Opinion ID: 746415
Heading Depth: 2
Heading Rank: 2

Heading: Violations of Authority

Text: 9
10 When this contract was entered into, section 2304(a) dictated that government contracts must go through formal advertising, and be awarded on a competitive bid basis, unless one of seventeen exceptions applied. In order to negotiate an individual contract rather than coordinating a competitive bid process, the contracting authority had to receive authority to negotiate. WES argues that the Air Force violated section 2304(a) by entering into a contract that exceeded the scope of the authorization to negotiate. Specifically, WES argues that the contract between REL and the Air Force required the design and development of an entirely new radar system, whereas the negotiation authorization only extended to the design and development of a transmitter and its integration into an existing system. The Board, however, held that the language integration into the total system approved by the Assistant Secretary of the Air Force included whatever was necessary in order to integrate the newly designed transmitter into a working system, including the redesign of other parts of the system as necessary to achieve compatibility with the transmitter. 11 We agree with the government that WES's interpretation of the negotiation authorization is overly narrow. The authorization was for the design, fabrication, and testing of the transmitter of the AN/MSQ-T11A, associated data, and its integration into the total system, as well as options ... for up to two production AN/MSQ-T11A Radar systems. This language encompasses a new, integrated system. However, we do not rule that WES was estopped, but that the contract terms did not exceed the authorization as correctly construed. The Board's holding that the Air Force did not violate 10 U.S.C. § 2304 is therefore affirmed. We need not and do not reach whether any such violation would void the contract. 12
13 DAR § 1-1502 provided in pertinent part (with emphasis added): 14 (a) Because options require offerors to guarantee prices for definite periods of time with no assurance that the options will be exercised, their improper inclusion could result in prices which are unfair to either the Government or the contractor. 15 (b) Option clauses shall not be included in contracts, and option provisions shall not be included in solicitations if: 16 ... 17 (ii) the contractor would be required to incur undue risks (e.g., the price or availability or necessary materials or labor is not reasonably foreseeable);.... 18 WES argues that the T-11A contract was void ab initio because it contained an option clause that violated DAR § 1-1502 because the option, WES asserts, allocated undue risks to REL, and the regulation says such clauses shall not be included. The Board held that WES lacked standing to challenge the government's alleged non-compliance with DAR § 1-1502(b)(ii). 19 We do not reach the issue of standing. Rather, we note that because REL failed to make a timely objection to the option clause, to any undue risk it believed was thereby improperly allocated to it, or assert a violation of the regulation, REL waived the right to challenge the validity of the contract under DAR § 1-1502(b)(ii). The doctrine of waiver precludes a contractor from challenging the validity of a contract, whether under a DAR or on any other basis, where it fails to raise the problem prior to execution, or even prior to litigation, on which it later bases its challenge. See United Int'l Investigative Servs. v. United States, 109 F.3d 734, 738 (Fed.Cir.1997); E. Walters & Co., Inc. v. United States, 217 Ct.Cl. 254, 576 F.2d 362, 367-68 (1978). The fact that REL failed to complain and WES agreed without objection to take over REL's contract, substantially completing it, constituted a waiver of the grounds for rescinding or voiding the contract because of a violation of the regulation, even assuming the option clause indeed violated the regulation. 20
21 WES's arguments that the inclusion of production options in this contract also violated DoD Directive 5000.1 and DAR § 1-334 are easily rejected. DAR § 1-334 limits the inclusion of ceiling priced production options when there is undue risk to the contractor or the government. This regulation, however, is limited on its face to major systems, and the Board found (and WES concedes) that the radar system at issue here is not a major system. DoD Directive 5000.1, although it does say that its management principles ... are applicable to all programs, says nothing specifically against the inclusion of production options in development contracts, and its general management principles cannot be read to bar the type of options included here. 22