A Case Study on Authority to Bind the Government

The concept of who has authority to bind the government seems clear – only contracting officers. However, litigation repeatedly arises around this topic. One type of dispute that appears in contracting authority cases is whether the parties formed a contract. Outlined below is real-world example of a contractor losing an award it had begun performance on because it relied on the representations of a contracting officer representative.

The Facts

The agency issued a request for quotes (RFQ) for office furniture. After review of the submitted quotes, the contracting specialist notified the apparent winning bidder that it had been awarded the contract and asked it to sign and return the attached SF1449 (the signature page in most federal procurements). The SF1449 was not signed by the contracting officer.

The contracting officer realized that the apparent winning bidder was non-compliant on a basic, mandatory requisite for award eligibility. Accordingly, the contracting officer never counter-signed the SF1449. The apparent winning bidder, however, began performance and incurring costs.

Several weeks later, the apparent winning bidder received a notice from the contracting officer indicating the contract had been given to the next bidder in line for award. The awardee had an SF1449 executed by the contracting officer.

The Relevant Law

In public procurements requisitioned through an RFQ process, the agency’s issuance of an order against a quote constitutes an offer that the vendor may accept either formally through an acceptance document (like an SF1449) or by performance.

Contracts may be entered into and signed on behalf of the government only by contracting officers.

The Court’s Decision

The court determined that the agency and the apparent winning bidder never formed a contract because the agency did not issue an order. A contract specialist made the award notice and sent a request to sign the SF1449. A contract specialist does not have authority to bind the government (and his actions were not ratified by the contracting officer); therefore, a valid offer for acceptance (either by singing the SF1449 or beginning performance) was not made. Alternatively, the awardee received an SF1449 executed by the contracting officer (a valid offer) which was accepted when it countersigned the document.

The Lesson Learned

The apparent winning bidder not only lost the contract it thought it had been awarded, but it was also unable to recover any costs associated with undertaking performance. This outcome was based solely on the fact that it relied on representations made by an individual who lacked authority to bind the government. The contract specialist’s notification of award was unauthorized and the apparent winning bidder should not have begun performance.

The case was not as simple as illustrated above. As with any dispute, the facts were more complicated and issues of delegation of authority, implied authority, and ratification were litigated. Despite extensive briefing on these topics, the court simply could not be swayed from the fundamental tenant in public contract law that only the contracting officer has the warranted authority to bind the government. Absent a clear showing of an exception like outlined above, this premise will virtually always defeat a contractor’s claim.

In sum, contractors are well-advised to confirm with the contracting officer whether an award has been made before undertaking performance when award notice comes from from someone on his or her team.

Weitz Morgan serves as litigation counsel to general counsels, business owners, and government contractors throughout Texas and nationally. This article is basic in nature and for the purpose of general interest and education.