Beware the Risks Inherent in Going-Along-To-Get-Along

There is a tension in Government Contracting: How does a contractor adequately protect its rights given the day-to-day realities of working with its Government Customer? It is not uncommon for contracting officials to forgo certain formal procedures in their interaction with contractors. When this happens, Contractors may be inclined to follow the Government’s lead in order to move the project forward. This “going-along-to-get-along” can take many different forms. For example: (i) complying with the direction of a contracting officer’s representative (“COR”) regarding a change in performance without seeking formal written approval from the contracting officer (“KO”); (ii) performing out of scope work at the KO’s direction without finalizing payment terms based on the KO’s promise that the contractor will be entitled to claim payment under a future modification or agreement; or (iii) forgoing a timely claim/appeal in reliance on a contracting officer’s promise to take/refrain from certain action. Unfortunately, and as depicted in a recent SBA decision, going-along-to-get-along can significantly compromise contractors’ rights.

This teaching moment comes from the recent size appeal of Sentient Digital, Inc. SBA No. SIZ-5963 (2018). The relevant factual background can be summarized as follows: Sentient Digital, Inc. (“SDI”) submitted to provide IT support services. The solicitation was issued as a small business set-aside. After review of proposals, SDI was identified as the apparent awardee. Upon receiving this notification, a disappointed offeror filed a size protest with the SBA. After a lengthy inquiry, during which time the agency awarded the contract to SDI, the SBA issued a formal determination that SDI was other than small based on the ostensible subcontractor rule. Under the applicable rules, SDI had 15 days to appeal the SBA’s finding to the Office of Hearings and Appeals (“OHA”).

The day after the SBA issued its decision, the KO asked whether Sentient intended to file an appeal. SDI replied that it would only appeal the decision if the contract was at risk. SDI’s position was based on the fact that the size determination was contract-specific (being predicated solely on the ostensible subcontract rule), and would not impact SDI’s eligibility on any other matter. The KO told SDI that its award would not be rescinded. Based on this affirmation, SDI did not appeal. Relying on the CO’s representation, SDI let the 15-day appeal period expire.

Five days after the expiration of the appeal period, the KO informed SDI that the Agency was, in fact, considering terminating the contract. The KO suggested that in order to avoid this outcome, SDI should request that the SBA reconsider its decision. SDI submitted this request, which was denied. At this point in time, about 10 days had passed since the expiration of the appeal period. Upon learning that the SBA would not reconsider its decision, the KO informed SDI that unless the SBA’s decision was appealed to OHA, SDI’s contract would be terminated. SDI promptly filed an appeal. The appeal was summarily dismissed.

In its decision, OHA explained that it “must” dismiss the appeal as untimely. Citing the 15-day appeal deadline, OHA explained that the applicable regulation provides for no exceptions, nor any authority by which a CO may extend the deadline for filing an appeal. Bluntly, OHA stated:

The fact that the CO initially indicated MSC would not terminate the award does not alter the time limit Appellant faced after receiving the size determination. Appellant relied upon the CO's word to its detriment. The regulation mandates that I dismiss this appeal. (emphasis added)

The lesson to take away from this decision is this: always affirmatively assert your rights by taking advantage of the formal processes in place to protect contractors. Here, SDI should have filed an appeal with OHA regardless of the CO’s representation. In another scenario, the affirmative assertion of rights could be in the form of demanding written direction from the CO for changed work, rather than following the directions of a COR. Insisting on formal compliance with regulations (be they change order processes or submission deadlines) should not jeopardize a contractor’s working relationship with the Government. In fact, quite the opposite is true: it is when these formal systems lapse, that problems arise and a contractor will find itself adverse to its Government client.