The interpretation of federal contracts is generally governed by the plain language of the contract. This means that adjudicative forums assign meaning to federal contracts primarily by giving the contractual words their ordinary sense and without referring to extrinsic evidence. If the plain meaning of contractual words is unambiguous, that meaning generally controls for the purposes of contract interpretation. However, there may be situations where the contract terms are unclear or ambiguous permitting more than one reasonable interpretation. In such situations, adjudicative forums may rely on certain extrinsic evidence to resolve contract interpretation disputes.

• Extrinsic Evidence in the Solicitation Phase

In resolving the meaning of ambiguous terms in case of interpretive disputes in federal contracts, adjudicative forums often look to the discussions between the government and prospective contractors in the solicitation phase of the procurement. Statements made by government officials during their interactions with prospective contractors at pre-proposal conferences, industry days, or pre-award testing may be used as evidence in contract interpretations as long as such statements do not directly contradict the contract language. As with other extrinsic evidence in the context of contract interpretation, written communications, such as handouts and meeting minutes, generally hold much more weight than oral statements made by government officials.

A basic tenet of the U.S. federal public procurement system is a fair and competitive bid process. This means federal agencies must provide potential contractors with sufficiently detailed solicitations that are clear and concise so they may compete intelligently and on a relatively equal basis. However, sometimes, issues arise when the solicitation itself contains hidden pitfalls. These are known as latent ambiguities. A latent ambiguity in a bid protest arises when a defect in the solicitation is not initially visible but only becomes apparent with the introduction of additional evidence, such as additional technical specifications, past performance evaluations, or discussions. Latent ambiguities may be differentiated from patent ambiguities, which are apparent solicitation defects or errors evident on the face of the solicitation.

A latent ambiguity may arise due to various reasons, including poorly drafted solicitation provisions, inconsistent or conflicting solicitation language, a lack of adequate clarification or guidance from the agency in response to offeror queries, or just a change in circumstances since the issuance of the solicitation. To demonstrate the presence of a latent ambiguity, the protestor should demonstrate that the ambiguity is not readily resolvable by referencing the solicitation or any applicable regulations. Furthermore, the protestor must prove that the latent ambiguity is genuine and material. To prove materiality, contractors can demonstrate that the latent ambiguity ultimately had a bearing on the source selection decision. The protestor must also show reliance on its reasonable interpretation of the latent ambiguity and competitive prejudice stemming from that reasonable reliance. In other words, the protestor must show that the latent ambiguity could have two or more reasonable interpretations and that the protestor relied on its own reasonable interpretation of the latent ambiguity in drafting its proposal. Finally, the protestor’s reliance on its own reasonable interpretation should have resulted in competitive prejudice.

A War Risks clause may be added to government contracts if performance is required in regions with a risk of war or war-like events. Such a clause helps allocate responsibility between the government and the contractor for any losses or damages caused by such events. While the Federal Acquisition Regulation (FAR) does not specifically contain a standard war risks clause, the defense supplement to the FAR (DFARS) includes clauses such as DFARS 252.228-7000, “Reimbursement for War-Hazard Losses.” Such a clause addresses the allowability of costs of war-hazard benefits for contractor employees. A War Risks clause can typically be negotiated between the government and the prospective contractor at the time of formation of the contract. As contracts in different regions have varying circumstances, risk allocation for specific events described in the War Risks clause should also be tailored and negotiated for each applicable contract. When disputes between the government and the contractor arise that implicate the War Risks clause, adjudicative forums such as the Boards of Contract Appeals or Federal Courts interpret the language of the War Risks clause to allocate increased costs liability between the parties.

As contracting parties, government agencies and their contractors must adhere to specific requirements in retaining contracts and records generated during the formation and administration of federal contracts. The Federal Acquisition Regulation (FAR) contains requirements describing specific retention periods of various records throughout the procurement lifecycle. It is important for contractors to ensure strict compliance with these record retention policies and procedures as contract documents and related materials may be required as supporting evidence in case of bid protests or claims litigation. Furthermore, contract documents and materials may also be subject to government audits during the required retention periods. Contractors should also be generally cognizant of retention requirements applicable to federal agencies in case they need access to government files and records. Depending on the circumstances, contractors may obtain government records during the discovery process in case of litigation or pursuant to a Freedom of Information Act (FOIA) request. Federal agencies also make certain contractual documents and records available publicly.

Contractor Retention of Files & Records Relating to Government Contracts