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Professor John B. Wyatt III, PDCM, Fellow

California State Polytechnic University, Pomona CA Breakout Session 705 April 24, 2007

1:40 PM – 2:40 PM

© Copyright 2007 John B. Wyatt III

All Rights Reserved

Will the Government Property Clause Become First Class Under the “Christian Doctrine”?

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What's in a name? That which we call a rose

By any other word would smell as sweet."

--From Romeo and Juliet (II, ii, 1-2)

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Christian Doctrine Overview

• Regulation required clause is read into a contract by operation of law when inadvertently omitted– G.L. Christian and Associates v. United

States (1963) • Omitted Termination for Convenience read in

because it “reflects a deeply ingrained strand of procurement policy”.

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Facts of the Christian Decision

• Deactivation of Fort Polk LA lead to T4C • G. L. Christian was “prime contractor” in

name only – real party in interest was Centex-Zachry (C-Z) - $250K “finders fee” paid by C-Z to Christian

• T4C after only 2.036% of work performed• T4C would result in lost profit of $5M and a

net lost of $95K

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Christian Decision’s Reasoning

• Procurement regulations have the force and effect of law

• T4C clause was required in construction contracts exceeding $1000.00

• T4C clause was not intentionally omitted since many other contractual references

• T4C clause implements a “major government principle” to cancel unneeded contracts and not pay unearned anticipatory profits

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General Engineering’s Interpretation of the “Christian Doctrine”

• CAFC interpretation relies heavily on the “deeply ingrained strand of public procurement policy” and “major government principle” language

• Result is that not every required clause is in reality “required” – thus creates two different classes of clauses

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General Engineering’s Two Prong Test

• the omitted clause must be required by regulation, statute or executive order, and

• the omitted clause must either (1) express a significant deeply ingrained fundamental procurement policy or (2) the clause (to be incorporated) is not written to benefit the party advocating its incorporation.

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BCAs’ Two Different Interpretations of Government Property (GP) Clause’s Status• 1st Class - ASBCA’s decisions that have held

that the GP clauses can be incorporated into a contract by operation of law via the “Christian Doctrine”.

• 2nd Class – Board (ASBCA and AGBCA) cases which assert that the government property GP clauses are not worthy of “Christian Doctrine” incorporation by operation of law

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1st versus 2nd Class Advocate’s Line-up

• 1st class view espoused in Dayron, Hart’s Foods and Rehabilitation Services

• 2nd class decisions are Chamberlain, CAST, American Bank Note and dissent in Rehabilitation Services

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The BCAs’ Two Different Interpretations

• Two vastly divergent interpretations by the BCA’s with their own peculiarities and weaknesses

• Result – whether the “Christian Doctrine” can be used to incorporate the applicable GP clause depends upon which board and what judge is considering the issue.

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Chronological Line-up of Cases

• Chamberlain (2nd)(1974); Dayron (1st)(1984); Hart’s Foods (1st)(1989); CAST (2nd)(1996); Rehabilitation Services (1st)(1996); and American Bank Note (2nd)(2005)

• As Chamberlain is first in time, we will start with the “2nd class designation” series of decisions

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The Chamberlain Decision (1974)

• Landmark ASBCA decision finding that GP clause is not indicative of a “deeply ingrained fundamental procurement policy” so as to justify “Christian Doctrine” application

• Viability uncertain - may have been suffered a D3 (death by designation of being dicta) in Rehabilitation Services majority opinion.

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Chamberlain Decision’s Facts

• Contractor had certain items of government property originally allocated to a facilities contract subsequently loaned to a production contract.

• Contractor facing partial termination for default

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Chamberlain’s Facts (Continued)

• Contractor alleged that the GP was defective and was the proximate cause of contractor’s failure to perform

• Problem – the production contract did not contain the required GP clause

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Contractor’s Arguments in Chamberlain

• Sought to use the “Christian Doctrine” to read the applicable GP clause into the production contract

• Applicable GP clause would have required the property to be “suitable for use” which was needed to assert excusable grounds for the default

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Contractor’s Reliance on Christian

• In Christian, gov’t was allowed to have the required T4C clause incorporated by law into the contract.

