When the Government is in a contract, it cannot just stop making payments. This is the general rule whether the contract is a procurement, grant, or cooperative agreement.[1] Rather, the Government’s continued non-payment is simply material breach.
For a grant or cooperative agreement that is not a contract, the Government has more flexibility to halt payments. Even so, the Administrative Procedure Act may make the Government’s non-payment subject to judicial review.
Discussion of these principles and related remedies follows. The discussion is focused primarily on contract remedies. It is not intended to be exhaustive. For example, not addressed are more outlying possibilities for a remedy—such as a Fifth Amendment violation, ministerial function negligence under the Federal Tort Claims Act, suit against a Government official or agent acting outside the scope of the Westfall Act (e.g., for tortious interference with a contract), etc.
Procurement Remedies
Starting with a procurement contract, there are multiple recourses to Government non-payment.
Prompt Payment Act Interest
First and foremost, the Prompt Payment Act (“PPA”) charges the Government interest for late payment. And the interest compounds every additional 30 days that payment is late.
Particularly, the PPA obligates the Government to pay a contractor “30 days after a proper invoice . . . if a specific payment date is not established by contract.”[2], [3]
Further, for a small business prime—or a not-small prime making accelerated payments to small business subs.—the Government is supposed to provide an “accelerated payment date with a goal of 15 days after a proper invoice . . . if a specific payment date is not established by contract.”[4]
Accelerated payment is also provided in other instances, including but not limited to when a single invoice is under $2,500.[5]
Generally, if the Government fails to pay within 30 days, or, as applicable, the date specified in the contract, the Government “shall pay an interest penalty to the [contractor] on the amount of the payment due.”[6]
“Payments falling due on a weekend or federal holiday may be made on the following business day without [the Government] incurring late payment interest penalties.”[7] “[P]ayment is deemed to be made on the date a check for payment is dated or an electronic fund transfer is made.”[8]
“The interest penalty shall be paid for the period beginning on the day after the required payment date[,] and ending on the date on which payment is made.”[9] “The interest shall be computed at the rate of interest established by the Secretary of the Treasury . . . which is in effect at the time the agency accrues the obligation to pay a late payment interest penalty.”[10]
Presently, the PPA interest rate is 4.625%.[11] The current interest rate may also be obtained from the Department of Treasury at 1-800-266-9667.[12] Additionally, the Bureau of the Fiscal Service offers an online PPA interest calculator—available here.[13]
Importantly, the contractor does not need to request PPA interest to obtain payment of the interest. Rather, the “[l]ate payment interest penalties shall be paid without regard to whether the vendor has requested payment of such penalty, and shall be accompanied by a notice stating the amount of the interest penalty, the number of days late and the rate used.”[14]
“Each agency head is responsible for . . . [e]nsuring timely payments and payment of interest penalties where required.”[15] “The head of an agency shall pay a[n] [interest] penalty under this section out of amounts made available to carry out the program for which the [interest] penalty is incurred.”[16] And, “[t]he temporary unavailability of funds to make a timely payment due for property or services does not relieve the head of an agency from the obligation to pay interest penalties under this section.”[17]
Pertinent to DoD—
“The DoD has special statutory authority that permits DoD Components to use funds financing the operation of the military department or defense agency with which the invoice or contract payment is associated for payment of PPA interest penalty expenses, rather than charging the expense to the program for which the penalty was incurred. P.L. 107-117, Div. A, Title VIII, Sec. 8084.”
DoD Financial Management Regulation, DoD 7000.14-R, Vol. 10, Ch. 7, § 070209.
To avoid compound interest, the Government must pay PPA interest in the first 30 days of interest accrual. Specifically—
“If the interest is not paid for 30 days, the interest then due is added to the principal and the prompt payment act interest begins anew to accrue on the added amount. It is thus that prompt payment act interest compounds every thirty days until the total amount due is paid.”
Gaffny Corp., ASBCA No. 46026, 94-1 BCA ¶ 26,522 (Nov. 22, 1993).[18]
Moreover, not only does the interest compound every 30 days, if the Agency pays the invoice but not the accrued interest, the contractor may obtain an additional penalty. However, to get the additional penalty, the contractor must timely demand it. On this point, the PPA states the following.
“If a [contractor] . . . [ ] is not paid the interest penalty by the agency within 10 days after the date on which such [invoice] payment is made; and [the contractor] makes a written demand, not later than 40 days after the date on which such [invoice] payment is made, . . . such [contractor] shall be entitled to an amount equal to the sum of the late payment interest penalty to which the contractor is entitled and an additional penalty equal to a percentage of such late payment interest penalty specified by regulation . . . .”
31 U.S.C. § 3902(c)(3) (emphasis added).[19]
The regulations clarify that “[t]he additional penalty shall be equal to one hundred (100) percent of the original late payment interest penalty but must not exceed $5,000.”[20] Furthermore, “the additional penalty paid shall not be less than $25[,]” and “[n]o additional penalty is owed, however, if the amount of the interest penalty is less than $1.00.”[21]
The Government’s PPA interest accrual is severed by the occurrence of either of two events—whichever occurs first. “An interest penalty . . . does not continue to accrue– (A) after a [Contract Disputes Act] claim for a[n interest] penalty is filed . . . ; or (B) for more than one year.” 31 U.S.C. § 3907(b)(1) (emphasis added).[22]
Thus, if the contractor wishes to appeal an Agency’s non-payment of PPA interest, the contractor must file a Contract Disputes Act (“CDA”) claim that addresses non-payment of the interest. See, e.g., Sprint Commc’ns Co., L.P., GSBCA No. 15139, 01-2 BCA ¶ 31,464 (May 17, 2001) (“Submission of a qualifying CDA claim for PPA interest is a jurisdictional prerequisite to the Board’s consideration of any PPA interest award.”).[23] Yet, once a contractor files a CDA claim for PPA interest, it stops the Government’s interest accrual—provided that interest accrual has not already stopped because one year has elapsed.[24]
Also, when calculating one year of PPA interest, the calculation uses a “360 day year[.]”[25] Why? It is either to make the 30-day compounding easier, or because the Government is employing Ancient Sumerians. Or both.
In sum, if the Government is untimely in paying a proper invoice, it starts incurring Prompt Payment Act interest. In turn, if the Government remains recalcitrant, the contractor may maximize its eventual recovery by waiting 360 days to file a CDA claim for the interest—on top of a claim for the amount of the unpaid invoice.
Contract Disputes Act Interest
If the Government continues to fail to pay, the contractor will have to file a CDA claim. And the CDA charges the Government interest for non-payment of a CDA claim.
To be clear, an invoice does not constitute a CDA claim.[26] This is because, typically, an invoice is a routine request for payment. A CDA claim is supposed to be a non-routine request for payment. The Federal Circuit states it this way.
“[D]emands for payment can be classified into two categories: ‘routine’ and ‘non-routine.’ As this court, sitting en banc, explained in Reflectone, Inc. v. Dalton, if the request is ‘non-routine,’ all that is required is that ‘it be (1) a written demand, (2) seeking, as a matter of right, (3) the payment of money in a sum certain’; the request does not need to be in dispute. [ ] If the request for payment is ‘routine,’ a pre-existing dispute is necessary for it to constitute a claim under the CDA.”
Parsons Global Servs., Inc. ex rel. Odell Intern., Inc. v. McHugh, 677 F.3d 1166, 1170 (Fed. Cir. 2012).
