The Small Business Administration (SBA) mentor-protégé program allows experienced firms to pair with smaller firms to form separate joint venture (JV) entities to pursue federal government contracts. The mentor and protégé firms enter into a JV agreement to meet the program’s regulatory requirements. The JV agreement typically divides the work and the responsibilities of contract performance between the member firms. The JV entities are usually “unpopulated,” meaning they do not have their own employees. Thus, instead of performing the work itself, the JV entity subcontracts the performance to member firms per the JV agreement and any subsequent addendums. Additionally, the JV entity is managed by the protégé firm and requires that the protégé firm hold at least 51% of the ownership interest. The SBA’s mentor-protégé program is designed to be mutually beneficial for participating firms, allowing the protégé to benefit from the mentor’s business development assistance and simultaneously affording the mentor firm access to certain contracts it could not otherwise compete for. Despite the arrangement’s “win-win” nature, disputes between participating firms can and often do arise. In case of such disputes, the JV member firms should be mindful that they are not only bound by the terms of the JV agreement but also by any contractually implied duties and covenants, such as the duties of loyalty, care, and good faith and fair dealing.

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.

When interpreting the terms of a government contract, contractors should generally look for the “plain-meaning” of the contract, assigning words their ordinary meaning. However, an equally important rule of federal contract interpretation requires a “whole-text” interpretation of the contract within the context of its structure and the logical relation of its various parts. Pursuant to this rule and the interpretative principles derived from and related to it, when interpreting a federal contract, the whole contract should be taken together such that none of its parts are rendered superfluous or ineffective. Put another way, in determining the meaning the parties intended to assign to specific contract terms or clauses, contractors should read the contract as a whole and within the entire context of the procurement. Furthermore, the meaning assigned by a party to a particular clause or term must be in harmony with the other parts of the contract. Contractors should also be mindful of their duty to enquire about patent ambiguities.

Harmonious Reading and Conflict Avoidance

In reading a federal contract as a whole, contractors should interpret the contract provisions in harmony with each other. That is, provisions should be interpreted in a manner that renders them compatible with each other rather than in contradiction. For instance, in a 2013 case before the Court of Federal Claims (COFC), the contractor attempted to argue that the government was required to exercise all option years in an indefinite delivery/indefinite quantity (IDIQ) contract for supplying leased aircrafts with one base and seven option years. The contractor primarily based its argument on the fact that the contract referred to itself as a “long-term” contract on at least three separate occasions. However, in applying the “whole-text” cannon, the Court disagreed with the contractor’s interpretation. The Court explained that the contractor’s interpretation of “long-term” would convert the word “option” into its opposite and make it an obligation. Instead, the Court harmoniously interpreted “long-term” as merely describing the contract with an assumption that the government would exercise the option years.

When entering federal contracts, the government acts in a proprietary capacity and owes contractors certain express and implied obligations. One such implied obligation is to disclose to the contractor facts and information vital to performance under the contract. Under what is also known as the “doctrine of superior knowledge,” the government may be held liable for breach of contract if it fails to disclose vital information impacting performance costs or duration. Notably, the doctrine of superior knowledge only applies to critical information withheld before the formation of the contract, with a related but distinct implied duty of good faith and fair dealing attaching post-contract formation. Contractors may prove that the government was in breach of contract under the superior knowledge doctrine by producing evidence that they: (1) undertook performance without vital knowledge of a fact that affects performance costs or duration, (2) the government was aware that the contractor did not have knowledge of the information and had no reason to obtain it, (3) any contract specification supplied by the government misled the contractor or did not put it on notice to inquire, and (4) the government failed to provide the relevant information. Thus, when the government violates this implied duty to disclose vital information in its possession pre-contract formation, contractors may assert a breach of contract action by demonstrating that their claim meets these four criteria.