Week 2 Case Study
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School
Texas A&M University *
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Course
2305
Subject
Law
Date
Feb 20, 2024
Type
docx
Pages
3
Uploaded by PresidentStrawOpossum31
I am writing to you regarding my analysis of the negotiations between the government and AsphaltNoMore for the concrete batch and rock crushing facility at a U.S. base in Iraq. After my review of the details, I have highlighted some important points and answered key questions in my findings. Is there a valid government contract?
There is no valid contract between the U.S. Government and AsphaltNoMore. Government contracts typically consist of statutes, regulations and policies that ensure proper spending of taxpayer money. The government holds a special status as a sovereign entity resulting in following the procedures of the Contracts Disputes Act which would have been crucial in this case. All government contracts are subject to the Federal Acquisition Regulation (FAR) which contain the policies and procedures for acquisitions by
all Federal agencies. The FAR’s primary objective is to maximize the agency’s ability “to obtain best value
based on the requirement and the evaluation factors set forth”, cost accounting standards and the defense thereof. Article 1 Section 8 of the Constitution empowers the U.S. Government to set taxes, tariffs and other means to raise federal revenue. This agreement was only verbal and did not have these regulations in place to avoid risk. Although a contracting officer was assigned in this case to delegate and
a notice of award was in place, that does not mean that an official government contract was entered upon between the US government and AsphaltNoMore, only letters were sent back and forth but did not outline the policies, or regulations that governed this agreement. Apparent authority does not bind the government in these types of contracts. Federal contracts are overall governed by the Federal Common Law which would minimize risk. The rules laid out in the Code of Federal Regulations (CFRs) “instead of a mutually agreed upon set of terms and conditions called out in a federal government contract” are also a way that they could have avoided risk by entering and following the code. Not having a specific contract type in place whether that outlines a firm fixed price or a cost-plus fixed price where the contractor has full responsibility of performance costs or where they have minimal responsibility would have been ideal to differentiate in this case. With the regulations of the Federal Common Law, it allows the government to revise, cancel or apply extensive audit and surveillance measures that are needed for these types of negotiations. If a contract had been in place, the contractor
would be entitled to reimbursement for any costs incurred and changes could have been made if desired by both parties. In this case, there was an offer made by the government to provide services and
acceptance by beginning the work entering them into a verbal contract to follow with a Notice of Award.
However, a Notice of Award does not constitute a contract which outlines the minute details of the negotiations. The contract they had in place did not specify provisions that allowed them to terminate, but the government did so anyway. What risks arise in this case?
The main risk that arises in this case is that AsphaltNoMore began doing work for the government in this
case with no contract in place. A verbal presentation was made where the government selected to build an asphalt plant on top of the addition to the concrete batch plant, this allowed personnel to begin work
but not be entered into a formal agreement governed by the Federal Common Law that would reimburse them for any error that occurred. AsphaltNoMore is at risk for reputational damages by not having a provision that allowed it to terminate the entirety or portions of the contract. Risks in pricing arise when no formal contract does not outline the obligations of AsphaltNoMore, making them responsible for any costs incurred in labor. AsphaltNoMore is at financial risk with these negotiations.
The government pushed back on the claim for materials and equipment in support of the subject requirement a claim exceeding in $100,000. By not assigning a contract number formally further puts AsphaltNoMore at risk. There were no specifications as to the time, material and labor hours involved in these types of negotiations. AsphaltNoMore are at risk for reputational damage of future government contracts following these negotiations which can result in less work coming through. The operational risk of these negotiations which result in flawed or failed processes, fraud, legal claims and business disruptions. As we saw in these negotiations, there was equipment that was not operational, and the burden eventually fell on AsphaltNoMore to correct these issues while the government put the work on hold. There is also a legal risk here that falls on AsphaltNoMore who began work to fulfill the commitments they made to the government, if this matter goes to legal proceedings the questions will arise whether they had a formal contract to comply with, but in this case, they did not so there is no framework to base the proceedings off of, solely verbal communication and a Notice of Award that does not outline the commitments. What should the stakeholders (Kris, Bethany, and AsphaltNoMore) have done to reduce risks? It is the CO’s responsibility to ensure development of proper requirements to ensure that contractors meet commitments of their contract. Ensuring that a solid contract was in place would have been the first way to reduce risk for the stakeholders. CO Kris should have recognized the risk from the beginning of the negotiations by identifying what caused the issue, estimating the probable impact and prioritizing it. CO Kris should have had better communication with the Major in this case, to discuss a formal agreement or included all the terms in the Notice of Award, they were unaware of the location of the equipment. This is negligence on the part
of the CO who should know to mitigate risk to both parties by ensuring that clauses were in place to protect both parties. It would have been ideal in this case to have a clear outlined definition of what is expected by the government and communicated to AsphaltNoMore. CO Bethany should have had better
communication overall with AsphaltNoMore to ensure an ease in transition of CO’s. She should have communicated properly with CO Kris from the initial transfer of projects to avoid the risks. She immediately assumed that AsphaltNoMore acted at its own risk rather than suggesting solutions to the current issues at hand. She could have been transparent and provided more insight into why operations
were being stopped and tried to work with AsphaltNoMore to come to a common understanding in the way to proceed. AsphaltNoMore should have pushed for a solid contract to be in place with statutes, policies and regulations to outline their responsibilities. Clear communication would have avoided many risks to their
business. What should stakeholder do now?
At this point, since we identified the risks that AsphaltNoMore faces, it is time to put a plan in place to mitigate further risk. The first step should be to enter in a solid contract proposed by AsphaltNoMore outlining the work that they will be providing. In the meantime, they should stop all work until that contract can be agreed to. Then, a decision needs to be made on how to proceed. Since the government
has already decided to disassemble and remove the rock crusher and asphalt plant, AsphaltNoMore needs to seek legal counsel on how to properly receive remedies for their damages and losses. It would
be CO’s responsibility at this juncture to facilitate the communication between the government and AsphaltNoMore. The stakeholders should enter into an agreement with clear set procedures, policies and regulations on how to move forward. AsphaltNoMore should come up with a plan to propose to the
government to avoid further risk. What is the likely outcome? The likely outcome would be that this issue would escalate to legal proceedings or mediation and arbitration. The absence of documentation regarding these negotiations challenges the outcome for AsphaltNoMore. They began work so they could be ultimately liable for the final decision. AsphaltNoMore could argue that because of the lack of communication from the government they suffered great financial and operational risk. The chances of AsphaltNoMore winning this case are highly unlikely because they knowingly began work without specifications from both parties on how to proceed. AsphaltNoMore assumed the risk when they opened their plants and crushers. This will have impact on future business and the reputation of AsphaltNoMore following these proceedings possibly making them liable for all the costs incurred. From the government’s perspective they have the standpoint that AsphaltNoMore assumed the risk when they agreed to begin work. This can be further argued in court or in mediation, to highlight the fact that the government did not take proper measures or ensure communication that would lead to successful completion of this project. In this case, it is looking like a possible loss for AsphaltNoMore because they simply began work without a contract which was an offer and acceptance and entering them into an agreement through the negotiations. Since a notice of award was given to them by the government, the government has a stronger argument that they knew the ramifications of what AsphaltNoMore entered into.
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