That said, a routine request for payment (a typical invoice) can become a CDA claim if the Government’s non-payment is elevated to a dispute.[27] Often, that can occur with minimal additional effort. Depending on the circumstances, it may be sufficient for the contractor to send a letter to the Contracting Officer stating that the Government’s continued non-payment is now disputed, asking the Contracting Officer for a final decision on paying the invoice(s), and, if the amount at issue exceeds $100,000, include the 41 U.S.C. § 7103(b)(1) certificate.[28]
Indeed, not much formality is required. As the Federal Circuit has stated—
“We know of no requirement in the Disputes Act that a ‘claim’ must be submitted in any particular form or use any particular wording. All that is required is that the contractor submit in writing to the contracting officer a clear and unequivocal statement that gives the contracting officer adequate notice of the basis and amount of the claim.”
Contract Cleaning Maint., Inc. v. United States, 811 F.2d 586, 592 (Fed. Cir. 1987).
If the contractor wants to claim unpaid PPA interest (discussed above), it must be addressed in the non-payment claim, or in its own, separate claim. If the contractor wants to assert Government breach of contract (discussed below), it must be addressed in the non-payment claim, or in its own, separate claim.
Once the non-payment issue has been turned into a claim, CDA interest starts accruing against the Government. If the contractor has claimed PPA interest in addition to the unpaid invoice(s), CDA interest accrues on both the PPA interest and the unpaid invoice(s).[29]
Unlike PPA interest, the contractor does not need to file a separate claim for CDA interest.[30] In fact, a contractor need not even expressly seek the CDA interest.[31]
Additionally, unlike PPA interest, which has a Sumerian year (360-day) cut-off, CDA interest will keep running on a claim until the claim is paid.[32]
The CDA interest rate is the same as the PPA interest rate—which, as stated, is currently 4.625%.[33] However, unlike PPA interest, CDA interest is “simple interest”—meaning that it does not compound.[34]
Also, unlike PPA interest, which applies the same interest rate for the entire interest accrual period, for CDA interest, one must apply a new interest rate every time the Department of Treasury re-assesses the interest rate (every six months).[35] Hence, if the CDA interest runs into a new six-month period, the updated interest rate must be applied in the new six-month period.
So, overall, CDA interest is a simple interest calculation potentially using multiple interest rates depending on how many six-month periods the interest runs through. Online, one can easily find a simple interest calculator to perform the calculation for each time period.
The statute commands that CDA interest “shall be paid to the contractor.”[36] Therefore, a Contracting Officer or Judge can provide the CDA interest payment to the contractor regardless of whether the contractor requests it.
To reiterate, where the Government persists in failing to pay, causing the contractor to file a CDA claim, the contractor can also obtain CDA interest.
Government Material Breach of Contract
The Government’s prolonged failure to make a contract payment is the Government’s material breach of contract.
All contracts—even Government contracts—require an exchange of obligations.[37] And, in a Government contract, the Government has two primary obligations: (1) good faith and fair dealing (which includes a duty to cooperate and enable the contractor’s performance); and (2) the duty to timely pay.
Hence, the Government’s “failure to pay money when due and owing is a paradigmatic breach of contract claim.” Housing Auth. of the City of Slidell v. United States, 149 Fed. Cl. 614, 626 (2020) (finding Government non-payment breached a HUDD annual contributions contract).
So, each time the Government fails to timely pay, it is a breach of contract. And, when the Government fails to pay for a prolonged period, it rises to a material breach.[38]
How long before Government non-payment rises to a material breach depends on the circumstances. Nonetheless, generally speaking, it does not take long. For example, in Hughes Grp. LLC, the VA’s failure to make payments for approximately two-and-a-half months constituted a material breach.[39] And, in Consumers Oil Co., the Board discussed several material breach cases where the Government’s payment delay was approximately one month.[40]
It is also worth noting that the Government can materially breach the contract by failing to make contract financing payments (e.g., progress payments).[41] Further, Government non-payment can breach the contract even if the performance period is over.[42]
If the unpaid sum is insubstantial, the Government’s non-payment might not rise to a material breach. Even so, Government material breach has been found in cases where the unpaid sums were only several thousand dollars.[43]
Furthermore—
“[B]oards of contract appeals do not inquire into whether the [Government’s] nonpayment rendered the contractor unable to continue performance. . . . Nor does the contractor’s right to abandon performance depend on whether the Government deliberately refuses to make payment. The [contractor’s] right to discontinue work arises equally when there is [ ] [Government] inadvertent failure to pay resulting, as in the instant appeal [ ], from administrative neglect.”[44]
After the Government’s non-payment rises to a material breach, the contractor must make a choice. The contractor can waive the Government’s breach, continue performance, and claim only partial/immaterial breach damages.[45]
Alternatively, the contractor must assert the material breach, cease performance, and can claim total/material breach damages.[46]
In this context, generally, partial/immaterial breach damages will consist of the unpaid invoices, the types of interest discussed above, and perhaps, if applicable, some delay, impact, and/or constructive change damages if the Government’s non-payment caused performance difficulties or changes.
Generally, total/material breach damages will include the preceding damages, lost profits, and, if applicable, reliance damages.[47] The contractor’s reliance damages could include before-breach performance costs that are not covered by unpaid invoices or otherwise compensated. Also, it could include the recovery of after-breach administrative costs incurred to deal with the abrupt end to the contract.
Typically, consequential damages (indirect losses)[48]—such as a lost business opportunity, harm to business goodwill, harm to other contracts, etc.—are not recoverable. However, in an extraordinary circumstance, a loss usually considered a consequential damage may be recoverable if it meets the Fed. Circuit’s three-part test—“(1) the damage[ ] w[as] reasonably foreseeable by the breaching party at the time of contracting; (2) the breach is a substantial causal factor in the damages; and (3) the damages are shown with reasonable certainty.”[49]
In short, if the Government stops paying the contractor, and that continues for a prolonged period, it is the Government materially breaching the contract. In which case, the Government will still have to pay the unpaid sums with interest. And the Government has just made itself liable for the contractor’s lost profits—while losing the benefit of the contract. This can be good news to a contractor—who may now obtain its profits without having to continue the work.
Government Repudiation of the Contract
Since the Government’s failure to pay can constitute a material breach, it logically follows that an unequivocal statement by the Government that it will make no further payments is the Government anticipatorily repudiating a contract. See, e.g., Dow Chem. Co. v. United States, 226 F.3d 1334, 1345 (Fed. Cir. 2000) (United States Bureau of Mines letter to Dow stating that it would make no further payments constituted the repudiation of a license agreement).
Repudiation is a “voluntary affirmative act indicating that the promisor will breach,”[50] or a “statement by the obligor to the obligee indicating that the obligor will commit a breach . . . .”[51] In essence, repudiation is a party quitting the contract.
However, to constitute repudiation, it must be an “absolute refusal to perform[,]” and it “must be treated and acted upon as such” by the non-breaching party.[52]
So, if an Executive Order, directive, memorandum, letter, or announcement unequivocally states the Government’s intent to not make any more payments vis-à-vis a contract, it can constitute a repudiation. Or, if the Government shuts down a payment system so that no payments can occur vis-à-vis a contract, it is an affirmative act that can also constitute a repudiation.[53]
In turn, the contractor informs Contracting Officials that the Government has made a statement or act of repudiation, and the contractor seeks adequate assurances that the Government will, in fact, perform payments. If Contracting Officials do not respond, or fail to provide adequate assurances, arguably, the repudiation is confirmed.
