Due to the highly regulated nature of federal government contracts, their formation and administration are governed by a well-defined set of rules. Despite this, government contracts rely on a foundation of mutual trust and cooperation between the government and its contractors. Parts of this invisible layer of obligation are embedded in the implied duties of cooperation, good faith, and fair dealing. Therefore, while related and somewhat interchangeable concepts, these implied duties are inherent to all government contracts and help ensure a successful, productive, and professional relationship between the contracting parties. However, from time to time, the Government may violate these implied duties, giving rise to contractor claims. Understanding these duties empowers contractors to navigate potential issues by identifying causes of action for Government breaches that result in disruption in performance or monetary damages. Therefore, a general discussion distinctly describing these obligations may be helpful to contractors alleging Government violations during contract performance.
o Duty of Cooperation
The Government’s duty to cooperate during the performance phase is as inherent to a government contract as the Government’s right to expect performance in accordance with specifications. Since both parties are required to work together as partners to achieve common contractual objectives, a lack of cooperation during performance by the Government may, and often does, become a source of disputes. When facing scenarios where contractors suspect a lack of adequate cooperation by the Government, they should evaluate the Government’s conduct in the context of the contract’s overall objectives. If the conduct at issue is inconsistent with the Government’s stated mission needs or hinders the contractor’s performance, the Government may be in breach of its duty of cooperation. The Government’s duty to cooperate during performance may be viewed independently by adjudicative forums in accordance with the facts at issue or in contrast with its treatment of other similarly situated contractors. Understanding the government's duty to cooperate empowers contractors to identify potential roadblocks and seek redress for hindered performance.
o Duty of Good Faith
As parties to a contract, both the Government and its contractor owe a duty of good faith in performance to each other. As a relatively broad concept, “good faith” may take on different meanings depending on the type of contract, the legal system, and the subject matter of the contract. Good faith performance of a contract generally requires faithfulness to an agreed-upon common purpose along with consistency in action per the reasonable expectations of the other party. Throughout the procurement lifecycle, the term “good faith” may be used in different contexts, with the duty’s meaning varying slightly in accordance with the context in which it is used. The duty of good faith is the underlying foundation of a fair and productive contractual relationship, requiring government officials to act honestly with a genuine intention to achieve procurement objectives. Notably, Government officials are presumed to act in good faith in carrying out their official duties, and this presumption of good faith action is at its strongest when contractors allege bad faith or bias. In such cases, contractors are required to provide clear and convincing evidence to sustain their allegations of bad faith or bias by Government officials.
o Duty of Fair Dealing
The mutual obligation of fair dealing is related to the duty of good faith and is equally applicable in federal procurement as in private or commercial contracts. Contractors may allege a violation of this duty by pointing to Government conduct that, under the circumstances, was unfair or prejudicial to contractor interests. To prove such allegations, the contractor may show that Government officials engaged in underhanded tactics that prejudiced the contractor. Examples of such violations may include abuse of discretion or official authority in making contractual decisions or even deliberate failure to mitigate damages. In cases where contractors suspect that the Government failed to disclose important information required for successful performance, they may allege that the Government had knowledge of material facts that it failed to disclose. In such claims, the contractor must additionally prove that it was unaware of the facts at issue.
The implied duties of cooperation, good faith, and fair dealing form the foundation of a successful contractual relationship between the Government and its contractor. By understanding these implied duties and their applications throughout the procurement lifecycle, contractors can identify potential causes of action against the government. Therefore, it is helpful for contractors to be familiar with the individual and collective operation of these duties in the context of contract performance. Depending on the specific facts at issue, contractors may assert that the Government violated one or more of these duties.
This Federal Contract Claims Insight is provided as a general summary of the applicable law in the practice area and does not constitute legal advice. Contractors wishing to learn more are encouraged to consult the TILLIT LAW PLLC Client Portal or Contact Us to determine how the law would apply in a specific situation.
