MANAGING RELATIONSHIPS IN

FEDERAL GOVERNMENT CONTRACTS

2

GOVERNMENT CONTRACTING IS

SERIOUS BUSINESS

3

Prime Contractor Is Liable for Subcontractor’s Failures

Prime Contractor is liable for total performance regardless of what is subcontracted [See FAR 9.604(3)]

Subcontractor’s violation of laws or ethics can put Prime Contractor at Risk

4

Government’s Remedies

1. Contractual

2. Administrative

3. Civil Litigation

4. Criminal Litigation

5

ContractualReduce Payments (Deductions)

Withhold Payments

Deductive Change

Termination for Convenience

Termination for Default

6

Administrative• Poor Contractor Performance

Assessment Report (CPAR)

• Finding of Non-Responsibility

• Suspension

• Debarment

7

Civil LitigationCivil False Claims

Contract Disputes Act

8

Criminal LitigationMonetary Fines

Imprisonment

9

Potential PenaltiesCompany

Individual

10

Company LiabilityFines

Damages

Reduction of Payment (Contract Amount, Change Order, Claim)

Forfeiture of Claim

Disqualified from Contract Award

11

Annulment of Contract

Termination of Contract

Suspension

Debarment

Criminal Liability

12

Individual LiabilityLose Job

Personal Debarment

Fines

Damages

Prison

13

MAKE CAREFUL CHOICES UPFRONT

14

Find Out All You Can

Do It Before Becoming “Wedded” to Partner

15

What You Learn Could AffectRisks You Are Willing to Take

Contract Terms You Are Willing to Accept

Price You Quote (Commensurate with Risk)

16

Personnel AssignmentsQualities and Experience

Staffing Levels

Staffing Mix

17

ADVANTAGES TO PRIME OF COMPETING SUBCONTRACTS

18

Optimum Benefits from Competitive Negotiation

19

Best ValueInvestment Required in Solicitation for Proposals

Complexity of Scope Guides RFP Requirements

Only Ask for What You Are Prepared and Able to Evaluate

20

Entertain Discussions Wherever Appropriate

Timing

Resources

21

Introduction to New CompaniesBetter Deal

Challenge Incumbent Complacency

Resource for Future Needs

Keep Selected Source in Line

22

Learn About Improved MethodsSeek Technical Proposals

Encourage Innovation in Evaluation Factors

23

Helps Ensure Competitive Pricing

Creates Leverage for Acceptance of Favorable Contract Terms

24

DEVELOP EFFECTIVE CONTRACT DOCUMENTS

25

Beware of “Agreements to Agree”

26

Do You Have a Deal (or Only a Lawsuit?)

Memorandum of Understanding

Letter of Intent

Teaming Agreement

27

Get Binding Agreements to Extent Possible

Essential Elements

Scope

Price

Term

28

TimingBefore Committing to Project

Before Agreeing on Price

Before Getting Married

29

Limitations on Promissory Estoppel (Detrimental Reliance)If Required, Make Agreement Subject to Conditions

Objective

Few in Number

30

Subcontractor Protections of Data in Proposal

Prevent Bid Shopping

31

Advance Confidentiality Agreements

Intellectual Property

Technical Data

Pricing

Proprietary and Business Sensitive Information

32

Limited LicenseQuid Pro Quo for Award

Cannot Be Used to Subcontractor’s Disadvantage

33

RemediesInjunction for Actual or Threatened Misappropriation

Damages

Royalties

34

Points Agreed upon Cannot Be Changed during Negotiations

Seat at the Table

Prior Written Authorization to Change

35

Focus on Key Provisions

36

What Are You Going to Do?

How Are You Going to Do It?

37

When and Under What Conditions Are You Going to Get Paid?

Prime Contractor: Pay If Paid

Only What Government Pays

Only If Government Pays

38

Subcontractor: “X” Days after InvoicePrime Must Pay Even If Government Hasn’t (or Won’t)

Not Subject to Problems Caused by Others

Timing

Amounts

Pay When Paid

39

Who Has What Risks?