Then, just like other forms of Government material breach, the contractor has to choose. The contractor can waive the repudiation and continue performance in the hope that the Government’s anticipatory breach does not ripen into a realized material breach. Or, the contractor can assert the anticipatory breach, cease performance, and can claim total/material breach damages (addressed above).
It generally does not matter at what level in the Government the repudiation occurs, be it Executive Branch officer or employee, President, or Congress. In point of fact, many of the big Government repudiation-of-contract cases involve constructive repudiation by Congress passing a public law. See, e.g., United States v. Winstar Corp., 518 U.S. 839, 924 (1996) (Congress’ passage of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 constituted an “impermissible repudiation” of a contract); Mobil Oil Expl. and Producing Se., Inc. v. United States, 530 U.S. 604, 623-24 (2000) (the Outer Banks Protection Act of 1990 repudiated lease contracts).
It is as the Supreme Court stated in the Sinking-Fund Cases—
“The United States are as much bound by their contracts as are individuals. If they repudiate their obligations, it is as much repudiation, with all the wrong and reproach that term implies, as it would be if the repudiator had been a State or a municipality or a citizen.”
99 U.S. 700, 719 (1878).
Additionally, the Government cannot evade its contract obligations even when its motive is to be fiscally conscientious. During the Great Depression, the Supreme Court addressed this point in Lynch v. United States.
“Punctilious fulfillment of contractual obligations is essential to the maintenance of the credit of public as well as private debtors. No doubt there was in March, 1933, great need of economy. In the administration of all government business economy had become urgent because of lessened revenues and the heavy obligations to be issued in the hope of relieving widespread distress. Congress was free to reduce gratuities deemed excessive. But Congress was without power to reduce expenditures by abrogating contractual obligations of the United States. To abrogate contracts, in the attempt to lessen government expenditure, would be not the practice of economy, but an act of repudiation.”
292 U.S. 571, 580 (1934).
Thus, as stated, the Government’s refusal to perform payments—whether by an unequivocal statement or an affirmative act—can constitute anticipatory repudiation. In which case, the contractor will be entitled to material breach remedies.
No Complete Contract Exculpation
Overall, it is important to remember that, generally, the Government cannot completely absolve itself of a contract.[54] Rather, like any other contract party, the offset rule is that if the Government breaches, it pays.
Specifically, the U.S. Constitution only addresses contracts twice. The passages are as follows.
“No State shall . . . pass any . . . Law impairing the Obligation of Contracts[.]” U.S. CONST. art. I, § 10.
“All Debts contracted and Engagements entered into, before the Adoption of this Constitution, shall be as valid against the United States under this Constitution, as under the Confederation.” U.S. CONST. art. IV.
As is apparent, both passages uphold the rights and responsibilities of contracting parties.
Notably, the U.S. Constitution does not give the Federal Government any special contract powers—such as the power to abandon a contract at will. Moreover, the U.S. Constitution does not even say that the Federal Government has the authority to enter into a contract.
The consequence of this is that the Government’s power to contract is not unique, but is the same inherent power to contract that a private entity or individual possesses. See Lynch, 292 U.S. at 579 (“When the United States enters into contract relations, its rights and duties therein are governed generally by the law applicable to contracts between private individuals.”).[55]
And, like other contracting parties, the Government cannot just absolve itself of contract responsibilities. See, e.g., Torncello v. United States, 231 Ct. Cl. 20, 26 (1982). (“We note as one of the most elementary propositions of contract law that a party may not reserve to itself a method of unlimited exculpation without rendering its promises illusory and the contract void[.]”).
Nonetheless, because the Government is also the Sovereign, there are some carve-outs to the notion that the Government is just another contracting party.
Terminations For Convenience
Particularly, the Government can fully or partially terminate a contract for its convenience (called a “termination for convenience,” “T4C,” or “TFC”). “The doctrine of termination for convenience enables the government, under certain circumstances, to terminate a contract that is no longer in the government’s interest.”[56] However, when the Government does so, “the contractor is entitled to recover all allowable costs incurred in the performance of the terminated work, a reasonable profit on the work done, and certain additional costs associated with the termination.”[57] Thus, although a TFC gives the Government broad flexibility to end a contract, the Government still must pay for work performed up to the termination. Hence, it does not completely absolve the Government of the contract.[58]
Additionally, the Government’s motive behind a TFC matters. The Government cannot TFC a contract in bad faith, or as an abuse of discretion—such as to get a better price, or where the Government formed the contract with no real intention of seeing it through.[59] A bad faith or abuse of discretion TFC is just a Government material breach.[60]
The Sovereign Acts Doctrine
Another place the Government gets some leeway is, where the Sovereign Acts Doctrine (“SAD”) is applicable, it shields the Government from liability. The SAD is a judicial rule “designed to distinguish between the Government’s twin roles as contractor and sovereign.”[61]
“The Government-as-contractor cannot exercise the power of its twin, the Government-as-sovereign, for the purpose of altering, modifying, obstructing or violating the particular contracts into which it had entered with private parties. Such action would give the Government-as-contractor powers that private contracting parties lack.
On the other hand, . . . , the Government-as-sovereign must remain free to exercise its powers. . . . The sovereign acts doctrine attempts to ‘balance[ ] the Government’s need for freedom to legislate with its obligation to honor its contracts by asking whether the sovereign act is properly attributable to the Government as contractor.’ ”[62]
Accordingly, when an act of the executive or legislature is the Government predominantly acting in its role as the sovereign, the SAD may apply. And when it does, the Government will not be liable for the results of the act. Stated another way, the SAD “simply relieves the Government as contractor from the traditional blanket rule that a contracting party may not obtain discharge if its own act rendered [contract] performance impossible.”[63]
Yet, for the Government to obtain the SAD’s protection from liability, the act of the executive or legislature must pass a two-part test.
First, the act must be “a genuinely public and general act that only incidentally falls upon the contract[.]”[64] As part of this, the Supreme Court has held that “a governmental act will not be public and general if it has the substantial effect of releasing the Government from its contractual obligations[.]”[65] And “[t]he greater the Government’s self-interest, . . . the more suspect becomes the claim that its private contracting partners ought to bear the financial burden of the Government’s own improvidence[.]”[66]
Second, even if an act is a public and general act, the Government must show that the act would “release the Government from liability under ordinary principles of contract law.”[67] “This second question turns on what is known in contract law as the ‘impossibility’ (sometimes ‘impracticability’) defense.”[68]
“[T[he common-law doctrine of impossibility of performance . . . excuses delay or nonperformance of a contract when the agreed upon performance has been rendered ‘commercially impracticable’ by an unforeseen supervening event not within the contemplation of the parties at the time the contract was formed.”[69]
The Government intentionally or negligently not paying a contractor fails both parts of the SAD test.
First, failing to pay a contractor is not a public and general act, but an act specific to that contractor. And it certainly has a substantial effect of getting the Government out of a contract obligation.
Second, failing to pay a contractor is not a basis to evoke the common law defense of impossibility/commercial impracticability. This is because the Government failing to pay is a possibility entirely contemplated by the parties at the time of contract award. It is why the Prompt Payment Act and related contract terms exist.
In short, although the SAD exists, it does not apply to the Government failing to pay a contractor.
The Unmistakability Doctrine
The unmistakability doctrine acknowledges the general notion that previous “[c]ontractual arrangements remain subject to subsequent legislation by the presiding sovereign.”[70] Consequently, assuming a new law is constitutionally sound and otherwise valid, like everyone else, a contractor will have to follow the new law. That is unless the Government contract exempted application of such a rule “in unmistakable terms.”[71] So, whereas SAD is about whether the Government will have to pay for the effects of a new rule, the Unmistakability Doctrine is about whether a contractor will even have to follow a new rule.
