If I’m a federal government contractor, why do I need a government contracts attorney on hand for advice? Can’t I use our regular business attorney to advise us on contract matters? Usually not. The law of federal government contracts differs significantly from regular commercial contract law. A contract entered into by two businesses is governed by state law and often by the version of the Uniform Commercial Code or UCC that has been adopted by your state. A contract between a business and the United States Government (usually referred to as a federal prime contract) is not governed by state law or the UCC, but is governed by a different body of law that has developed over the last one hundred and fifty years – since the American Civil War. Commercial contract disputes are often litigated in state courts or federal district courts. Federal Government Contract disputes are litigated in specialized Federal Courts or federal administrative boards, each with their own internal rules and practice requirements.
Leaving aside government contracts for grants or loans, most government contracts are for the acquisition by the U.S. government of goods or services. At the heart of federal government contract law is the Federal Acquisition Regulations or the FAR. The FAR is codified as part of the U.S. Code of Federal Regulations (Title 48) and is 7 printed volumes with 35 chapters and thousands of pages. In addition to these written regulations, there is a body of case law on interpreting federal government contracts developed by the U.S. Court of Federal Claims, the applicable Court of Appeals, the GAO, and the applicable Board of Contract Appeals, which are the specialized courts or quasi-judicial offices charged with interpreting federal government contract law.
Moreover, there are several notable legal principles that distinguish federal government contract law from traditional commercial law. One of the most unusual differences is the federal government’s right to terminate almost any federal government contract unilaterally and without your agreement. This is called a “termination for convenience” and there is a special clause defining this right in most federal prime contracts. If the government has a contract with you to buy 100 guns and, after the contract begins, they decide that 50 is really all they need, they can terminate the contract after delivery of 50 guns. You don’t get to recover any lost profit on the guns you did not deliver. You do have some right to recover extra costs you incurred that you expected would be paid back through the sale of all 100 guns, but all such costs are highly regulated by the FAR.
Another legal principle that applies uniquely to federal government contracts is what is now referred to as the Christian doctrine. The name comes from the U.S. Supreme Court case of G.L. Christian and Assoc. v. United States, 375 U.S. 954 (1963). The Christian Doctrine says that if your federal prime contract fails to include a contract clause that was required by regulation to be included, the Court will interpret the contract as though the clause had been included. In a commercial contract, if the parties did not include a clause in the contract, the clause has no legal enforceability – regardless of whether the parties intended or desired the clause to be included at the time. Not so in federal government contracts.
Another difference is the standard government contract “Changes” clause. In a commercial contract, once the parties agree on the terms of a contract, the terms are locked in unless all parties agree to change them. Not so in federal government contracts. By way of a specific “Changes” clause required to be in many government contracts, the government reserves the right to make changes to the contract within the general scope, including changing specifications, the method or manner of performance, or accelerating the work. The government contractor is not allowed to refuse the change, as a commercial contractor could, and the government is not in breach of the contract by insisting that the change be carried out. The government contractor is entitled to payment for the increased costs in performance attributed to the change.
Federal government contracts also have the potential to create criminal liabilities in certain contexts where it would not in a commercial contract. If one of your employees lies to get a federal government contract or falsifies an invoice to the federal government, both the employee and the company could face stiff criminal and civil sanctions under the False Claims Act. In a commercial context, you would likely face only a civil lawsuit.
These are only a few of many different and sometimes intricate requirements of federal government contract law. Federal Government contracting practice is a specialized area that can be overwhelming to attorneys unfamiliar with the unique rules and regulations. For this reason, if you are or intend to be a provider of products or services to the Federal Government, it is probably a good idea to have a government contracts attorney in your corner. The Federal Government is big and can be a tough and stubborn adversary, especially for the unprepared.