40

Risk Shifting ProvisionsFlow Down Clause

“Remedy” Granting Clauses

41

DisputesForum

Duty to Proceed

Recovery Limitations

42

Risk Mitigation/ProtectionsInsurance

Indemnity

Bonds or Other Guarantees

43

ABILITYONE CONSIDERATIONS

44

Prime ContractEducate Government Early

Incorporate Protections into Prime Contract

45

Subcontracting Procurement List

Services

46

SPECIAL PROVISIONS FOR ABILITYONE CONTRACTS

Committee JurisdictionPursuant to the Javits-Wagner-O’Day Act, 41 U.S.C. §§46-48c (“JWOD Act”) and implementing regulations, particularly 41 C.F.R. §51,the Subcontracted Services have been set aside on the Procurement List by the Committee for Purchase from People Who Are Blind or Severely Disabled (“Committee”).

47

Notwithstanding anything to the contrary in the Prime Contract, in the Federal Acquisition Regulation, or any other document, the Committee has exclusive and plenary jurisdiction and authority over all aspects of the Subcontracted Services, , including but not limited to scope of work, all issues of performance, pricing, Subcontract terms, Subcontract administration, modifications, and disputes between the Prime Contractor and the Subcontractor with respect to the Subcontracted Services. By way of example and not limitation, the Committee’s jurisdiction and authority over the Subcontracted Services control over and supersede the Prime Contract clauses concerning Changes, Disputes, and Termination.

48

Further in this regard, all price and price-related terms of the Subcontracted Services are subject to Committee review and approval on the following intervals: (1) for the initial performance period; (2) no less than annually thereafter; and (3) as requested by the Subcontractor. Any Committee-approved price change or economic adjustment to the Subcontracted Services shall be reflected in an amendment to this Subcontract, to be effective upon a date designated by the Committee.

49

AbilityOne ProgramThe Subcontractor is a qualified and participating non-profit agency within the meaning of the JWOD Act, implementing regulations, policies, and procedures, and in accordance with the requirements of the Committee and of NISH, including the AbilityOne Program.

50

The Contractor acknowledges and agrees that the Subcontractor has the responsibility and decision-making authority for ensuring that the requirements of the AbilityOne Program are met and that purposes and intent of the AbilityOne Program are satisfied with regard to performance of Subcontracted Services

51

Both parties agree to endeavor to create a harmonious work environment and cooperation among their respective employees and Subcontractor’s AbilityOne Workers.

52

“AbilityOne Workers”“AbilityOne Workers” are persons employed by the Subcontractor who meet the following criteria:

Have a documented disability within the meaning of applicable federal and state law, including but not limited to the JWOD Act and implementing regulations, policies, and guidelines;

53

Are considered participants of the Community Rehabilitative Program/ AbilityOne Program receiving services under such programs from the Subcontractor;

Are employed at the job site in a rehabilitative environment for rehabilitative purposes; and

May be employed under special certificates issued by the U.S. Department of Labor, Wage and Hour Division.

54

It is the intention and understanding of the parties to this Subcontract that (i) Subcontractor’s AbilityOne Workers will be employed and will work at the site of performance of Subcontracted Services under conditions which are primarily rehabilitative; (ii) Subcontractor will provide on-site supervisors to oversee the work of AbilityOne Workers and will provide other counseling and rehabilitative services in accordance with the AbilityOne Program and Subcontractor’s standard services; and (iii) Subcontractor may apply productivity and other permissible standards to AbilityOne Workers in accordance with subminimum wage requirements of the Department of Labor and as otherwise permitted by law.

55

Notwithstanding anything to the contrary in the Prime Contract or elsewhere, the Subcontractor shall have control over and full decision-making authority to all matters pertaining to or affecting AbilityOne Workers, subject to Committee jurisdiction and approval, including but not limited to employment, training, counseling, rehabilitative services, placement, work assignment, staffing levels and ratios, conflict or grievance procedures, discipline, and payments concerning AbilityOne Workers.