In any event, the Unmistakability Doctrine generally does not apply to Government non-payment. As the Supreme Court stated in Bowen, the sovereign “does not have the power to repudiate its own debts . . . simply in order to save money.”[72] Or, as the Court stated in Perry, the sovereign is “without power to reduce expenditures by abrogating contractual obligations of the United States[,]”[73] and an unpaid contract liability “remains binding upon the conscience of the sovereign.”[74]
To reiterate, generally, the Government cannot completely absolve itself of a contract. Just like any other contract party, if the Government breaches, it pays.
Remedies Under a Grant or Cooperative Agreement
Turning to a grant or cooperative agreement, the scope of the remedies available for Government non-payment significantly rests on whether the grant or cooperative agreement is also considered a contract.
As addressed in Footnote 1, the Federal Grant and Cooperative Agreement Act of 1977 distinguishes between a procurement contract, a grant, and a cooperative agreement.[75] Again, the purpose of a procurement contract is for an Agency to obtain the goods, services, intellectual property, and/or construction that the Agency needs to meet its mission to the American people.[76] A grant or cooperative agreement is different. Generally, the purpose of a grant or cooperative agreement is to distribute federal assistance in order to carry out a Congressionally-approved public purpose.[77]
So, whereas under a procurement contract the essential character of the agreement is an Agency acquiring, under a grant/cooperative agreement, the essential character is the Agency giving. Hence, a grantee or cooperate is referred to as a “recipient” of the assistance agreement.[78]
Accordingly, often a grant or cooperative agreement is more in the vein of a conditional gift. See, e.g., Williams & Wilkins Co. v. United States, 1972 WL 17712, at 15 (Ct. Cl. 1972) (“The grants are characterized by the Public Health Service as ‘conditional gifts’ and are made annually on the basis of research proposals submitted to the Public Health Service by prospective grantees.”).[79]
When an Assistance Agreement is Also a Contract
Nonetheless, not every Government contract is a procurement contract. See, e.g., United States v. President and Fellows of Harvard Col., 323 F. Supp. 2d 151, 164 (D. Mass. 2004) (“That the purpose of a cooperative agreement is assistance and not procurement is not dispositive of the determination of whether a cooperative agreement is a contract.”). And sometimes a grant or cooperative agreement is also a Government contract—albeit an assistance contract.[80] In which case, contract remedies are available for the Government’s breach.[81]
A grant/cooperative agreement will be considered a Government contract if: (1) the grant/cooperative agreement satisfies the basic elements of a Government contract; or (2) it is apparent that the Agency is conducting a Trojan Horse procurement (using a grant/cooperative agreement to evade procurement law).
Scenario 1: An Assistance Contract
Regarding the first scenario, “[t]he requirements for a valid contract with the United States are: a mutual intent to contract including offer, acceptance, and consideration; and authority on the part of the government representative who entered or ratified the agreement to bind the United States in contract.” Total Med. Mgmt., Inc. v. United States, 104 F.3d 1314, 1319 (Fed. Cir. 1997).
The two requirements that a grant or cooperative agreement may not satisfy are: (1) consideration; and (2) establishing Government authority to form an assistance contract.
On the consideration requirement, the U.S. Claims Court (predecessor to the Court of Federal Claims) previously stated the following.
“[I]n the context of government contracts this court has held that consideration must render a benefit to the government, and not merely a detriment to the contractor; government officials do not have authority to make contracts in which no benefit flows to the government.”
Metzger, Shadyac & Schwarz v. United States, 12 Cl. Ct. 602 (1987).[82]
Further, “[t]he term ‘benefit’ means the receipt as the exchange for a promise some performance or forbearance which the promisor was not previously entitled to receive.” Turner Constr. Co., GSBCA No. 15502, 05-1 BCA ¶ 32,924 (Mar. 18, 2005). Furthermore, “[p]erformance of a pre-existing legal duty is not consideration.” Allen v. United States, 100 F.3d 133, 134 (Fed. Cir. 1996).
Therefore, for a grant or cooperative agreement to be a contract, the Government must obtain some benefit from the deal—be it beneficial performance or beneficial forbearance. This consideration requirement is arguably the less difficult of the two problem requirements.
The more difficult requirement is establishing Government authority to form an assistance contract.[83] Whereas, typically, an Agency has well-founded authority to enter into a procurement contract, an assistance contract is a different matter.
Consequently, the party asserting that the at-issue assistance agreement is a contract must be able to point to a specific statute or regulation that empowers the Agency to provide the assistance through a contract. See Thermalon Indus., Ltd. v. United States, 34 Fed. Cl. 411, 413-15 (1995) (National Science Foundation (“NSF”) research grant was a contract because NSF obtained the benefit of research results and a royalty-free IP license, and the National Science Foundation Act of 1950 gave NSF authority to enter into research assistance contracts); President and Fellows of Harvard Col., 323 F. Supp. 2d at 164-66 (cooperative agreement with USAID was a contract because it conferred a benefit on USAID, and the Foreign Assistance Act of 1961 gave USAID the authority form an assistance contract); Housing Auth. of the City of Slidell, 149 Fed. Cl. at 626 (finding Government non-payment breached a HUDD annual contributions contract because, in part, 24 C.F.R. § 990.115 made the particular assistance a contract).
As the case law shows, once requisite statutory or regulatory authority has been identified, the assistance agreement may be considered a contract.[84] So, as stated, sometimes a grant or cooperative agreement is also a Government contract.
Scenario 2: A Trojan Horse Procurement
Turning to the second scenario, a grant or cooperative agreement can also be a contract if it is a Trojan Horse procurement. Occasionally, an Agency cloaks a procurement as a grant or cooperative agreement. When the Agency does so, the agreement may be treated for what it actually is—not what it pretends to be.
CMS Contract Mgmt. Servs. provides a clear-case example. See 745 F.3d at 1381. In 2011, HUDD re-solicited and re-competed administrative services contracts, leading to a multitude of bid protests. See id. at 1383. In response, HUDD undertook corrective action. See id. However, plot twist, HUDD re-solicited the requirement as a Notice of Funding Availability (“NOFA”) for cooperative agreements. See id. More bid protests followed asserting that the NOFA was actually soliciting procurement contracts. See id. at 1384. GAO agreed. See id. Then, second plot twist, HUDD ignored GAO’s recommendation and announced its intention to award cooperative agreements anyway. See id. The contractors then protested at the U.S. Court of Federal Claims, and the issue advanced to the Fed. Circuit. See id. at 1385. In turn, the Fed. Circuit decided that “[b]ecause the PBACCs at issue are procurement contracts, and because HUD concedes it did not comply with federal procurement laws, the decision of the Court of Federal Claims must be reversed and remanded for disposition consistent with this opinion.” Id. at 1385-86.
As the case shows, where a grant or cooperative agreement is actually a procurement, the law will see past the pretense that the arrangement is just public assistance.
Additionally, of note—in a situation where a warranted official has not signed an assistance agreement that is actually a procurement, an exercise of authority may be found through acquiescence, implied authority, integral authority, ratification, and/or institutional ratification.[85]
Thus, where it is apparent that an assistance agreement is actually a Trojan Horse procurement, a Government contract may be found.
