complete performance. The contracting officer may extend the contract completion date by formal modification to allow the contractor to correct deficient work.
- The third—and least preferable—potential action is to reject the noncompliant item and terminate the contract. (Remember—the COR cannot terminate a contract.)
Remedies
Remedies for nonconformance issues include the following.
- Invoke the related contract clause (Stop Work, Cure Notice, Show Cause, Liquidated Damages, Warranty, or Termination)
- Withhold or reduce award and incentive fees
- Invoke inspection clauses (reject the noncompliant work or allow rework)
- Suspend progress payments
- Decline to extend the term of the contract (by not exercising an option or award term)
- Modify the contract
- Address claims or consideration
- Take legal recourse
- Use alternative dispute resolution (ADR)
- Document the issue in the past performance database
The COR's key role with regard to remedies is monitoring. Heavy reliance is placed on the COR's observations and documentation. The COR must keep good records and promptly notify the contracting officer of any noncompliance issues. In addition the COR should be prepared to suggest remedies to the contracting officer.
Note: Silence is not golden. Silence on the part of the government could be interpreted by the contractor as the government's acceptance of substandard supplies or services.
Invoice and Payment
Cash flow is the lifeblood of any company. Contractors need to be paid for the supplies and services they have provided so that they can pay their own bills and employees. Timely payment of contractors also encourages them to continue to do business with the government. Congress, recognizing the importance of timely payments, passed the Prompt Payment Act. The act specifies that, if the government does not make payment on a valid contractor invoice within a specified period of time, the government is liable to pay interest, computed at the federal funds rate.
Note: The COR should ensure that invoices receive prompt attention and are reviewed for accuracy and consistency with contract terms.
The following are important terms regarding invoice and payment procedures.
- Invoice. The invoice is the billing statement for supplies or services accepted by the government.
- Invoice payment. The invoice payment is the government disbursement of monies for supplies or services accepted by the government.
- Prompt payment. All solicitations and contracts must specify payment procedures, payment due dates, and interest penalties for late invoice payment. Unless specifically prohibited by the contract, the contractor is entitled to payment for accepted partial deliveries of supplies or partial performance of services that comply with all applicable contract requirements and for which prices can be calculated from the contract terms.
The contractor may request payment via an invoice or via the SF 1449 or DD 1155, Order for Supplies or Services. Appendix 1 contains a sample SF 1449. In reviewing the payment request, the COR should be familiar with the following.
- Contract number or order number
- Office locations and points of contact
- Contract line item number (CLIN) structure (a CLIN identifies a separate supply or service to be required under contract)
- Inspection/acceptance
- SOO/SOW/PWS
- Period of performance/delivery dates
Contents of a Valid Invoice
According to FAR 32.905, Payment Documentation and Process, the following are the minimum requirements for a valid invoice.
- Complete contract number, including delivery/task order number (if applicable)
- Name and address of contractor
- Invoice date
- Invoice number
- Description of services or supplies provided
- Quantity of services or supplies provided
- Unit of issue–as specified in the "Schedule of Supplies"
- Manufacturer's part number (as applicable), as specified in the contract
- Unit price and extended total, for each line item
- Invoice total
- Shipment number (as applicable)
- Postage and transportation (as applicable), if authorized by the contract to ship "Prepay and Add" include the transportation cost (parcel post, United Parcel Service) as a separate line
- Required certification–as required by the contract (for example, certification of conformance, administrative contractor officer approval)
- Taxpayer Identification Number if not required to be registered in the Central Contractor Registry (CCR) (when applicable)
- Electronic funds transfer/banking or remittance information for foreign contractors who are CCR exempt (when applicable)
- Any other contract-directed requirements
Inaccurate or invalid invoices must be returned within 7 days.
DFARS 252.232-7003, Electronic Submission of Payment Requests and Receiving Reports, requires contractors to submit payment requests electronically, but the clause lists exceptions. For a contingency contracting situation, two exceptions are key.
- DoD is unable to receive a payment request or provide acceptance in electronic form.
- The contracting officer administering the contract has determined, and documented in writing, that electronic submission would be unduly burdensome to the contractor.
Voucher and Invoice Review
The contracting officer is responsible for monitoring invoice payments according to the terms and conditions of the contract and local policy/ guidance.
