Opinion ID: 2784995
Heading Depth: 2
Heading Rank: 1

Heading: Challenge to Payment Terms

Text: A. Background The Federal Acquisition Streamlining Act of 1994 (“FASA”) was implemented to “revise and streamline the acquisition laws of the federal government” and “facilitate the acquisition of commercial products.” S. Rep. No. 103CGI FEDERAL INC. v. US 11 259, at 1 (1994). To that end, FASA reformed government procurement by requiring the federal government to purchase commercial items under commercial terms to the extent practicable. In particular, FASA provides that the Federal Acquisition Regulations (“FAR”) include “a list of contract clauses to be included in contracts for the acquisition of commercial end items,” and that the list, to “the maximum extent practicable . . . shall include only those contract clauses that are . . . determined to be consistent with standard commercial practice.” 41 U.S.C. § 3307(e)(2)(B). FASA also requires that, “[t]o the maximum extent practicable, only the contract clauses [in the above-mentioned list] may be used in a contract . . . for the acquisition of commercial items.” Id. § 3307(e)(2)(D). FAR Part 12 was created to implement FASA. FAR Part 12 states that it “shall be used for the acquisition of supplies or services that meet the definition of commercial items.” 48 C.F.R. § 12.102(a). FAR Part 12 implements FASA’s mandate by requiring that “contracts for the acquisition of commercial items shall, to the maximum extent practicable, include only those clauses” required by law or “[d]etermined to be consistent with customary commercial practice.” Id. § 12.301(a). It precludes the inclusion of “any additional terms or conditions in a solicitation or contract for commercial items in a manner that is inconsistent with customary commercial practice for the item being acquired unless a waiver is approved in accordance with agency procedures.” 48 C.F.R. § 12.302(c). The Federal Supply Schedule (“FSS”) program pro- vides a simplified process for the government to obtain commercial supplies by negotiating underlying FSS contracts with suppliers of commercial products and then allowing executive agencies to issue orders for those commercial products pursuant to the underlying FSS contract. See Sharp Elecs. Corp. v. McHugh, 707 F.3d 12 CGI FEDERAL INC. v. US 1367, 1369 (Fed. Cir. 2013). FAR Subpart 8.4 governs the FSS program. 48 C.F.R. §§ 8.401-8.406. B. Whether the 2014 RFQ Payment Terms Violate FAR Part 12 The 2014 RFQs being challenged here were issued pursuant to the Financial and Business Solutions Schedule, an underlying FSS contract. The Court of Federal Claims found, and neither party disputes, that the services solicited in the 2014 RFQs are commercial items and that the revised payment terms therein are inconsistent with customary commercial practice. Opinion and Order at 9, 19; see Oral Argument 37:45-41:45. We affirm these undisputed fact findings. 5 Thus, the only issue is whether FAR Part 12’s proscription against terms that are inconsistent with customary commercial practice applies to the 2014 RFQs. If it applies, the payment terms are in violation. Before the Court of Federal Claims, the government does not appear to have disputed that FAR Part 12’s proscription against terms inconsistent with customary commercial practice applies to solicitations for the underlying FSS contracts themselves. Opinion and Order at 12. However, the government argued that FAR Part 12’s proscription does not apply to orders made pursuant to the existing FSS contracts. The Court of Federal Claims agreed. Opinion and Order at 19-22. It reasoned that FAR Subpart 8.4, which governs the FSS program, does 5 The government, in response to oral argument questions, indicated that the Court of Federal Claims was without authority to find that the revised payment terms were inconsistent with customary commercial practices. We deem this issue waived by the government. See SmithKline Beecham Corp. v. Apotex Corp., 439 F.3d 1312, 1320 (Fed. Cir. 2006). CGI FEDERAL INC. v. US 13 not expressly state that FAR Part 12 applies to orders made pursuant to an existing FSS contract. Opinion and Order at 20. It similarly found that FAR Part 12 does not expressly state that its provisions apply to such orders. Opinion and Order at 20-21. We review the Court of Federal Claims interpretation of the applicable regulations de novo. Abbott Labs. v. United States, 573 F.3d 1327, 1330 (Fed. Cir. 2009). We conclude that FAR Part 12’s proscription against terms inconsistent with customary commercial practice applies to the 2014 RFQs and therefore that the RFQs violate that proscription. 6 On a general level, FAR Part 12 applies to the 2014 RFQs because it makes clear that it “shall be used for the acquisition of [commercial items].” 48 C.F.R. § 12.102(a). The 2014 RFQs meet the broad definition of an “acquisition” under FAR: Acquisition begins at the point when agency needs are established and includes the description of requirements to satisfy agency needs, solicitation and selection of sources, award of contracts, contract financing, contract performance, contract administration, and those technical and manage- ment functions directly related to the process of fulfilling agency needs by contract. Id. § 2.101. More specifically, FAR § 12.302(c)’s proscription against any “solicitations or contracts” including terms “inconsistent with customary commercial practice” 7 6 CGI alternatively argues that the revised pay- ment terms violate FASA and are illegal for unduly restricting competition. We need not reach these alternative grounds because we find that the terms violate the applicable provisions in FAR Part 12. 7 FAR § 12.302(c) provides a limited exception to this proscription against terms inconsistent with custom14 CGI FEDERAL INC. v. US applies to the 2014 RFQs because the RFQs are a “solicitation” and the resulting order is a “contract” as those terms are defined by FAR. FAR expressly defines a solicitation to include requests for proposals: “Solicitation means any request to submit offers or quotations to the Government. . . . Solicitations under negotiated procedures are called ‘requests for proposals.’” Id. § 2.101 (emphasis added). Similarly, FAR defines a “contract” as including orders: “[C]ontracts include (but are not limited to) awards and notices of awards; job orders or task letters issued under basic ordering agreements; letter contracts; orders, such as purchase orders . . . .” Id. (emphasis added). FAR § 12.302(c) thus applies, on its face, to the 2014 RFQs. The government and the Court of Federal Claims are correct that FAR Subpart 8.4 does not explicitly state that FAR Part 12 applies to orders made pursuant to existing FSS contracts. We conclude, however, that FAR Part 12 applies to this situation expressly by its terms. To the extent there is any perceived inconsistency between FAR Subpart 8.4 and FAR Part 12, FAR Part 12 controls. 48 C.F.R. § 12.102(c) (“When a policy in another part of this chapter is inconsistent with a policy in this part, this part 12 shall take precedence.”).