Under certain circumstances throughout the procurement lifecycle, contractors may need to establish understandings, agreements, planned actions, or otherwise define the scope and procedures for relationships between themselves and a federal agency to accomplish mutual goals and objectives. When meeting such objectives does not require fiscal obligations or contract awards governed by the Federal Acquisition Regulation (FAR), contractors may negotiate and enter memorandums of understanding (MOUs) or memorandums of agreement (MOAs) with the government. These memorandums provide an overarching framework to govern the relationship between the parties under such circumstances by clearly defining their roles, responsibilities, and expectations. Such memorandums may have binding authority depending on the authority used to execute the memorandum and the facts surrounding other impacted contracts or agreements. In such situations, if the government is in breach of its obligations under the memorandum, contractors may have the right to obtain monetary damages as a party to the memorandum of agreement.
- Memorandums of Understanding
When an effort requires the federal government to provide federal funds, resources, or items for support, and the memorandum is only being used for the limited purposes of establishing a general framework of the parties’ rights and obligations, contractors may elect to enter into an MOU with the government. An MOU is typically used if the circumstances do not require a high level of detail to establish the parties’ specific roles, responsibilities, and actions. MOUs are generally not issued under specific authority and are not usually legally binding.
- Memorandums of Agreement
Meanwhile, when the parties require that their rights, obligations, or course of action be defined with a high level of detail or specificity, a memorandum of agreement may be utilized. When entering an MOA with a government agency, contractors should ensure that the scope, purpose, period of performance, and the authority of the executing official to enter into the agreement are clearly established. Many federal agencies may also have pre-existing agency-specific formats for such MOAs. Therefore, contractors should enquire about and request that MOA be consistent with the agency’s established format for such agreements where feasible.
Notably, MOAs may not be used to issue property leases by the General Services Administration (GSA), federal contracts under the FAR, grants, cooperative agreements, or interagency agreements for direct acquisitions. Similarly, such agreements or memorandums cannot be utilized to create fiscal or indemnification obligations. As with any contract or agreement, when entering into MOAs with a federal agency, contractors should ensure that the termination clause affords adequate due process, including a reasonable notice period. Contractors should also review the terms of the MOAs to ensure they are generally reasonable and consistent with applicable laws and regulations. Finally, the MOA should also reference any applicable agency policies and procedures.
While MOAs are typically legally binding, when entering such agreements, contractors should be mindful that enforceable contract liability under the Tucker Act does not attach to every agreement with the government. Therefore, just because an agreement, understanding, or memorandum can semantically be stated as, or has the cognizable elements of, a traditional contract does not necessarily mean that the instrument is automatically enforceable against the government. However, when specifically granted congressional authority to enter into contractual agreements can be traced to the government official executing the MOA, adjudicative forums need not make further inquiries to determine whether the source of substantive law at issue separately mandates compensation. In other words, if the government is in breach of a properly executed MOA entered by a duly authorized government official binding the government as a contracting party – the government can be held liable for monetary damages for that breach under the Tucker Act and traditional principles of contract law. Finally, in disputes where it is not entirely clear whether the government issued the memorandum in its capacity as a contracting party, parties to the memorandum may request the reviewing adjudicative forum for a declaration of the specific rights and obligations of the parties under the memorandum.
This Federal Procurement 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.