Contract Remedies for Non-Payment Apply
Returning to the issue of non-payment, 28 U.S.C. § 1491(a) gives the U.S. Court of Federal Claims (“CoFC”) jurisdiction over performance disputes of all express and implied-in-fact Government contracts, including assistance agreements that qualify as such.[86] As discussed above, prolonged non-payment by the Government is a material breach of contract. And, the Government can anticipatorily repudiate a contract by refusing to make further payments. So, where the Government fails to make payments for a grant or cooperative agreement that is also a contract, the Government’s contract breaches are redressable at CoFC.
Nevertheless, for an assistance agreement, obtaining interest for late payment is a thornier issue. Particularly, the Government cannot be liable for interest without an express statutory waiver of sovereign immunity.[87] As discussed above, generally, the PPA provides interest for late payment under a contract where an Agency acquires property or services.[88] And the CDA provides interest for an unpaid CDA claim. Therefore, if an assistance agreement is a Trojan Horse procurement, arguably, the PPA will apply. Yet, the CDA will not unless the recipient can file a CDA claim.
If an assistance agreement is a non-procurement contract or is not a contract, likely, neither statute will apply. Beyond that, perhaps the underlying statute for the grant or cooperative agreement provides a sovereign immunity waiver for the recipient to obtain interest. But that would be a rare situation.
Again, the scope of the remedies available for Government non-payment significantly rests on whether the grant or cooperative agreement is also considered a contract.
Promissory Estoppel
Generally, promissory estoppel is not available as the basis for a remedy.
“[P]romissory estoppel is essentially an equitable cause of action whereby one who reasonably relies on another’s promise can subsequently require that person to make good on his promise.”
Carter v. United States, 98 Fed. Cl. 632, 638 (2011).
“The doctrine of promissory estoppel acts as a substitute for consideration necessary to create a contract where the party relying on a promise has detrimentally relied and the refusal to enforce the promise would result in injustice.”[89]
However, promissory estoppel is an implied-in-law contract. See id. “[C]ourts generally do not allow for promissory estoppel when a binding contract exists.”[90] Additionally, “the Tucker Act does not give th[e] Court [of Federal Claims] jurisdiction over actions for breach of an implied-in-law contract.”[91] Further, “[t]he [Contract Disputes Act] does not apply to ‘quasi-contracts’ which are implied in law[.]”[92] Furthermore, pursuant to the Little Tucker Act at 28 U.S.C. § 1346(a)(2), a U.S. District Court does not have jurisdiction over an express or implied contract that exceeds $10,000.[93] So, to the extent that a promissory estoppel claim against the Government is even possible, a grantee or cooperate would have to limit the claim to no more than $10,000.[94] Which makes it not a practical remedy.
The Administrative Procedure Act
Concerning the Administrative Procedure Act of 1946 (“APA”), for a grant or cooperative agreement that is purely an assistance agreement (not a contract), the APA offers an avenue for judicial review of Agency action or inaction. To be clear, an APA cause of action is not a suit to obtain a contract remedy. Rather, an APA suit challenges Agency action/inaction that is unconstitutional or otherwise illegal, arbitrary and capricious, an abuse of discretion, lacking substantial evidence, contrary to facts, and/or non-compliant with required procedures. See 5 U.S.C. § 706. Accordingly, an APA suit is brought at a U.S. District Court to obtain an injunction, declaratory relief, a remand to an Agency, and/or the vacating of previous Agency action. Under the APA, a U.S. District Court can also “compel agency action unlawfully withheld or unreasonably delayed[.][95] An APA suit cannot be brought at the U.S. Court of Federal Claims.[96] Additionally, the APA does not permit a claim for monetary damages.[97] However—key detail—“[c]laims that do not seek monetary relief or that seek ‘specific remedies that have the effect of compelling monetary relief’ are not claims for monetary damages.”[98] Much more can be said on an APA suit—enough for its own note. Here, the important point is that, depending on the circumstances, an APA suit may provide a potential path to redress Agency non-payment where other paths are blocked.
Summation
To recap, the Government does not have the power to abandon a contract at will, or to simply cease the performance of contract payments. For an assistance agreement that is not a contract, the Government has more flexibility to cut off payments—being that a pure assistance agreement is more in the character of a conditional gift. Yet, even there, the APA likely makes the Government subject to judicial review for such an action. So, even under a pure assistance agreement, the Government does not possess unfettered discretion to stop payments.
Generally speaking, the Government seeking to balance the budget is laudable. However, as part of that endeavor, the Government resorting to repudiating a contract does not work. It is merely a beleaguered attempt to solve a problem with a problem. Because it does not eliminate contract liabilities. And even increases those liabilities with added interest and breach of contract liabilities.
[1] Consistent with theFederal Grant and Cooperative Agreement Act of 1977 at 31 U.S.C. §§ 6301-09, contractor generally refers to the recipient of a procurement contract. See 31 U.S.C. § 6303. Grantee refers to the recipient of a grant agreement. See id. at § 6304. Cooperatee refers to the recipient of a cooperative agreement. See id. at § 6305.
An agreement is a procurement contract when “the principal purpose of the instrument is to acquire (by purchase, lease, or barter) property or services for the direct benefit or use of the United States Government[.]” Id. at § 6303. Stated another way, when using the term “procurement,” it refers to an Agency obtaining the goods, services, intellectual property, and/or construction that the Agency needs to meet its mission to the American people. See FAR 1.101 (“The Federal Acquisition Regulations System is established for . . . acquisition by all executive agencies.”); FAR 2.101 (definition of Acquisition); see also CMS Contract Mgmt. Servs. v. Mass. Housing Finance Agency, 745 F.3d 1379, 1381 (Fed. Cir. 2014), cert. denied, 575 U.S. 962 (2015). However, the term procurement does not include the Government acquisition of real property. See 41 U.S.C. § 1121(c)(1)(a) (Office of Federal Procurement Policy Act of 1974 (“OFPP Act”) excludes the procurement of real property from the Federal Acquisition Regulation); Int’l Indus. Park, Inc. v. United States, 95 Fed. Cl. 63, 67 (2010) (the term procurement is defined by the OFPP Act, which excludes real property); see also 41 C.F.R. Ch. 102, Subchapter C (real property section of the Federal Management Regulation).
An agreement is a grant when “the principal purpose of the relationship is to transfer a thing of value to the . . . recipient to carry out a public purpose . . . instead of acquiring (by purchase, lease, or barter) property or services for the direct benefit or use of the United States Government[.]” 31 U.S.C. § 6304. In short, a grant distributes funding and/or property to fulfill a statutorily established “public purpose”—often philanthropic in nature. However, the term excludes a subsidy, a loan, a loan guarantee, cash assistance to an individual, and/or insurance. See 2 C.F.R. § 200.1 (definition of grant or grant agreement).
An agreement is a cooperative agreement when “the principal purpose of the relationship is to transfer a thing of value . . . to carry out a public purpose . . . instead of acquiring . . . and [ ] substantial involvement is expected between the executive agency and the . . . recipient . . . .” 31 U.S.C. § 6305. A cooperative agreement “[i]s distinguished from a grant in that it provides for substantial involvement of the Federal agency or pass-through entity in carrying out the activity contemplated by the Federal award[.]” 2 C.F.R. § 200.1 (definition of cooperative agreement). The term excludes a subsidy, a loan, a loan guarantee, cash assistance to an individual, insurance, and/or a cooperative research and development agreement (“CRADA”) (authorized by the Federal Technology Transfer Act of 1986 at 15 U.S.C. § 3710a). See id.
[2] 31 U.S.C. § 3903(a)(1)(B); 5 C.F.R. § 1315.4(g); FAR 32.904(b).
