Your company, an agricultural testing laboratory, was successful in procuring a U.S. government contract to provide the Department of Agriculture with crop testing services. You commenced performing under the contract, measuring the yields of various crops under different herbicide and fertilizer application conditions, and provided preliminary test results to the government. Unfortunately, a disgruntled laboratory technician destroyed the final test result data, rendering you unable to provide the required final report. When you press the government for payment for the preliminary data provided under the contract, the government asserts that you are not entitled to payment and, citing an insurance requirement in the contract, inquires as to your insurance coverage for the loss of data.
A lawyer experienced in government contract law and insurance coverage law can help you determine whether your insurance policy provides coverage for your loss sustained as a result of the lost data, as well as whether you met the government contract's insurance requirement and whether the insurance policy provides coverage for any potential liability to the government for failing to provide the final report. In addition, the lawyer can assert your claim for payment for the services performed and data provided.
To help ensure payment and protect against the risk of loss and liability, it is advisable to consult with an attorney with insurance and government contract experience to ensure the most advantageous contract possible and to make sure that the contract's insurance requirements adequately address the circumstances. Likewise, the attorney can assist in ensuring timely performance under the contract and interpreting the contract as the need arises.Are There Federal Regulations Concerning Government Contracts?
The federal regulations concerning government contracts are known as the Federal Acquisition Regulations (FAR). These regulations are issued by the General Services Administration of the federal government. Attorneys practicing in the area of government contracts are familiar with the complex and arcane provisions of the FAR, which have applicability both in the formation of a government contract and in disputes arising from nonperformance or nonpayment.
An example of the degree of complexity of the federal regulations dealing with government contracts is the Department of Defense's applicable procurement regulations. Under these regulations, which are fairly typical of federal procurement regulations, a government contractor must first deal with a procurement contracting officer in charge of awarding contracts. Then the government contractor must work with an administrative contracting officer during performance of the contract. Then, if an issue arises that brings the contract's termination provisions into play, the contractor must address those issues with the government's termination contracting officer. The extent to which these government agents communicate with each other varies from agency to agency and person to person. It is important that a government contractor communicate with the correct government agent in acquiring a government contract, performing under the contract, and addressing any termination issues. Unlike most private contracts, the government will not be bound by contracts or concessions made by a government officer who does not have authority to act. An experienced government contract attorney can ensure that contracts and other required documentation is in the proper form, drafted as advantageously as possible, and executed by the proper government officer. A government contractor should not rely on the government for advice on how to proceed in addressing these issues.Are Government Contract Cases Similar to Other Contracts?
Breach of contract cases arise when a part to a contract breaches the contract and the other party to the contract suffers damages as a result of the breach. A breach of contract case can arise from a government contract just as easily as it can result from any other kind of commercial contract. However, complications can arise from the unequal resources and bargaining position between the government and the government contractor in negotiating the terms of the contract, the large size of many government contracts, and the insurance coverage provisions of the contract. In addition, government contract provisions which appear to be "boilerplate" often have received distinct meaning from the results of past contract litigation. Also, disputes under government contracts follow a different procedural route than those arising under private contracts because of the government's special status.
The typical breach of government contract case alleges that the government contractor breached the contract or was negligent. In some cases, breach of contract claims and negligence claims are both asserted. A breach of contract arises when a party to a government contract breaches the contract and the breach results in damages to the other party to the contract. For the government to prevail on a negligence claim, it generally must establish four elements in order to recover. First, the government must show that the party being sued owed a duty to the government. Second, the government must prove that the other party breached that duty. Third, the government must then show that it was damaged. And fourth, the government must establish that the breach was the proximate cause of the damages.
Generally, it is easier for the government to prevail on a breach of contract claim rather than on a negligence claim. This is because the contract ordinarily sets forth the contractual duty in black and white, and because it is difficult to establish a duty owed by the contractor to the government apart from the duty owed pursuant to the contract. Importantly however, insurance policies procured under requirements of government contracts are likely to provide coverage against negligence claims but not against breach of contract claims. This is because of the general policy of the law that a party to a contract is liable for breaches thereof, as well as insurance policy provisions disclaiming coverage for breach of contract claims.
State agencies, municipalities, and public authorities operating under state law are subject to government contract regulations similar to those applicable to the U.S. government. However, these are imposed under state law rather than federal law. An attorney with experience in the area of federal government contracts is likely to have experience in the area of state or municipal contracts as well.Conclusion
If you contemplate entering into a contract with the U.S. government or, to a lesser extent, with a local or state government agency, you can expect that a breach of the contract on your part can result in substantial liability. It is important that you negotiate the best contract possible and protect yourself to the extent possible through insurance coverage. To the extent an insurance policy can protect you against the potential loss, insurance coverage should be obtained. In any event, you can expect that the contract will contain provisions imposing insurance requirements on you. In most cases, a failure to obtain the required insurance will itself constitute a breach of the government contract.
When seeking an attorney to represent you in negotiating a government contract and responding to any loss or claim of breach, it is important to inquire as to his or her background in government contracts and insurance law. Ask questions about his or her training and experience so that you can make an informed decision about whether this is the right person to zealously represent your interests in negotiating the contract, asserting your claim for payment under the contract, or defending you against any breach of contract claim asserted by the government. A lawyer experienced in insurance and government contract law can help a contractor determine whether it has breached the government contract, assess insurance coverage, determine what defenses and counterclaims may be available, and provide representation throughout the entire litigation process. Lawyers experienced in insurance and government contract law can also advise government contractors on preventing liability through good business practices.