Quelling Disputes May Key on Contract Proposals

A recurring issue in government contract disputes is the legal significance of a contractor’s proposal after the award of a contract.

Contractors often take the position that their proposed manner of performing is relevant directly in resolving contract disputes.

The government, conversely, often argues that the contract requirements, not the contractor’s proposal, are the touchstone for performance.

In some cases, the answer is simple because the government includes a special clause in the contract that expressly incorporates the contractor’s proposal into the contract. In these cases, depending upon the specific language of the clause, a contractor’s technical and cost proposals may become a binding part of the contract.

But what happens in the more common situation, when the contract does not expressly incorporate the contractor’s proposal? What significance does the proposal have in that context?

Based on fundamental notions of contract law, a contractor’s proposal can have significant, even controlling, value in resolving disputes.

When faced with conflicting interpretations of contract terms, courts and administrative boards of contract appeals seek to carry out the common understanding of the parties at the time of the award.

Therefore, the relevant meaning of a contract clause is the meaning that the parties intended at the time of award, not some meaning offered by a party at a later date.

To determine the parties’ intent at the time of award, courts and boards often look to the circumstances surrounding formation of the contract.

These circumstances can include all types of pre-award communications between the parties, including government statements at a bidders’ conference, written questions and answers exchanged between the contractors and the government, and a contractor’s statements in its technical or cost proposals.

Thus, regardless of whether a contractor’s proposal is incorporated expressly into a contract, the proposal can play an important role in resolving a contract dispute.

For example, if a particular specification is susceptible to more than one reasonable interpretation, and the contractor has explained its interpretation in its technical proposal, the government cannot insist upon an alternate interpretation after award unless it compensates the contractor for the change.

Similarly, if the statement of work allows various methods of performance, and the contractor has described its planned method in its proposal, the government cannot insist upon a different manner of performance without compensating the contractor for the change.

The rule of law that supports this common-sense result is that a contracting party is bound by the known, pre-award interpretation of the other party, unless it expresses clearly its disagreement with the interpretation before the contract award. Any unexpressed disagreement or reservation a party may have at the time of award would be irrelevant.

Thus, if the government knows or has reason to know the meaning that a contractor intended to convey in its proposal, but voices no disagreement with that meaning during evaluation of the proposal, then the government will be bound by the contractor’s meaning.

Of course, this rule works both ways, so contractors must beware of ignoring government interpretations that conflict with the their planned method of performance.

Because proposals routinely provide considerable detail regarding a company’s planned method of meeting contract requirements, they can be a rich source of evidence in resolving post-award disputes.

Contractor personnel at all levels should understand the technical and cost assumptions underlying a proposal, so that government-initiated changes to a contractor’s proposed approach can be identified and claimed, as appropriate.
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