[3] But see FAR 52.216-7(a)(2) (Allowable Cost and Payment) (“Contract financing payments are not subject to the interest penalty provisions of the Prompt Payment Act.”); FAR 52.232-7(h) (Payments under Time-and-Materials and Labor-Hour Contracts) (“Contract financing payments are not subject to the interest penalty provisions of the Prompt Payment Act.”); FAR 52.232-16(l) (Progress Payments) (“Progress payments are considered contract financing and are not subject to the interest penalty provisions of the Prompt Payment Act.”); FAR 52.232-29(g) (Terms for Financing of Purchases of Commercial Products and Commercial Services) (“A payment under this clause is a contract financing payment and not subject to the interest penalty provisions of the Prompt Payment Act.”); FAR 52.232-32(c)(2) (Performance-Based Payments) (“A payment under this performance-based payment clause is a contract financing payment under the Prompt Payment clause of this contract and not subject to the interest penalty provisions of the Prompt Payment Act.”); FAR 52.232-36(c) (Payment by Third Party) (“Payments made or due by the third party under this clause are not payments made by the Government and are not subject to the Prompt Payment Act or any implementation thereof in this contract.”).
[4] 31 U.S.C. § 3903(a)(10) and (11); FAR 32.009-1; but see FAR 52.232-40(b) (Providing Accelerated Payments to Small Business Subcontractors) (“The acceleration of payments under this clause does not provide any new rights under the Prompt Payment Act.”).
[5] See 31 U.S.C. § 3903; 5 C.F.R. §§ 1315.4(g), 1315.5, 1315.6, and 1315.12(a); FAR 32.904.
[6] 31 U.S.C. §§ 3902(a) and 3903(a)(1)(B).
[7] 5 C.F.R. § 1315.4(h).
[8] 31 U.S.C. § 3901(a)(5).
[9] 31 U.S.C. § 3902(b); but see id. at § 3904 (the time period for running the interest may be different if the contractor offers a discount for the Agency making payment within a specified time, and the Agency accepts and only partially pays within the time limitation of the discount).
[10] 31 U.S.C. § 3902(a); see also 5 C.F.R. § 1315.2(d).
[11] See Interest Rates, www.fiscal.treasury.gov, available at https://www.fiscal.treasury.gov/prompt-payment/rates.html (last updated Jan. 2, 2025).
[12] 5 C.F.R. § 1315.18(b).
[13] See Prompt Payment, www.fiscal.treasury.gov, available at https://www.fiscal.treasury.gov/prompt-payment/interest.html (last updated Jan. 2, 2025).
[14] 5 C.F.R. § 1315.10(b)(2); FAR 32.907(a).
[15] 5 C.F.R. § 1315.3(e).
[16] 31 U.S.C. § 3902(f).
[17] 31 U.S.C. § 3902(d).
[18] See also 31 U.S.C. § 3902(e) (“An amount of an interest penalty unpaid after any 30-day period shall be added to the principal amount of the debt, and a penalty accrues thereafter on the added amount.”).
[19] See also FAR 32.907(c).
[20] 5 C.F.R. § 1315.11(b).
[21] 5 C.F.R. § 1315.11(c).
[22] See also 5 C.F.R. § 1315.16(a)(2).
[23] See also 31 U.S.C. § 3907(a) (“A claim for an interest penalty not paid under this chapter may be filed under section 7103 of title 41.”).
[24] See 5 C.F.R. § 1315.16(a)(2) (“Once a claim is filed under the Contract Disputes Act interest penalties under [the PPA] will never accrue on the amounts of the claim, for any period after the date the claim was filed. This does not prevent an interest penalty from accruing under Section 13 of the Contract Disputes Act after a penalty stops accruing under [the PPA]. Such penalty may accrue on an unpaid contract payment and on the unpaid penalty under [the PPA].”).
[25] 5 C.F.R. § 1315.10(a)(9).
[26] Under FAR 2.101, a legally effective claim is “a written demand or written assertion by one of the contracting parties seeking, as a matter of right, the payment of money in a sum certain, the adjustment or interpretation of contract terms, or other relief arising under or relating to the contract.” FAR 2.101.
[27] See, e.g., Rover Constr. Co., ASBCA No. 60703, 17-1 BCA ¶ 36,682 (Mar. 1, 2017) (quoting CCIE & Co., ASBCA No. 58355, 14-1 BCA ¶ 35,700 (Aug. 12, 2014)) (“Through these repeated communications, appellant converted its routine request for payment into a claim within the meaning of FAR 2.101, and the law imposes no requirement of proof of performance to ‘convert an invoice into a claim after it becomes disputed or is not timely acted upon.’ ”); see also FAR 33.206(a).
[28] See also FAR 33.207.
[29] See 31 U.S.C. § 3907(b)(2) (“A penalty accruing under [41 U.S.C.] section 7109(a)(1) and (b) may accrue on an unpaid contract payment and on the unpaid penalty under this chapter.”).
[30] See 41 U.S.C. § 7109(a)(1).
[31] See id.
[32] See 41 U.S.C. § 7109(a)(1) (“Interest on an amount found due a contractor on a claim shall be paid to the contractor for the period beginning with the date the contracting officer receives the contractor’s claim, pursuant to section 7103(a) of this title, until the date of payment of the claim.”); see also Technocratica, ASBCA No. 46007, 94-1 BCA ¶ 26,584 (Dec. 22, 1993) (“Interest on the sum of interest penalty and additional penalty shall compound under the PPA, per 31 U.S.C. sec. 3902(e), until . . . the date of receipt of the claim, and interest shall then run under the CDA until paid.”).
[33] See 31 U.S.C. § 3902(a); 5 C.F.R. § 1315.2(d).
[34] See FAR 33.208.
[35] 41 U.S.C. § 7109(b); FAR 33.208.
[36] 41 U.S.C. § 7109(a).
[37] See, e.g., Ace-Fed. Reporters, Inc. v. Barram, 226 F.3d 1329, 1332 (Fed. Cir. 2000) (“To be valid and enforceable, a contract must have both consideration to ensure mutuality of obligation, see generally Restatement (Second) of Contracts §§ 71, 72 (1981), and sufficient definiteness so as to ‘provide a basis for determining the existence of a breach and for giving an appropriate remedy.’ Id. [at] § 33(2)[.]”); Trauma Serv. Grp. v. United States, 104 F.3d 1321, 1325 (Fed. Cir. 1997) (“The general requirements for a binding contract with the United States are identical for both express and implied contracts. [ ] The party alleging a contract must show a mutual intent to contract including an offer, an acceptance, and consideration. [ ] A contract with the United States also requires that the Government representative who entered or ratified the agreement had actual authority to bind the United States.” (internal citations omitted)); Torncello v. United States, 231 Ct. Cl. 20, 28 (1982) (“[T]he promises and obligations flowing from each party to the other define both the minimum and maximum performances of each and furnish the consideration from each party that courts require for enforceability.”).
