• R.D. Lieberman,Consultant

Reprocurement Contract May Not Exceed Undelivered Term of Defaulted Contract

After a contract has been terminated for default, Federal Acquisition Regulation (“FAR”) 49.402-6 permits the agency to repurchase the same or similar services or supplies against the defaulted contractor’s account, as long as the supplies or services are still required. Even though the Government Accountability Office (“GAO”) recognizes that statutes and regulations governing regular procurements are not strictly applicable to reprocurements after default, the GAO will review a reprocurement to determine if an agency acted reasonably under the circumstances. Recently, the GAO sustained a protest because the Defense Information Systems Agency (“DISA”) awarded a reprocurement contract for a term that was 3½ months greater than the undelivered term left on the defaulted contract. Steel Point Solutions, LLC, B-418224, Jan. 31, 2020.

Akira Technologies, Inc. was awarded a task order by DISA for communications support services pursuant to a Federal Supply Services (“FSS”) schedule contract. The acquisition was therefore conducted pursuant to FAR Part 8.4 (Federal Supply Schedules), and the contract was issued as a commercial item contract, under FAR Part 12 (Commercial Items). Because of this, the original contract was terminated pursuant to FAR 8.406-(a)(1) and FAR 12.403, rather than FAR Part 49. Accordingly, FAR 49.402-6(b) is only applicable as guidance and only to the extent that it does not conflict with specific procedures in commercial item acquisitions. The DISA defaulted Akira after 3 ½ months of performance, and the protester here challenged the length of the reprocurement contract.

The GAO’s decision was based on its conclusion that under FAR 49.402-6, an agency cannot enter into a reprocurement contract for quantities or terms exceeding the undelivered quantity or term remaining, even for a commercial item. GAO concluded that the agency’s repurchase authority is restricted to any remedy available to a buyer in the marketplace. GAO noted that the preferred remedy is “cover,” which authorizes a buyer to purchase replacement goods for those due from the seller, and then repay the government the difference in price between the original and substituted price. GAO saw no authority permitting DISA to enter into a reprocurement contract for more than the undelivered quantity (i.e. the reprocurement contract was for 30 months of performance even though only 26 ½ months remained on the original contract) because it would exceed the legal remedy of “cover.”

Takeaway. The preferred remedy for a reprocurement after default is “cover,” whether in a FAR Part 49 procurement, a Part 12 procurement, or a Part 8 (Federal Supply Service) procurement.

For other helpful suggestions on government contracting, visit:

Richard D. Lieberman’s FAR Consulting & Training at https://www.richarddlieberman.com/, and Mistakes in Government Contracting at https://richarddlieberman.wixsite.com/mistakes.

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The website of Richard Donald Lieberman, a government contracts consultant and retired attorney who is the author of both "The 100 Worst Mistakes in Government Contracting" (with Jason Morgan) and "The 100 Worst Government Mistakes in Government Contracting." Richard Lieberman concentrates on Federal Acquisition Regulation (FAR) consulting and training, including  commercial item contracting (FAR Part 12), compliance with proposal requirements (FAR Part 15 negotiated procurement), sealed bidding (FAR Part 14), compliance with solicitation requirements, contract administration (FAR Part 42), contract modifications and changes (FAR Part 43), subcontracting and flowdown requirements (FAR Part 44), government property (FAR Part 45), quality assurance (FAR Part 46), obtaining invoiced payments owed to contractors,  and other compliance with the FAR. Mr.Lieberman is also involved in numerous community service activities.  See LinkedIn profile at https://www.linkedin.com/in/richard-d-lieberman-3a25257a/.This website and blog are for educational and information purposes only.  Nothing posted on this website constitutes legal advice, which can only be obtained from a qualified attorney. Website Owner/Consultant does not engage in the practice of law and will not provide legal advice or legal services based on competence and standing in the law. Legal filings and other aspects of a legal practice must be performed by an appropriate attorney. Using this website does not establish an attorney-client relationship. Although the author strives to present accurate information, the information provided on this site is not guaranteed to be complete, correct or up-to-date.  The views expressed on this blog are solely those of the author. FAR Consulting & Training, Bethesda, Maryland, Tel. 202-520-5780, rliebermanconsultant@gmail.com

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