Subcontractor Coverage Under the Christian Doctrine

By: John Kashuba, Associate

 

Problem: Recent litigation has produced ambiguity as to whether subcontractors are covered under the Christian doctrine. If this is indeed the case, practitioners advising clients bidding or negotiating for procurement work containing clauses espousing requirements as to the kinds of materials that must be used, or other clauses containing compliance mandates with environmental laws and regulations are strongly encouraged to be hyper-vigilant as to the wording, text, form, and structure of the contract. Any omissions or oversights by agency personnel or contractor must be carefully scrutinized and investigated to avoid problems further down the road.

 

Background: The Christian doctrine has become an indelible and enduring part of procurement jurisprudence, such that many in the field will need little introduction to its basic tenets. As a refresher, the doctrine is a reflection of two major principles. First, the government should not be bound by the unauthorized actions of its agents. Second, the laws and policies governing government procurement enacted by Congress should be respected and followed by all parties. As such, under Christian, required clauses that are omitted from a government contract, intentionally or inadvertently, are read into the contract by operation of law. Over the last 50 years, scholars, practitioners, courts, and administrative boards have struggled to decide what clauses should be covered under this doctrine, and which contractors should be covered.

 

A.    THE LEGAL TEST FOR DETERMINING WHETHER A CLAUSE SHOULD BE COVERED:

 

 

The current Christian doctrine standard guiding most contracts in government procurement comes from the Federal Circuit Court of Appeals. The Court laid out a revised three-step blueprint/two-prong test the missing clause in question must pass in order to be read into a government contract by operation of law.[1] The first prong, similar to the Court of Claims in Christian, is that the missing clause must be mandatory in the contract in question.[2] Thus, the presence of the missing clause must be derived from regulations that carry the force of law or a statute mandating its usage for the particular contract. This step is merely a reaffirmation of Christian.[3]

However, the Court radically departed from the status quo of normal Christian jurisprudence, creating two new second steps (essentially II-A and II-B). Under step II-A, it must be discerned if the missing clause in question expresses a “significant or deeply ingrained strand of public procurement policy.”[4] The Court stunned conventional procurement even further when it announced that, even if a clause does not meet the first two criteria enumerated, it may still be read into the contract (step II-B) if the clause is not written “to benefit or protect the party seeking incorporation.”[5]

 

B.    BACKGROUND–WHO SHOULD BE COVERED?

 

Whether subcontractors are covered under the Christian Doctrine is mired in mystery. Undoubtedly, prime contractors who transact directly with the Federal government are covered. The unique facts of Christian itself beg this question.

In January 1957, discussions arose between G.L. Christian and H.B. Zachry Co. about the formation of a joint venture to complete the later disputed contract.[6] Zachry declined to enter into a joint venture with G.L. Christian, but offered to buy out the rights to the contract for $250,000.[7] This transaction was approved by G.L., and the rights and duties of the contract were assigned to Zachry.[8] Shortly thereafter, Zachry and Centex Construction Company, Inc. formed a joint partnership in which Centex agreed to be the managing member of the venture and in charge of construction.[9] The joint venture was approved by the Corp, on the condition that it take the form of a subcontract from the original contractor, G.L. Christian. Centex-Zachry and Christian signed an “Agreement to Sub-Contract with Irrevocable Power of Attorney Attached” which gave Centex-Zachry power of attorney, and purported to hold Centex-Zachry responsible for “any and all claims, suits, actions, debts, damages, costs, charges and expenses” associated with the contract.[10] The Court went to great lengths to lay out the facts, but, notably, did not comment as to whether the outcome would’ve been different if Centex-Zachry had subcontracted the job to another actor, or whether the Christian doctrine had any limitations or application to subcontractors. While the facts of Christian beg these questions, the Court of Claims, despite the prominent role of Centex-Zachry, declined to answer them. The silence was deafening.