• In Chamberlain, contractor argued that the same result should be the same for the required GP clause

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Chamberlain’s Surprise Decision

• ASBCA found that “nothing in th[e] [GP] clause approaches the stature of a public procurement policy so as to require its incorporation…by operation of law”.

• ASBCA believed that the GP clause was not needed to prove excusable cause of delay

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The Chamberlain Decision (Cont.)

• “The law of bailment [in the absence of the GP clause would] provide for [sufficient] resolution of problems [resulting from the government providing property to contractors]”

• “Incorporation limited to extraordinary action in extraordinary circumstances”

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An Error in Chamberlain ?

• GP was originally provided under the FACILITIES contract which had its own GP clause and suitability for use provision

• No need to consider incorporation of a GP clause in the PRODUCTION contract

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Other BCA Decisions Advocating the 2nd Class Designation

• Computing Application Software Technology, Inc.(CAST)(1996) - ASBCA refused to read in NASA specific GP clause to correct contracting officer’s error

• Determined the GP clause did not express a significant or deeply ingrained public procurement policy

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Other BCA Decisions Advocating the 2nd Class Designation (Continued)

• In American Bank Note (2005), the AGBCA held that the Gov’t ha[d] not demonstrated that the [GP] clause expresses a significant or deeply ingrained strand of public procurement policy and thus not incorporated by operation of law.

• AGBCA further praised Judge Kienlen’s dissent in ASBCA’s Rehabilitation Services decision

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BCA Decisions Supporting GP Clauses’ 1st Class Designation

• Dayron (1984) Gov’t supplied defective detonators impeded Contractor’s performance in assembling fuses.

• Contract contained the “As Is” clause but not the GP clause (warranting that the GFP would be suitable for use)

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Dayron – Advocating 1st Class Theory

• ASBCA applied “Reverse Christian Doctrine” reasoning and read the “As Is” clause out of the contract

• ASBCA (citing Christian) read the applicable GP clause into the contract

• No reference made to Chamberlain or fundamental procurement policy

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Hart’s Foods – Advocating 1st Class Theory

• Harts Foods (1989) defective gov’t provided equipment hindered contractor performance of services.

• No GP clause in the services contract• Applicable GP clause read in, but no

reference to Christian, Chamberlain or fundamental procurement policy

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Rehabilitation Services of Northern California (1996) – 1st Class Theory

• Battle of ASBCA Judges Tunks vs. Kleinlen• Judge Tunk’s MAJORITY opinion declares

that the GP clause “expresses a significant strand of public procurement policy”

• Cites $83 billion of GFP (1992) with contractors as justifying the significant status

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Rehabilitation Serv. Majority’s Opinion

• Judge Tunks reaffirms Dayron and Hart’s Foods findings/analysis

• Applied Christian Doctrine and incorporated the GP clause by operation of law

• Declared Chamberlain’s designation of the GP clause as 2nd class should not be afforded legal precedent.

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Chamberlain’s Purported Death By Being Declared Dicta (D3)

• Judge Tunks asserts that Chamberlain’s declaration that the GP clause was 2nd class was not legally significant but was “mere dicta”

• Minority opinion of Judge Kienlen vehemently disagrees with Judge Tunk’s “dicta designation” of Chamberlain’s language.

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Dicta Defined

• Dicta means an “opinion of a judge which does not embody the resolution or determination of the court”

• Dicta does not warrant stare decisis application of case law precedent

• Means “insignificant words”

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Judge Kienlen’s Dissenting Opinion

• Found that no board or court reviewing Chamberlain’s analysis ever declared it to be dicta

• “No factual or precedential predicate exists that the GP clause is a deeply ingrained strand of public procurement policy”

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More About Judge Kienlen’s Dissent

• Declared that Tunk’s reliance on the $83B figure is misleading as no breakdown of what is good equipment versus inadequate or obsolete junk.