56

Modifications of Procurement List Services Subject to Committee Approval

The Contractor may not, without the Subcontractor’s prior written consent, make any modification to Subcontracted Services or execute or agree to any amendment, modification, or alteration of the Prime Contract which affects the Subcontracted Services, including but not limited to scope of services, statement of work, description of services to be performed, times or duration of performance, frequency of performance, place of performance, manner or method of performance, or in any other respect which makes the Subcontractor’s performance of Subcontracted Services more costly, more difficult, more time-consuming, or less efficient or which adversely affects the revenue or profitability derived by the Subcontractor from performance of Subcontracted Services.

57

The Prime Contractor shall equitably adjust the Subcontract price for all modifications to Subcontracted Services, including any increases in Subcontractor’s cost of performance, together with reasonable allowances for markup.

The substance, provisions, and pricing of any modification are subject to Committee approval.

Conditions on Amendments

This Subcontract sets forth the entire and integrated agreement and understanding between the parties hereto, and supersedes any prior and contemporaneous understandings and agreements, whether written or oral with respect to the subject matter herein. The terms and conditions of this Subcontract may be amended only (a) by written instrument executed by both parties hereto or (b) by direction of the Committee.

58

Restriction on Adverse ActionThe Contractor may not assert or take a deduction, withhold or reduce payments due the Subcontractor hereunder, or take any other action adverse to Subcontractor with respect to Subcontracted Services (“Adverse Action”) except (i) to the extent the Government has taken Adverse Action against the Contractor for which the Subcontractor is at fault, (ii) before such Adverse Action is taken, the Subcontractor had been given sufficient advance notice and reasonable opportunity to cure any alleged deficiency in Subcontracted Services giving rise to the Adverse Action, and (iii) the Committee approves the Adverse Action. Subcontractor shall not be liable to Contractor for delays or other problems in performance of Subcontracted Services which are occasioned by causes beyond Subcontractor’s reasonable control and without its negligence, including but not limited to acts of God, acts of a public authority in its sovereign capacity, or any other matters of force majeure.

59

Contractor and Subcontractor shall immediately report in writing to the other party any problems which could prevent it from performing its respective work in accordance with the requirements of this Subcontract. At a minimum, the report shall identify the problem, its potential impact on performance, proposed methods to remedy the problem, and when the proposed method is expected to remedy the problem. However, the reporting of problems shall not absolve the responsible party from complying with its obligations under this Subcontract.

60

The Contractor and Subcontractor shall keep each other timely informed of substantive communications with the Government pertaining to or affecting Subcontracted Services. Neither party shall make any response or commitment to the Government on any matter which affects the other party's performance without first obtaining the other party's consent.

61

Limitations on Incorporation by Reference

This Subcontract incorporates by reference the terms and conditions of the Prime Contract between the Government and Contractor, insofar as is applicable to the Subcontracted Services, except that (a) nothing in the Prime Contract shall limit, supersede, or nullify Committee jurisdiction and (b) this Subcontract controls over any conflict, discrepancy, or inconsistency between the Prime Contract and the Subcontract.

62

With respect to Subcontracted Services, Subcontractor assumes toward Contractor all the rights and obligations which, under the Prime Contract, Contractor assumes toward the Government, and Contractor assumes toward Subcontractor all the rights and obligations which, under the Prime Contract, the Government assumes toward Contractor, unless otherwise provided in this Subcontract and except to the extent of the Committee’s jurisdiction.

63

Special Disputes ProceduresAny claim, disagreement, assertion of right, matter of controversy, or dispute (collectively “dispute”) arising under, relating to, or existing with respect to this Subcontract or to the Subcontracted Services shall be resolved by the Contractor and Subcontractor as provided in this paragraph.

