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Seventh Commandment of Government Contracting: Thou shalt avoid hostility

October 21, 2014

(This article is part of a 10-part series for the blog of Public Contracting Institute called, “A Government Contractor’s Ten Commandments.”)

By Tim Sullivan

For someone coming into Government contracting for the first time, one of the most difficult things to understand is the role that protests and disputes play in the Government contracting world. In the commercial sector, the thought of suing a customer or a prospective customer is simply absurd; after all, how can you expect to develop or maintain a good business relationship with someone you are litigating against? Isn’t the customer always right?

In Government contracting, one quickly learns about a “contract of adhesion,” that is, a contract that does not result from two evenly-matched parties negotiating a deal from scratch, but one that is created as a result of a procurement process in which the customer, a Federal agency, dictates the rules of the road from start to finish. Sometimes this customer makes mistakes, and Congress decided long ago that it needed to enact statutes that provided the contractor, or the disappointed offeror, legal recourse. Those statutes are implemented by Part 33 of the Federal Acquisition Regulation, “Protests, Disputes, and Appeals.”

Even though the statutes and regulations contemplate processes for protests, disputes and appeals, a contractor should exercise caution and restraint in pursuing these avenues. As a general rule, I advise clients to try to resolve disagreements with their customers at the lowest possible level and at the earliest possible time, always maintaining a professional demeanor. I also advise them never to go over a Government employee’s head until it is abundantly clear that that person will not deal with them reasonably. Companies should deal with these issues on their own, for as long as they can, because introducing a lawyer into the process can complicate the matter in numerous ways. Perhaps most important in dealing with these situations is the “tone” of all communications.

Tone is something rarely covered in school, but it can have great influence on your ability to resolve a problem with a customer. If that customer thinks you are yelling at her (for example, by typing an e-mail in all caps), threatening her or condescending to her, your chances for success are quickly heading south. Smart contractors avoid inflammatory language and they never, never, never threaten a contracting officer. Once he or she perceives a threat, there is a danger they will abandon their organizational goals and deal with you personally. While you might prevail several years and thousands of dollars later, they will have had the satisfaction of knowing how much trouble they have caused you.

One wag once said, “Never argue with a man who buys ink by the barrel,” making the point that picking a fight with a newspaper is not a very smart thing to do. The same can be said of picking a fight with Uncle Sam. Even if you win, you may find it is a Pyrrhic victory because you have alienated so many Government officials in the process. Moreover, if your fight spills into litigation, your adversary is one that does not worry about budgets like you do — it prints money. While the protest or disputes process may ultimately be your only choice, make sure you and your lawyers discuss your chances of success and the likely cost before declaring war. The decision to litigate is yours, not your lawyer’s, and you need this information in order to make this important decision.

I have heard people say that suing the government is not like a lawsuit in the commercial sector because the statutes and regulations allow for such actions and the Government is like an elephant — this stuff just rolls off its back and no one takes things personally. In other words, it’s all business. That is simply not true. Behind every government action there is a person or, more likely, a team of people, who are going to become involved as witnesses in your litigation. In order to prevail in your protest or claim you may have to show that these people are incompetent, liars or schemers, and you will be exposing them to many difficult hours of deposition and court testimony. This is an experience they are not likely to forget, and, more troubling, they will always associate it with you and your company. Imagine how this experience will affect the other contracts you are performing with this same agency, or the way that this agency will evaluate future proposals you submit. You must take this potential impact into account before you pull the trigger.

Because of the potential damage that litigating a contract dispute might cause to the relationship between you and your customer, you and your lawyer should carefully consider using Alternative Dispute Resolution (ADR) rather than a full-blown trial format. The boards of contract appeals and the U.S. Court of Federal Claims are happy to accommodate parties that elect ADR, and it has two great advantages over full-blown litigation: First, the parties control the schedule — something that would never happen otherwise. Second, because of the nature of ADR, it offers an opportunity for the parties to resolve their differences without destroying their relationship, something scorched-earth litigation will not achieve.

“Past performance” plays a major role in Government contracting today and should weigh heavily on your mind as you contemplate going to the mat with your Government customer. While agencies are not supposed to retaliate against a contractor by slamming its past performance just because it had the audacity to sue them or file a protest against them, there is no doubt that these adversary relationships can “chill” the past performance reviews this contractor will be receiving in the future. For example, imagine the frustration when a contractor receives an “acceptable” or “met requirements” rating from a customer agency when it believes it should have been rated as “outstanding.” Good luck challenging that.

When I broke into this business in the early 1970s, there was nothing contractors enjoyed more than a good fight, for example, throwing an annoying Government auditor out of their offices or telling a demanding contracting officer’s technical representative to go jump in the lake. But imagine how either of those sophomoric actions would play out today in a past performance evaluation (and in the world of social media). That is why I tell people that the concept of past performance is the number one behavior modification tool in the Government’s toolbox. With that kind of weapon available to the Government, smart contractors teach their employees to behave professionally in all their dealings with the Government, even if they are angry or frustrated. This should be expected behavior in any event, of course, but this disciplined, controlled approach will protect your interests in the long run.

Tim Sullivan is the chair of Thompson Coburn’s Government Contracts Group. He can be reached at tsullivan@thompsoncoburn.com or (202) 585-6930. Tim previously authored a series of articles on the “10 Myths of Government Contracting.”