CORs can approve invoices on fixed-price contracts. However, for cost-reimbursement, time-and-materials, and labor-hour contracts, CORs can review—but not approve—invoices. For other than fixed-price contracts, The Defense Contract Audit Agency has the sole authority for verifying claimed costs and approving interim payment requests. Only the contracting officer can approve final payment requests.
Note: CORs must understand local finance office procedures and requirements for proper invoicing. CORs should ask their contracting officers for additional details.
Note: Payment to a contractor implies work is progressing according to the contract. Therefore, CORs must ensure the government is getting what it is paying for. CORs must monitor contractor performance through review of monthly reports, on-site visits, and surveillance reviews. It is vital that CORs review billing statements thoroughly and on time.
COR approval of a voucher or invoice implies that, to the best of the COR's knowledge, the nature, type, and quality of effort or materials being expended are in general accord with the progress of work under the contract. In other words, the COR supports the contracting officer by ensuring that payments are made for performance in accordance with the contract terms and conditions.
The following are examples of typical problems that may be found on invoices.
- Inflated or unrealistic labor hours
- Unsupported other direct costs, such as poor descriptions that cannot be tied to specific tasks
- Unauthorized overtime charges
- Incorrect or unrealistic labor category
- Management hours disproportionate to worker bee hours
- Duplicate invoice, or wrong invoice
- Undercharges due, for example, to competing workload demands
- Math errors
- Wrong contract or task order number
- Wrong price (proposed versus negotiated)
- Wrong CLIN or SubCLIN
- No point of contact for defective invoices
- No date
- Incorrect or missing shipment information
- No remittance address
- Negotiated prompt pay discounts not offered
Overtime
Overtime (OT) cannot be paid unless specifically allowed on the contract. Only the contracting officer can authorize the use of OT. When reviewing a contractor's OT claims, the COR should consider whether the OT was necessary and, if so, whether additional funds can be obtained to fund the OT.
Interest Penalties
The COR must process invoices promptly. If the government fails to make payment by the due date, the designated payment office must automatically pay an interest penalty. The due date is (1) the thirtieth day after the designated billing office receives a proper invoice from the contractor, or (2) thirtieth day after government acceptance of supplies delivered or services performed.
Warranties
A warranty is a promise or affirmation given by a contractor, supplier, or manufacturer to the government, user, or purchaser regarding the nature, usefulness, condition, or performance of the supply or service to be delivered under the contract.
Implied Warranties
There are two types of implied warranties: warranty of merchantability, and warranty of fitness for a particular purpose. The warranty of merchantability implies that supplies must be fit for the ordinary purposes for which such supplies are normally used. This type of warranty is incorporated in the contract unless stated otherwise. The warranty of fitness for a particular purpose implies special protection for a buyer that relies on the seller's expertise in selecting suitable supplies. A properly written performance statement in the SOO/SOW/PWS will help to better identify this warranty.
Implied warranties may be excluded in three ways.
- By calling the buyer's attention, in understandable language, to the exclusion of warranties
- When the buyer has examined the product (sample or model) or when the buyer has refused to examine the product
- By agreement of both parties
Express Warranties
An express warranty may be purchased to cover the risk of a product defect. Express warranties are based on the following.
- Any promise or affirmation of facts that become part of the bargain
- A description of supplies that is part of the basis for the bargain
- Any sample or model that is part of the basis for the bargain
The use of express warranties is decided by the head of the contracting activity, based on whether they are economically feasible and administratively practical. Because they must be purchased, the costs must be weighed against the need for protection against risk.
The warranty takes effect at time of delivery. If an item is delivered for storage or later use, the warranty provides a starting time after delivery. The length of the warranty period must be specified.
Warranties can be enforced when a defect within the warranty scope arises during the warranted period.
Past Performance
The government relies on past performance data to assist with making award decisions. Therefore, in support of future acquisition efforts, the performance of contractors under current contracts should always be documented. The contracting officer may task the COR with collecting performance information. The COR should be fair in assigning a performance rating and should provide narrative explaining the reasons for the rating.
