Contractors are well aware that they cannot rely on the apparent authority of government officials. Under Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380 (1947), only an authorized contracting officer may bind the government. But what about the apparent authority of contractor representatives? That was the question presented for consideration in Aspen Consulting, LLC v. Secretary of the Army, No. 2021-1381 (Fed. Cir. 2022).
Aspen Consulting won a contract to outfit Army health and dental clinics at Rose Barracks in Vilseck, Germany. The contract provided for payments to be made by electronic funds transfer to an Aspen company account at Bank of America. It did so by incorporating FAR 52.232-33 (Oct. 2003), which required the government to make payment to the account that Aspen identified in the Central Contractor Registration database. Aspen’s Bank of America account was listed in its CCR file.
During the first year of Aspen’s performance, the government released twelve progress payments to the Bank of America account. For reasons that do not appear in the opinion, an Aspen vice-president and operations manager sent the contracting officer an email requesting that the government make future payments to another company-owned account at Commerzbank. The government honored this request, making two progress payments totaling more than $264,000 to the account at Commerzbank.
Aspen’s owners soon advised the contracting officer that its vice-president was not authorized to make a change in the payment instructions. Aspen filed a claim for breach of contract to recover the two progress payments, asserting that the government had breached the contract by failing to send progress payments to the Bank of America account.
The Armed Services Board of Contract Appeals denied Aspen’s claim. The Board concluded that the Army did not breach its payment obligation because the vice-president who sent the email instructions had apparent authority to bind the company. Under the circumstances, the Board concluded that it was reasonable to honor the vice-president’s email request. The duty to resolve the conflict between the payment instructions in the CCR file and those in the vice-president’s email fell on Aspen, not the Army.
In a February 2022 opinion, the Federal Circuit reversed. According to the court, whether or not the Aspen vice-president had apparent authority to change the payment instruction does not matter. The contract provided for payment to be made to the account at Bank of America, which was identified in Aspen’s CCR file. Changes in the payment instructions would need to have been made by updating the CCR file. Since the CCR file had not been changed, there had been no change in the account designated for payment. The Army’s failure to make payment to the account designated in the CCR file was a breach of contract. Aspen’s entitlement to damages arising from the breach will be addressed on remand.
Aspen Consulting does not spell the end of apparent authority in government contracting. There are still circumstances when the government may reasonably rely on the apparent authority of contractor representatives. It also does not make it impossible for the government and contractor representatives to communicate by email or even to use email to modify contract requirements. But it sure makes doing so more difficult.
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