[38] See N. Helex Co. v. United States, 197 Ct. Cl. 118, 124 (1972) (“The Government’s failure to pay a large amount over an extended period of time was a conceded breach of its contractual obligation. . . . Perhaps mere delay in payment, for a while, would not be a material breach but there is a clear distinction between delay of that kind and a total failure to pay over many months.”); see also Consumers Oil Co., ASBCA No. 24172, 86-1 BCA ¶ 18,647 (Dec. 16, 1985) (“[T]he Government’s failure to make payment when due will discharge the contractor’s duty to continue performance only if the breach is ‘material,’ as distinguished from insubstantial or immaterial.”); U.S. Servs. Corp., ASBCA Nos. 8291 and 8433, 1963 BCA ¶ 3,703 (Mar. 29, 1963) (“We find that the Government, after receipt of due notice and, without justification, failed to meet its obligation to make payment for the month of February within the time required by the contract and that this failure was a breach of a material condition.”); SECTEK, Inc. v. U.S. Dep’t of Homeland Sec’y, DOTCAB No. 4516, 05-2 BCA ¶ 33,067 (Sept. 8, 2005) (“The Government’s failure to make timely payment in accordance with the terms of the contract for work performed is a breach.”); but see OST, Inc., CBCA Nos. 7077 and 7103, 2023 WL 5319430 (July 31, 2023) (“AmeriTask cannot assert a breach of contract based upon FEMA’s non-payment of money that AmeriTask never invoiced[.]”).
[39] See Hughes Grp. LLC, CBCA No. 5964, 23-1 BCA ¶ 38,297 (Mar. 6, 2023).
[40] See Consumers Oil Co., supra.
[41] See, e.g., Short Electr., Inc., ASBCA No. 40499, 93-2 BCA ¶ 25,579 (Nov. 18, 1992) (“We hold that failure to make progress payments was a material Government breach, rendering appellant’s default excusable.”).
[42] See, e.g., TEM Assocs., Inc., DOTCAB No. 2024, 89-1 BCA ¶ 21,266 (Oct. 21, 1988).
[43] Consumers Oil Co., supra.
[44] See id.
[45] See Scott Timber Co. v. United States, 692 F.3d 1365, 1378 (Fed. Cir. 2012) (quoting Richard A. Lord, Williston on Contracts § 39:32 (4th ed.)); Cities Serv. Helex, Inc. v. United States, 211 Ct. Cl. 222, 234-35 (1976); SUFI Network Servs., Inc., 124 Fed. Cl. 511, 514 (2015) (quoting Sys. Fuels, Inc. v. United States, 666 F.3d 1306, 1311 (Fed. Cir. 2012)) (“Common law breach of contract damages ‘are recoverable where: (1) the damages were reasonably foreseeable by the breaching party at the time of contracting; (2) the breach is a substantial causal factor in the damages; and (3) the damages are shown with reasonable certainty.’ ”).
[46] See id.
[47] See id.; see also N. Helex Co. v. United States, 207 Ct. Cl. 862, 888 (1975), cert. denied, 429 U.S. 866 (1976); Glendale Fed. Bank, FSB v. United States, 239 F.3d 1374, 1382-83 (Fed. Cir. 2001) (“The underlying principle in reliance damages is that a party who relies on another party’s promise made binding through contract is entitled to damages for any losses actually sustained as a result of the breach of that promise. . . . As a general proposition, these damages are available for injuries resulting from activities that occurred either before or after the breach.”).
[48] Brian A. Gardner, Editor in Chief, Black’s Law Dictionary, 3d Pocket Ed., at 174 (2006) (definition of consequential damages).
[49] SUFI Network Servs., Inc., supra (emphasis added); see also Prudential Ins. Co. of Am. v. United States, 801 F.2d 1295, 1300 (Fed. Cir. 1986) (“Our predecessor court, the Court of Claims, has stated that foreseeability for consequential damages under government contract law is based upon what the parties contemplated as of the time the contract was made. [ ] As between private parties, the Supreme Court has recognized that the party who breaches a contract can only be held responsible for such consequences as may be reasonably supposed to be within the contemplation of the parties at the time the contract was made.” (internal citation omitted)).
[50] Fredericksburg Non-Profit Housing Corp. v. United States, 113 Fed. Cl. 244, 254 (Oct. 23, 2013) (quoting Franconia Assocs. et al. v. United States et al., 536 U.S. 129, 143 (2002) and Restatement (Second) of Contracts § 252)).
[51] Fredericksburg Non-Profit Housing Corp., supra (quoting Amber Res. Co. v. United States, 538 F.3d 1358, 1368 (Fed. Cir. 2008) and Restatement (Second) of Contracts § 250)).
[52] United States v. Dekonty Corp., 922 F.2d 826, 828 (Fed. Cir. 1991) (quoting Dingley v. Oler, 117 U.S. 490, 503 (1886) and In re Smoot, 82 U.S. 36, 48 (1872)).
[53] See, e.g., Alaska Pulp Corp., Inc. v. United States, 48 Fed. Cl. 655, 662 (2001) (Congress’ passage of the Tongass Timber Reform Act of 1990 was an affirmative act that repudiated a timber sales contract).
[54] See Black’s Law Dictionary, 3d Pocket Ed., at 3 (definition of absolve is “To release from an obligation, debt, or responsibility”).
[55] See also United States v. Tingey, 30 U.S. 115, 122 (1831) (In response to an argument that a contract was invalid because the Navy could not point to any law giving it the power to make the contract—“If the government or an officer on their behalf can make the United States parties to a bill of exchange; can vest in them the legal title to such a bill as indorser; and this without legislative authority; why may they not in like manner become obligees in a bond. Is the capacity of the government less than that of a corporation, or of a subordinate officer, or of a private individual?”); Perry v. United States, 294 U.S. 330, 352 (1935) (“When the United States, with constitutional authority, makes contracts, it has rights and incurs responsibilities similar to those of individuals who are parties to such instruments. There is no difference, said the Court in United States v. Bank of the Metropolis, 15 Pet. 377, 392, 10 L.Ed. 774, except that the United States cannot be sued without its consent.”).
[56] Nationwide Roofing and Sheet Metal Co., Inc. v. United States, 14 Cl. Ct. 733, 735 (1988).
[57] Best Foam Fabricators, Inc. v. United States, 38 Fed. Cl. 627, 638 (1997).
[58] See Torncello v. United States, 231 Ct. Cl. 20, 21 (1982) (“[W]e hold that the termination for convenience clause does not apply in the situation here and find the government in breach.”).
[59] See JKB Solutions and Servs., LLC v. United States, 18 F.4th 704, 709 (Fed. Cir. 2021).
[60] See, e.g., TigerSwan, Inc. v. United States, 110 Fed. Cl. 336, 345 (2013) (“[A]n improper termination for convenience may give rise to a breach of contract claim when the agency (1) terminates the contract in bad faith or (2) abuses its discretion in its decision to terminate the contract.”).
[61] Yankee Atomic Elec. Co. v. United States, 112 F.3d 1569, 1575 (Fed. Cir. 1997).
[62] Id. (quoting United States v. Winstar Corp. et al., 518 U.S. 839, 896 (1996)).
[63] Winstar Corp. et al., 518 U.S. at 904.
[64] Stockton East Water Dist. v. United States, 583 F.3d 1344, 1366 (Fed. Cir. 2009).
[65] Winstar Corp. et al., 518 U.S. at 899.
[66] Id. at 898.
[67] Id. at 896.
[68] Stockton East Water Dist., 583 F.3d at 1366.
[69] Hercules Inc. v. United States, 24 F.3d 188, 204 (Fed. Cir. 1994); see also Seaboard Lumber Co. v. United States, 308 F.3d 1283, 1294 (Fed. Cir. 2002) (“This defense requires Seaboard to show that[:] (i) a supervening event made performance impracticable; (ii) the non-occurrence of the event was a basic assumption upon which the contract was based; (iii) the occurrence of the event was not Seaboard’s fault; and (iv) Seaboard did not assume the risk of occurrence.”).
[70] See Merrion v. Jicarilla Apache Tribe, 455 U.S. 130, 147 (1982).