The contracting officer enters contractor performance information into the Contractor Performance Assessment Reporting System (CPARS), either at the completion of a contract or at intervals specified by the buying agencies. CPARS documents the following aspects of the contractor's performance.
- Conformance to contracting requirements and standards of good workmanship
- Forecasting and control of costs
- Adherence to contract schedules
- History of reasonable and cooperative behavior and commitment to customer satisfaction
- Business-like concern for the interest of the customer
The government's CPARS assessment should reflect the contractor's performance as documented by the COR during the monitoring process.
Contract Closeout
Contract closeout actions are primarily the contracting officer's responsibility, but COR assistance may be required. COR assistance is indispensable when disputes or litigation is involved.
A contract is not completed until it has been closed. Timely contract closeout does the following.
- Allows all affected activities to concentrate on current and future requirements
- Allows for deobligating excess funds
- Identifies the need for additional funds
With the help of the COR, the contracting officer must ensure that the following actions have been accomplished.
- Services have been rendered
- Articles have been delivered and accepted
- Payments and collections have been made
- Property and classified information have been dispositioned
- Releases from liabilities, obligations, and claims have been obtained from the contractor
- Assignments of refunds and credits have been executed by the contractor
- Administrative actions have been accomplished
- Excess funds have been deobligated
- Contract file is properly documented
Table 3 summarizes do's and don'ts for contract administration
Do's | Don'ts |
Remember that the COR is an agent of the US government, with only the authority delegated by the contracting officer. |
Accept less than what is required by the contract |
Get the names of contractor personnel authorized to represent the contractor. |
Assume an interpretation of ambiguous contract language which would be favorable to the government. Remember: if the contractor's interpretation is reasonable, it will prevail. |
Find out the specific authority of contractor personnel. Does the person you are dealing with have the authority to obligate the contractor? |
Hold up payment unless performance is deficient or defective. |
See that all government approvals or consents are timely. |
Accept supplies or services without complete inspection. |
|
Make any change, modifications, deletions, or additions to the contract requirements. Work through the contracting officer. |
|
Automatically consider all contractor claims unreasonable. Be fair and impartial. |
Table 3. Do's and Don'ts for Contract Administration
Notes
- A supplemental agreement is a contract modification based on the parties' prior agreement regarding a change. It incorporates an equitable adjustment to the contract cost, schedule, or both, as a result of the change. Supplemental agreements often involve the submission, by the contractor, of a proposal and detailed negotiations. Top
- The Army, Air Force, and Navy ratification procedures are similar. They are described in the individual service FAR supplements: Army AFARS 5101.6023, Ratification of Unauthorized Commitments and AFARS 5101.602-3-90, Ratification Procedures; Air Force AFFABS 5301.602-3, Ratification of Unauthorized Commitments and MP5301.602-3, Processing Ratifications; and Navy NMCARS 5201.602-3 (S-90), Ratification of Unauthorized Commitments. Top
- The Antideficiency Act prohibits authorizing or incurring obligations or expenditures in excess of amounts apportioned by the Office of Management and Budget (OMB) or in excess of amounts permitted by agency regulations. Top
- The Antideficiency Act prohibits authorizing or incurring obligations or expenditures in excess of amounts apportioned by the OMB or in excess of amounts permitted by agency regulations. Top
Chapter Acronyms
ADR – Alternative Dispute Resolution
AFARS – Army FAR Supplement
AFFARS – Air Force FAR Supplement
CCR – Central Contractor Registry
CLIN – Contract Line Item Number
COR – Contracting Officer's Representative
CPARS – Contractor Performance Assessment Reporting System
DD – Department of Defense When Used With Form
D&F – Determination and Findings
DFARS – Defense Federal Acquisition Regulation Supplement
DoD – Department of Defense
DoS – Department of State
FAR – Federal Acquisition Regulation
LOA – Letter of Authorization
MP – Mandatory Procedure
NMCARS – Navy Marine Corps Acquisition Regulation Supplement
OMB – Office of Management and Budget
OT – Overtime
PDF – Portable Document Format
PWS – Performance Work Statement
SF – Standard Form
SOO – Statement of Objectives
SOW – Statement of Work
SPOT – Synchronized Predeployment Operational Tracker
US – United States
WAWF – Wide Area Workflow