Utilizing the Christian doctrine, the United States Court of Appeals for the Federal Circuit (“Federal Circuit”) recently held that bonding requirements were included in government contracts by operation law.
K-Con, Inc. v. Sec’y of the Army, 908 F.3d 719 (Fed. Cir. 2018)
The Army awarded K-Con, Inc. (“K-Con”) two contracts that did not include express requirements for performance and payment bonds. The contracts were for the design and construction of a laundry facility and a communications equipment shelter, but did not include FAR 52.228-15 requiring bonds in construction contracts over $150,000. The Army asked K-Con to provide the performance and payment bonds prior to receiving a notice to proceed on construction of the buildings. Two years later, K-Con provided the bonds and then submitted a request for equitable adjustment to the contract for increases in costs and labor over the two-year period.
The contracting officer denied the request claiming the bonding requirement was incorporated into the contracts via the Christian doctrine. The Armed Services Board of Contract Appeals (“Board”) agreed as did the Federal Circuit. In affirming the Board, the Federal Circuit concluded that the contracts were for construction and as such the bonding requirement was mandatory and sufficiently ingrained in public procurement policy so as to be incorporated into the contract.
The Christian Doctrine
The Christian doctrine is a judicially created principal of government contract law that provides certain clauses are of such importance in public procurements so as to be considered incorporated by operation of law. The government has a responsibility to notice vendors of contract requirements, whether expressly or through incorporation by reference. However, since the development of the Christian doctrine through case law, a mandatory contract term that conveys a deeply ingrained strand of public procurement policy is considered to be included even if it is not actually in the agreement.
Application of the Christian Doctrine in Government Construction Contracts
In K-Con, Inc., the Federal Circuit determined that the governing statures and regulations included obligatory language around performance and payment bonds. Specifically, it pointed out that the Miller Act, as implemented by FAR 28.102-1, 28.103-3, and 52.228-15, explicitly states that bonds “must” be furnished in government construction contracts. The Court therefore concluded that the first requirement under the Christian doctrine – that the term be mandatory – was satisfied given the contracts at issue were for construction of government facilities.
The Court further determined that requiring performance and payment bonds is a deeply ingrained strand of public procurement policy. It reasoned that unlike commercial transactions where a worker or supplier may obtain a mechanic’s lien on the subject property to ensure payment, no such option exists in government contracts. As such, bonds are necessary to provide protection to those who supply labor or materials to a contractor on a public contract. Further, the Court outlined that the Miller Act has consistently required performance and payment bonds for the same purpose. Accordingly, it held that in construction contracts, despite the fact that the statute and regulations require express incorporation of the bonding requirement, performance and payment bonds are of such significance in public contract law as to be read into the contract.
The Take Away
K-Con, Inc. is a good reminder to contractors to be well-aware of the statutory and regulatory framework forming the basis of their contract and that certain obligations may be imposed that are not apparent on the face of the agreement. Consequently, contractors will want to be mindful of ensuring they are fully compliant with their contracts and of arguments based on the government’s failure to include a contract clause, as was the case in K-Con, Inc., or for including the wrong clause. Per the Christian doctrine, doing so is not necessarily a bar to the government’s ability to deny claims, enforce terms, or recover damages under an aspect of the contract.