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Federal Circuit Applies Christian Doctrine to Incorporate Missing Payment and Performance Bond Requirements

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The Christian doctrine is an important rule in government contract law but it is not often the subject of a Federal Circuit opinion. In K-Con, Inc. v. Secretary of the Army (Fed. Cir. November 5, 2018), the Federal Circuit applied the Christian doctrine to read in to an Army design and construction contract missing FAR clauses requiring the contractor provide both payment and performance bonds.  

The contractor, K-Con, Inc., was awarded two task order contracts to design and construction a laundry facility and to construct a communications-equipment shelter.  The original solicitations were issued in September 2013 using “Standard Form 1449, Solicitation/Contract/Order for Commercial Items.” The Army solicitations did not expressly require the posting of payment or performance bonds and failed to include standard FAR clause 52.228-15, Performance and Payment Bonds— Construction.  One month after contract award, the Army requested that K-Con provide performance and payment bonds “in accordance with FAR 28.102-2(b)” so that the Army could issue its notice to proceed with the contracts. In 2015, K-Con provided the bonds and the contracts were modified to compensate K-Con for the bonding fees.

In January 2016, K-Con submitted a request for equitable adjustment (“REA”) in the total amount of $116,336 to recover increases in materials and labor costs caused by the two-year delay in issuing the notices to proceed pending K-Con providing the bonds.

The contracting officer determined that the contracts were for construction which requires performance and payment bonds, and he denied the other requests, “on the basis that the bond requirements set forth in FAR 58.228-15 were incorporated into the contracts at the time they were awarded, under the Christian doctrine.”

K-Con argued that the contracts were for commercial items, and not for construction.  But the Federal Circuit found that contracts to be patently ambiguous and K-Con should have sought clarification from the Army.  The Court wrote, “We conclude that the contracts were patently ambiguous. On the one hand, as the Army admits, if the contracts had been issued using the standard construction contract form, they would have been construction contracts without any ambiguity. But that is not what happened here. Instead, these contracts issued using the standard commercial items contract form. The line item descriptions even included the phrase “FOB: Destination,” which is typically used for commercial items contracts.”  But since K-Con did not seek clarification from the Army, it cannot now argue that its interpretation that the contracts were commercial items, and therefore bonds were not required, was proper.

Implications For Contractors

The Federal Circuit’s decision in K-Con, Inc. v. Secretary of the Army is important to contractors for at least two reasons.  First, contractors are reminded that one of the unique rules of government contracting is that clauses that are required to be included into contracts by statute or regulation  (e.g. mandatory clauses) and “express a significant or deeply ingrained strand of public procurement policy” will be incorporated into a contract as a matter of law when missing from the contract document.  Second, if a solicitation is ambiguous on its face, that is, patently ambiguous, a contractor must seek clarification from the government agency otherwise it takes the risk that its interpretation of what the contract means is not shared by the government agency.  

About RJO’s Government Contracts Group

Rogers Joseph O’Donnell is highly respected as one of the leading government contracts law firms in the country. For several years the firm has been recognized by Chambers USA as being one of the top eight government contracts law firms in the nation and “far and away the best government contracts lawyers on the West Coast.” Several of RJO’s attorneys also have been recognized for their individual excellence by Chambers. Our government contracts attorneys handle all aspects of government contracting at the federal, state and local levels throughout the country.  For questions about the Federal Circuit’s opinion in K-Con, Inc. v. Secretary of the Army, please contact Patricia Meagher at pmeagher@rjo.com or 415.956.2828.

 

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