The federal government may only enter into contracts through the authorized actions of its officials possessing actual authority, with the contractor bearing the burden of proving that the government official upon whose statements and actions it relied had the necessary authority to bind the government. In certain situations, however, unauthorized commitments by government officials may be subsequently ratified. In federal contracting parlance, an unauthorized commitment refers to an agreement that is not binding on the government solely because the government official who made the commitment lacked the authority to enter into that agreement on behalf of the government. Such unauthorized commitments may later be authorized by government officials with the authority to bind the government. Thus, even when a government official does not possess the express or implied actual authority to bind the government, the government may still be bound by the contract if the official’s unauthorized commitment is subsequently ratified by an official with the necessary authority. Notably, while contract disputes adjudicative forums may determine whether ratification has taken place, they do not have the authority to ratify unauthorized commitments. Ratification may be express or implicit and may occur at the individual or institutional level.
- Express Ratification
For a federal agency to expressly ratify unauthorized commitments, the ratifying official must possess the requisite authority and know all the pertinent facts. The Federal Acquisition Regulation (FAR) outlines specific procedures that agencies must adhere to when expressly ratifying unauthorized commitments. Notably, express ratification may occur even when the authorizing official fails to follow specific procedures listed in FAR. Express ratification, which may be referred to as express individual ratification, typically requires the ratifying official to meet the following conditions listed in FAR 1.602-3(c).
- Supplies or services have been provided to and accepted by the Government, or the Government otherwise has obtained or will obtain a benefit resulting from performance of the unauthorized commitment.
- The ratifying official has the authority to enter into a contractual commitment.
- The resulting contract would otherwise have been proper if made by an appropriate contracting officer.
- The contracting officer reviewing the unauthorized commitment determines the price to be fair and reasonable.
- The contracting officer recommends payment and legal counsel concurs in the recommendation, unless agency procedures expressly do not require such concurrence.
- Funds are available and were available at the time the unauthorized commitment was made.
- The ratification is in accordance with any other limitations prescribed under agency procedures.
- Implicit Ratification
Implicit ratification is a fact-based action that occurs when government officials with the authority to ratify, such as a contracting officer (CO), gain knowledge of an unauthorized commitment and then affirmatively act, or fail to act, in a manner that implicitly approves that commitment. The government may implicitly ratify an unauthorized commitment or agreement at the individual or institutional level.
o Implicit Individual Ratification
Implicit individual ratification occurs when a government official possessing actual authority to contract impliedly approves a previously unauthorized contractual commitment with full knowledge of all the facts upon which the unauthorized action was taken. Significantly, while the authorizing official’s knowledge of all the facts is necessary to support a finding of implicit individual ratification, the knowledge may be actual or constructive. In the context of implicit individual ratification, constructive knowledge can be found under circumstances where the government official with actual authority knew or should have known of the matter but allowed it to continue. In other words, the authorizing official’s constructive knowledge of the unauthorized commitment, together with his silence or inaction, may amount to ratification, especially in situations where the government tacitly accepts benefits from the agreement. In Civilian Board of Contract Appeals (CBCA) 6621, the procuring agency’s continued use of commercial computer security software for nine months past its decision to not exercise the final option period, when coupled with the contracting officer’s knowledge of the continued use for five of the nine months, entitled the contractor to recover the entire price of the option period. The Board ruled that the agency’s acceptance of the benefit of continued use of the software in conjunction with the contracting officer’s knowledge and inaction meant that the agency had ratified an unauthorized commitment.
o Implicit Institutional Ratification
Implicit institutional ratification occurs when the government seeks and receives benefits from a contract that is otherwise unauthorized. A key element of an implicit institutional ratification claim is actual or constructive knowledge of the unlawful promise by government officials with ratifying authority. The Court of Federal Claims (COFC) has applied the doctrine of institutional ratification to ratify an unauthorized contract in the absence of express ratification. In a 2003 decision, the COFC found institutional ratification when the procuring agency demonstrated its acceptance of the contract through a written agreement, repeatedly recognized the existence of the contract, and benefited from the products and services provided by the contractor for over a year. In that case, even though the unauthorized contract was never expressly ratified, the contracting officer was directly involved in implementing and overseeing performance. The government further confirmed its intent to treat the contract as a binding commitment by making over $16 M in payments before attempting to exit the agreement under the terms of the contract. The Court found these facts sufficient to indicate that the government had institutionally ratified the contract.
Ultimately, ratification must be based on a showing of the government’s acceptance of the contract. While there is no universal test to determine whether ratification has occurred, a common scenario indicating the presence of ratification is where the government overreaches by allowing the continuation of the contractor’s services but later denies payment. Contractors should be mindful that although FAR 1.602-3 provides procedures for express ratification, those procedures do not preclude a finding of express ratification when they are not followed. Similarly, the express ratification procedures in the FAR do not preclude a finding of either form of implicit ratification. Finally, it is also noteworthy that implicit institutional ratification cannot occur due to the unauthorized commitments or actions of low-ranking government employees because that would expose the government to potentially uncontrollable expenditures in a wide range of scenarios. Contractors can be better positioned to identify instances of express and implicit ratification during performance of their federal contracts by getting familiarized with the concept of actual authority vested in specific government officials and understanding the overarching framework governing express and implicit ratification in federal contracts.
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.