64

Contractor and Subcontractor agree to use their best efforts to resolve any dispute following these principles: (i) consistent with the intent of this Subcontract, (ii) at the lowest level of organization or management, (iii) as expeditiously as circumstances allow, (iv) as fairly as possible, (v) avoiding undue prejudice to the rights or interests of the other party, and (vi) minimizing damages to the maximum extent reasonable.

65

Contractor and Subcontractor agree that disputes should be resolved whenever possible at the project level and should therefore first be submitted to the parties’ most senior on-site representatives. If the dispute cannot be resolved at the project level, then either party may request that the dispute be presented to the chief executive officers of the respective parties for resolution. If the chief executive officers are unable to resolve the dispute within five business days after submission to them or as otherwise mutually agreed, either party may seek determination by the Committee, in accordance with the procedure prescribed in 41 CFR 51-6.15, for disputes between contracting activities and non-profit agencies, of any dispute which involves or affects Subcontracted Services, and such determination shall be final and binding upon both Contractor and Subcontractor. If the Committee determines it does not have jurisdiction over the dispute, either party may seek redress of the dispute by filing an action but only in a court of competent jurisdiction located in the [Name of State].

66

Both parties shall continue performance of their respective obligations pursuant to this Subcontract during the pendency of any dispute, with the exception that if Contractor fails to pay Subcontractor without justification amounts as and when due under this Subcontract, Subcontractor has the right (but not the obligation) to suspend its performance until such time as such payments are made, provided Subcontractor delivers written notice of the proposed suspension at least 5 days in advance of the date of suspension.

67

Nothing in this Subcontract shall limit the authority of the Committee (or NISH as the Committee’s authorized agent) to take actions regarding disputes between the Contractor and Subcontractor to ensure proper performance of Subcontracted Services and preservation of the Subcontract.

68

Limitation on Forum Selection Clause

This Subcontract shall be construed and governed in accordance with the laws of the [Name of State], excluding its choice of law rules, and in accordance with the Federal Government contracting law, including the authority of the Committee, as appropriate.

69

APPRECIATE LIMITATIONS ON AUTHORITY

70

Contracting OfficerAll Powerful

71

Sole AuthorityChangesSuspension of WorkStop WorkTerminations

ConvenienceDefault

72

Warrant LimitationsSubject to Availability of Funds

Anti-Deficiency Act

Appropriation Data on Documents

73

Contracting Officer’s Representative

Authority Limited by Letter of Appointment

Scope of Authority Specified

What COR Can Order

Dollar Limit

74

Commanders, Technical Advisors, Inspectors

Tend to Want to Run the Show

No Authority to Go Outside Contract

75

Maintain Positive, Regular Communications During Performance

Make “Marriage” WorkWork on Relationship

76

Hallmarks of Good RelationshipCandor

Trust

Mutual Respect

Politeness

77

Cooperation

Positive Attitude

“Collegeality”

78

Partnering Principles

Goals Are the Same

Efficient Performance

Good Results

Minimum Problems

79

Problems Are Inevitable

Strike Quickly

Lowest Levels First

Elevate as Needed

80

Inherent Government Limitations

Authority

Notice Requirements

Lesson: Pick Your Spots

81

No Surprises!

82

Trust, But Verify (Ronald Reagan)

83

Nip It in the Bud (Barney Fife)Problems Seldom Get Better Over Time

84

Early Recognition Systems

Develop Disclosure Culture

Performance Problems

Dividends for Ethics Problems

85

Quality Assurance Inspections

Frequent Meetings

Open Dialogue with Upstream and Downstream Partners

86

Deal with Problems Promptly and Effectively

Solve Problems Rather than Fix Blame

Cure Causes as Well as Symptoms

Devote Appropriate Resources

Follow the Contract

87

Art of Giving Effective Notice

Factual

Timely

Compliance with Contract

“I expect you to pay for it”

88

Top-Down Commitment

If Top Management Does Not Believe in It, Success Is Unlikely

Make Employee Acceptance a Priority

SESSION TITLE: Relationships

SESSION CODE: CRP-W1045

Session Evaluation Information