[71] Id. at 148.
[72] Bowen v. Public Agencies Opposed To Social Sec. Entrapment, 477 U.S. 41, 55 (1986).
[73] Perry, 294 U.S. at 352.
[74] Id. at 354.
[75] See Footnote 1.
[76] See 31 U.S.C. § 6303; see also 2 C.F.R. § 200.1 (definition of Contract).
[77] See 31 U.S.C. §§ 6304-05; see also 2 C.F.R. § 200.1 (definitions of Cooperative agreement and Grant agreement or grant).
[78] See 2 C.F.R. § 200.1 (definition of Recipient).
[79] See also Wahba v. N.Y.U., 492 F.2d 96, 100 n.3 (2d. Cir. 1974) (“This relationship results from the basic nature of the grant as a conditional gift in response to a request for support of a project in which there is a substantial measure of public interest.”); D.R. Smalley & Sons v. United States, 178 Ct. Cl. 593, 598 (1967), cert. denied, 389 U.S. 835 (1967) (“These grants are in reality gifts or gratuities.”). It should also be acknowledged that, sometimes, the violation of a condition to a conditional gift can give rise to a cause of action under contract or quasi-contract. See, e.g., Register v. Nature Conservancy, 2014 WL 6909042, at 6 (E.D. Ky. Dec. 9, 2014) (finding that a conditional gift was an oral contract); Restatement (Second) of Contracts § 90.
[80] See, e.g., Community Relations—Social Dev’t Comm’n in Milwaukee Cnty., 8 Cl. Ct. 723, 725 (1985) (“Defendant contends that a grant is not a contract, as it evinces no contractual language or intent to be bound. This question, however, has already been laid to rest by the Court of Claims, which has held that a notice of a federal grant award in return for the grantee’s performance of services can create cognizable obligations to the extent of the government’s undertakings therein.”); Trauma Serv. Grp. v. United States, 104 F.3d 1321, 1326 (Fed. Cir. 1997) (“[C]ontrary to the opinion of the trial court, a MOA can also be a contract—whether this one is, we do not decide.”).
[81] See, e.g., San Juan City Col. v. United States, 391 F.3d 1357, 1361 (Fed. Cir. 2004) (“The fact that this contract covers government financial grants does not warrant a different standard. If the government has breached the Agreement, the College is entitled to seek whatever damages it is entitled to receive.”).
[82] See also Transworld Sys., Inc., CBCA No. 6049, 22-1 BCA ¶ 37,994 (Aug. 13, 2020); Collecto, Inc. d/b/a EOS CCA, CBCA No. 6001, 22-1 BCA ¶ 37,997 (Sept. 2, 2020).
[83] See, e.g., Trauma Serv. Grp. v. United States, 104 F.3d 1321, 1326 (Fed. Cir. 1997) (“For contracts with the United States, however, an implied-in-fact contract—just as an express contract—requires an authorized agent of the Government.”).
[84] See, e.g., Imaginarium, LLC v. United States, 166 Fed. Cl. 234, 244-45 (2023) (“[The] law does not annihilate the character of a grant or cooperative agreement being a legally enforceable contract if the grant or cooperative agreement meets the common law elements of a contract, and the enabling statute for the grant or cooperative agreement provides authority to contract.”).
[85] See Americom Gov’t Servs., Inc., CBCA No. 2294, 14-1 BCA ¶ 35,687 (Aug. 13, 2014) (“Contractual ratification in government contracts may be accomplished by a contracting official accepting government responsibility either directly or implicitly through his or her actions, and sometimes inactions. Ratification may also occur through institutional ratification, which does not require the ratification to be made by an authorized contracting official.”); Angel v. United States, 172 Fed. Cl. 102, 128 n.13 (2024) (“In a recent decision, the Federal Circuit found that a supervisor at the United States Mint was plausibly alleged to have implied actual authority to contract to accept and redeem mutilated coins, when some of those coins were alleged to have been melted down and used by government, because such contracting authority was plausibly an ‘integral part’ of his duties. Portland Mint v. United States, 102 F.4th 1371, 1384 (Fed. Cir. 2024).”); Portland Mint v. United States, 102 F.4th 1371, 1383-84 (Fed. Cir. 2024) (quoting Liberty Ammunition, Inc. v. United States, 835 F.3d 1388, 1402 (Fed. Cir. 2016) and H. Landau & Co. v. United States, 886 F.2d 322, 324 (Fed. Cir. 1989)) (“Authority is integral ‘when the government employee could not perform his or her assigned tasks without such authority.’ ”).
[86] See Thermalon Indus., Ltd. v. United States, 34 Fed. Cl. 411, 417-18 (1995) (finding that the 28 U.S.C. § 1491(a) Tucker Act jurisdiction over express and implied-in-fact contracts with the United States applies where an agreement has the elements of a binding contract).
[87] See, e.g., England v. Contel Adv. Sys., Inc., 384 F.3d 1372, 1378-79 (Fed. Cir. 2004); see also 31 U.S.C. § 3902(g); 5 C.F.R. § 1315.15.
[88] See 31 U.S.C. § 3902(a); D.E.W., Inc., ASBCA No. 4291, 92-1 BCA ¶ 24,540 (Nov. 5, 1991) (“The Prompt Payment Act (PPA) is a waiver of sovereign immunity for interest payments, . . . Under 31 U.S.C. [§] 3902(a), the interest penalty applies to late payments the Government is obligated to make under a contract to acquire property or services.”).
[89] A & R Fugleberg Farm, Inc. v. Triangle Ag, LLC, 828 F. Supp. 2d 1045, 1053 (D. N.D. 2011).
[90] Ace Am. Ins. Co. v. Fed. Crop Ins. Corp., 209 F. Supp. 3d 343, 347 (D.D.C. 2016).
[91] Nematollahi v. United States, 38 Fed. Cl. 224, 235 (1997).
[92] Energroup, Inc., EBCA No. 413-5-88, 89-1 BCA ¶ 21,233 (Aug. 15, 1998).
[93] 1200 Sixth St., LLC v. U.S. ex rel. Gen. Servs. Admin., 848 F. Supp. 2d 767, 778 ( E.D. Mich. 2012).
[94] See Smith v. Orr, 855 F.2d 1544, 1553 (Fed. Cir. 1988) (“[O]ur holding is entirely consistent with the well-established principle that a plaintiff may pursue such a claim in a district court if the plaintiff waives his right to recover the amount exceeding $10,000.”).
[95] 5 U.S.C. § 706(1).
[96] See Crocker v. United States, 125 F.3d 1475, 1476 (1997) (“[T]he trial court [CoFC] correctly held that it lacks the general federal question jurisdiction of the district courts, which would allow it to review the agency’s actions and to grant relief pursuant to the Administrative Procedure Act, 5 U.S.C. §§ 701-706 (1994).”); Heuss v. United States, 315 F. App’x 255, 257 (Fed. Cir. 2008) (citing Murphy v. United States, 993 F.2d 871, 874 (Fed. Cir. 1993) (“[T]he Court of Federal Claims does not have jurisdiction to hear cases arising under the APA.”).
[97] See Bowen v. Mass., 487 U.S. 879, 895 (1988).
[98] United States v. Cleveland, 356 F. Supp. 3d 1215, 1236 (D. N.M. 2018) (quoting Normandy Apts., Ltd. v. U.S. Dep’t of Housing and Urban Dev’t, 554 F.3d 1290, 1298 (10th Cir. 2009)).
[View source.]
