Insight 44 - Substack.jpg

Implied Duties of Cooperation, Good Faith, and Fair Dealing in Federal Contracts

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.

RELATED INSIGHTS

TLF-Federal-Procurement-Insight-3.jpg

The presumption of good faith presumes that government officials carry out their obligations during the performance of a government contract in good faith. The presumption is at its strongest when contractors allege quasi-criminal wrongdoing by government personnel acting in the course of their official duties. To overcome the presumption of good faith in this context, contractors must present “well-nigh irrefragable” proof. In other words, contractors must present evidence that cannot be refuted or disproved. Compared to the three standards of proof generally recognized by courts, the “well-nigh irrefragable” proof standard is the closest to the clear and convincing standard. This standard imposes a heavier burden on the contractor than imposed by the preponderance of the evidence standard but a somewhat lighter burden than requiring proof beyond a reasonable doubt, reserved for criminal cases. Clear and convincing evidence has also been described as evidence that produces an abiding conviction in the mind of the judge that the truth of the factual contention is highly probable.

The presumption of good faith can be difficult to overcome when applied in the context of allegations of quasi-criminal wrongdoing by government officials. Nevertheless, contractors may meet the “well-nigh irrefragable” proof standard if they present evidence of the government’s specific intent to injure the contractor. Such evidence may include government actions that amount to bad faith. Bad faith actions are motivated by malice, animus, conspiracy, or otherwise part of a course of governmental conduct designed to be oppressive. In the absence of evidence of the government officials’ specific intent to injure it, the contractor will find it challenging to overcome the strong presumption that the government’s administrative actions are correct and taken in good faith. Overcoming the presumption of good faith may be particularly difficult when a significant amount of time has passed between the occurrence of the underlying events and the contractor’s subsequent allegations of bad faith.

more
TLF-Bid-Protest-Insight-4.jpg

Unsuccessful contractors may challenge contract award decisions on the grounds that the agency misevaluated proposals, which prejudiced the protestor. Experienced contractors understand that in post-award protest cases, the Government Accountability Office (GAO) and the Court of Federal Claims (COFC) do not replace their opinions or the protester's viewpoints with the agency's evaluation. Instead of reevaluating offerors’ proposals, the agency record is examined to determine whether the source selection decision was reasonable and whether the agency’s evaluation was consistent with the solicitation’s evaluation criteria. That is because the evaluation of proposals is considered squarely within the agency’s discretion. Thus, even if there are two or more reasonable subjective interpretations or positions on technical evaluation details, the agency’s evaluation position will prevail as long as it is reasonable and consistent with the stated criteria.

It should be noted, however, that the agency’s evaluation is only afforded discretion so long as the award is reasonable and consistent with the terms of the solicitation. In B-421567; B-421567.2, a 2023 protest decision, the GAO sustained a protest challenging the agency evaluation of the awardee’s proposal after finding that the agency failed to evaluate technical proposals consistent with the solicitation’s evaluation criteria. In that post-award protest involving the award of a task order under the Army’s ITES-3S IDIQ contract on a best-value basis, GAO found that it was unreasonable for the agency to evaluate the awardee’s technical proposal as meeting the requirements when the awardee’s IDIQ level labor categories did not fully meet the task order solicitation’s position requirements. In its decision, the GAO additionally found that the protestor was prejudiced by the Agency’s failure to enforce the solicitation requirements when evaluating the awardee’s proposal because had the protestor known that the agency would accept labor categories that did not fully meet the requirements of the task order, the protestor could have proposed less qualified labor categories, thus achieving cost-savings and lowering its total evaluated price in the process.

more
TLF-Bid-Protest-Insight-10.jpg

Acquisition planning on U.S. federal contracts requires the contracting activity to coordinate and integrate the efforts of all personnel responsible for the acquisition via a comprehensive plan that fulfills the government’s requirements in a timely manner and at reasonable cost. The Competition in Contracting Act (CICA) of 1984, implemented by Federal Acquisition Regulation (FAR) Part 6, mandates full and open competition in federal procurement. Consequently, while there are limited exceptions enumerated in FAR § 6.3, federal agencies must generally use competitive procedures in procuring products and services. Furthermore, federal agencies are expressly prohibited from entering contracts for property or services by utilizing non-competitive procedures when they have failed to properly plan the procurement in advance.

Contractors looking to challenge the Government’s use of non-competitive procedures in such improperly planned procurements must be prepared to demonstrate that the agency’s decision was unreasonable under the particular circumstances of that procurement. In 2014, the Bureau of Indian Affairs (BIA), an agency under the Department of Interior (DOI), was involved in a procurement contract for technology services. The procurement at issue was a Buy Indian Set-Aside conducted under the Buy Indian Act of 1910, and the eventual contract was awarded to an eligible non-incumbent contractor. However, a week before the conclusion of the predecessor contract, the incumbent contractor timely protested the award at the Government Accountability Office (GAO). In response, the BIA informed the GAO that it intended to take corrective action and requested that the GAO dismiss the incumbent’s protest.

more
TLF-Federal-Procurement-Insight-52.jpg

It is common for individuals to switch roles between the public and private sectors in the federal contracts industry. Also known as the "revolving door" in industry parlance, this practice often leads to government officials leaving their positions to work for federal contractors or contractor employees obtaining roles in government agencies that regulate or award contracts to their former employers. As one can imagine, this practice can and often does lead to actual or perceived conflicts of interest at various stages of the procurement process. The Federal Acquisition Regulation (FAR) subpart 9.5 describes three types of organizational conflicts of interest (OCI) that may arise during the procurement lifecycle. These include biased ground rules, unequal access to non-public information, and impaired objectivity. Moreover, FAR § 3.1101 defines personal conflict of interest as a situation in which a covered employee has a financial interest, personal activity, or relationship that could impair the employee's ability to act impartially and in the government's best interest when performing under the contract.

more

Implied Duties of Cooperation, Good Faith, and Fair Dealing in Federal Contracts

TILLIT LAW Federal Contract Claims Insights