Edward (Teddie) V. Arnold | Seyfarth Shaw | April 2, 2019
The typical government contract contains a laundry list of standard Federal Acquisition Regulation (FAR) or Defense Federal Regulation Acquisition Supplement (DFARS) clauses that outline the requirements for the construction or services to be provided. These clauses are either expressly stated, i.e. written out in full length in the contract, or incorporated by reference to a particular provision which the contractor must research for the specific language. But contractors beware: not all contracts are what they seem. Since 1963, courts have held that certain clauses are so integral to public procurements that they are deemed incorporated by operation of law, even if they are omitted from the contract.
The Christian Doctrine
The “Christian Doctrine” arises from the Court of Claims’ 1963 decision in G.L. Christian & Associates v. United States. The contractor there sought to recover anticipated profits on a contract that terminated by the U.S. Department of the Army. The government sought to avoid liability for anticipated profits, relying on the standard termination for convenience clause, which disclaims government liability for anticipated profits on unperformed work. Interestingly, the termination for convenience clause was not referenced or incorporated in G.L. Christian’s contract. The government argued that, despite its absence, the clause should be read into the contract as a matter of law. In support of its argument, the government relied on Section 8.703 of the Armed Services Procurement Regulations (“ASPR”), which requires the termination clause be inserted in all fixed-price construction contracts such as the one at issue. The Court agreed, stating that since World War I, the limitation on anticipated profits in a termination case was “a deeply ingrained strand of public procurement policy.”
Following this ruling, various boards of contract appeals and courts took a relatively broad view of the court’s holding, incorporating clauses and procurement regulations with little or no consideration for whether such provisions reflected a deeply ingrained strand of public procurement policy. Thus, a series of ancillary clauses were deemed incorporated by operation of law, even though they were not in the contract. For example, one case from the Court of Claims held that the ASPR “Mistake in Bids” clause was incorporated by law into the contract based on a theory that: “If a regulation appears intended to define and state the rights of a class of persons, it is presumptively intended to benefit those persons.” The Court ruled that the missing clause was intended to benefit bidders, without any analysis as to whether that end was a deeply ingrained in the federal procurement scheme.
The Federal Circuit Reels in the Christian Doctrine
In 1993, the Court of Appeals for the Federal Circuit addressed the expanding scope of the Christian Doctrine in General Engineering & Machine Works v. O’Keefe. Emphasizing Christian’s reliance on the significant and long-standing policy implemented by the termination for convenience clause, the Court re-iterated that “the Christian Doctrine does not permit the automatic incorporation of every required contract clause.” Rather, “the Christian Doctrine applies to mandatory contract clauses which express a significant or deeply ingrained strand of public procurement policy.” In the wake of General Engineering, one set of commentators noted: “They [the courts and boards] have been saved for the last 20 years by being able to mechanically follow the Christian Doctrine to incorporate all mandatory clauses in the contract without analysis or thought. But that day is over. Under the guidance provided by the Federal Circuit, the boards of contract appeals now have to think through each case to determine if the clause meets the General Engineering tests.”
Under the guidance of General Engineering, the Armed Services Board of Contract Appeals (ASBCA) has invoked the Christian Doctrine only twice to incorporate clauses into contracts. And even so, the ASBCA only incorporated clauses that had been previously incorporated under earlier case law. In that same time, the ASBCA has refused to invoke the incorporate various other clauses.
K-Con, Inc.—Mandatory Bonding Requirements
In its most recent decision involving the Christian Doctrine, the Federal Circuit held for the first time that bonding requirements in FAR Part 52.228-15, “Performance and Payment Bonds—Construction,” were incorporated in every construction contract at the time of award. Not only did the Court find that the purposes of the performance and payment bonds rendered them “a significant or deeply ingrained strand of public procurement policy,” it was also persuaded by the fact that government property cannot be subject to subcontractors’ and suppliers’ mechanic’s liens. Thus, protecting subcontractors and suppliers represents a deeply ingrained strand of public procurement policy.
The lesson of K-Con: Federal contractors of all sizes must understand: (1) what type of contract is being contemplated by the government’s solicitation; (2) which provisions are found in those types of contracts; and (3) which provisions have been, or may be, deemed incorporated by operation of law even if not present in the contract. This will greatly impact how contractors price their proposals in competitive solicitations to better account for potential risks.
Post-1963 Christian Decisions
Post-1993 General Engineering Decisions
Relevant Board Decisions 2007 to Present