• AGBCA in American Bank Note rated Kienlen’s dissent as “commendable” and rejected Tunk’s analysis

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1st Class vs. 2nd Class Tally

• 1st class – ASBCA’s Dayron, Hart’s Foods and majority in Rehabilitation

• 2nd class – ASBCA’s Chamberlain, CAST, and dissent in Rehabilitation; and AGBCA’s American Bank Note

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Who’s Winning – 1st or 2nd Class?

• 3 to 3 tie with 1st Class decisions having a slight edge because ASBCA decisions are more highly regarded than those of other BCA’s;

• But, Chamberlain was never expressly overruled by ASBCA and AGBCA’s American Bank Note decision is the most recent case

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Other Potential Factors

• FAR Case 2004-025 (rewrite of FAR part 45 and associated GP clauses)

• Creation of the new Civilian Board of Contract Appeals (CBCA) (§847 of the National Defense Authorization Act for Fiscal Year 2006 (effective 1/6/07))

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FAR Case 2004-045 – Property Rewrite

• FAR Case 2004-025 (FAR Part 45 Re-write) merges former separate GP clauses (FAR’s 52-245-1, 2, 5, and 19) into a “mega clause” to be designated new FAR 52.245-1 (70 Federal Register 54878 (Sept. 19, 2005))

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FAR Property Rewrite Arguably Supports 1st Class Determination

• Very obvious that the combining of 4 former FAR GP clauses into the one new mega clause makes it of paramount significant importance in government property management

• Significant enough to be 1st class?

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2004-025 - Humongous Gov’t Effort

• Introductory summary of the FAR Case bespeaks of the importance of the proposed changes

• Drafting of rewrite was a Herculean effort which involved over 10 years and enormous gov’t and industry resources

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Drafters May Have Dropped the Ball

• 2004-025 should have contained EXPLICIT LANGUAGE that its changes to protect the gov’t’s interest in its property do reflect or implement a significant deeply ingrained fundamental procurement policy.

• Why did they forfeit this golden opportunity?

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AGBCA/CBCA/1st or 2nd Class?

• AGBCA has now been merged into the new CBCA (along with Energy, Housing/ Urban Development, Interior, Labor, Transportation, Veterans Affairs, and the General Services Administration boards)

• CBCA’s clout arguably greater than the individual BCA’s that it replaced

• Judges from the other BCA’s may disagree with the American Bank Note analysis

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Importance to the CM Professional

• Common belief that any FAR required clause if left out will be magically put in the contract via the Christian Doctrine is wrong!

• Christian Doctrine treatment/analysis of GP clause(s) are classic examples of BCA doublespeak and resulting confusion

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Conclusion/Recommendation

• ASBCA needs to EXPRESSLY overrule Chamberlain

• Ample evidence exists that providing and protecting government property is a significant deeply ingrained fundamental procurement policy

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Acknowledgements/Citations

Special thanks to Douglas Goetz, Ph.D. of Defense Acquisition University for his observation that the facilities contract in the Chamberlain case did contain its own government property clause.

Federal Court and Board Decisions1. G. L. Christian and Associates v. United States, 160 Ct. Cl. 1, 312 F. 2d 418, reh’g denied 160 Ct. Cl. 58, 320 F. 2d 345 (1963).2. General Engineering & Machine Works v. O’Keefe, 991 F.2D 775 (Fed. Cir. 1993).3. Appeal of Chamberlain Manufacturing Corporation, 74-1 BCA 10368, ASBCA No. 18103 (1974)4. American Bank Note, Appellant, 05-1 BCA §32867, AGBCA No. 2004-146-1, 2005 WL 242664 (Ag.B.C.A.) (2005)5. Appeal of Computing Application Software Technology, Inc., 96-1 BCA §28204 (1996)6. Appeal of Dayron Corporation, ASBCA No. 24,919, 84-1 BCA §17213 (1984)7. Appeals of Hart’s Food Service, Inc., d/b/a Delta Food Service, 89-2 BCA §21789, ASBCA No. 30756, 3057, 1989 WL 47610 (A.S.B.C.A.). 8. Appeal of Rehabilitation Services of Northern California, 96-2 BCA §28324, ASBCA No. 47085, 1996 WL 223717 (A.S.B.C.A.).