 

C.    DISCUSSION:

 

Policymakers have taken a renewed interest in ensuring that the purchasing habits of the nation’s largest consumer, the Federal government, comply with the goals of mitigating and reducing impacts on a myriad of environment problems and concerns.[11] As such, the Federal government has implemented a number of Affirmative Procurement Programs (APPs) designed to encourage (and require, in some instances) the use of environmentally-friendly materials and supplies. [12] The sustainable procurement purchasing requirements along with instructions applying them to procurement situations are found in Part 23 of the Federal Acquisition Regulations (FAR).[13] The standardized texts of the corresponding clauses referenced in Part 23 are located in Part 52 of the FAR.[14]

As stated above, it is well-settled that prime contractors are covered by Christian. In 2013, the Department of Labor Administrative Review Board and the United States District Court for the District of Columbia issued a pair of rulings that will usher in a new era of contracts litigation.[15] The controversy underlying both cases centered on a subcontract awarded to a number of hospitals by the University of Pittsburgh Medical Center (UPMC), the prime contractor, to provide medical products and services to government employees.[16] The health maintenance subcontract in question omitted Equal Opportunity clauses required to be in every government contract by Executive Order 11246, the Rehabilitation Act, and the Vietnam Era Veterans’ Readjustment Act.[17] The Office of Personnel Management argued that, even though the subcontractors were not directly dealing with the Federal government, the applicable regulations and laws required the inclusion of the clauses into every contract including transactions involving subcontractors. The District Court found that the Equal Opportunity requirements were to be read into the subcontract by operation of law.

The key implication from UPMC, at this juncture, is in understanding that the floodgates have opened for the government to use the Christian doctrine to successfully have missing FAR flowdown clauses read into subcontracts where the government lacks contractual privity. As one practitioner has noted, this is the first time the Federal government has been able to successfully litigate such an outcome.[18] As such, construction and service subcontractors who perform contracts that contain FAR Part 23 environmental clauses should be on high alert; acutely aware of the federal contract requirements while focusing on possible missing clauses. A mistake in performance can result in a costly termination for convenience or default for the prime contractor, leading to severe repercussions, both for the reputation and financial health, of the responsible subcontractor.

One scholar has aptly noted that, in the context of the Christian doctrine, for contacting officers and lawyers, an ounce of prevention is worth a pound of cure.[19] This axiom seems all the more appropriate for practitioners advising subcontractors in the aftermath of UPMC. It is important, as the green procurement landscape continues to take shape, for all parties to read the requirements of a solicitation carefully, deciphering its wording and clauses to ensure that prevention, rather than cure, is what rules the day.

 

[1]    General Eng’g & Mach. Works v. O’Keefe, 991 F.2d 775, 779 (Fed. Cir. 1993).

[2]    General Eng’g, 991 F.2d at 779 (“Thus, under the Christian Doctrine a court may insert a clause into a government contract by operation of law if that clause is required under applicable federal administrative regulations”).

[3]    G.L. Christian & Assocs. V. U.S., 312 F.2d 418, 424 (Ct. Cl. 1963).

[4]    General Eng’g, 991 F.2d at 779 (“However, the Christian Doctrine does not permit the automatic incorporation of every required contract clause…the Christian Doctrine applies to mandatory contract clauses which express a significant or deeply ingrained strand of public procurement policy”).

[5]    Id. (Citing Chris Berg, Inc. v. United States, 426 F.2d 314, 317 (Ct. Cl. 1970)).

[6]    Id.

[7]    Id.

[8]    Id.

[9]    Christian, 312 F.2d at 422-23.

[10]   Id.

[11]   Ian Urbina, The Shopping List as Policy Tool, The New York Times (Jan. 25, 2014), http://www.nytimes.com/2014/01/26/sunday-review/the-shopping-list-as-policy-tool.html.

[12]   For a complete description of the green procurement programs operated by the Federal government and the legal framework, See: Manuel, Kate, “Environmental Considerations in Federal Procurement: An Overview of the Legal Authorities and Their Implementation”, Congressional Research Service (January 7, 2013).

[13]   48 C.F.R. § 23.000 (2013).

[14]   48 C.F.R. § 52.000 (2013).

[15]   Univ. of Pittsburgh Med. Ctr. Braddock v. Harris, 934 F. Supp. 2d 238 (D.D.C. 2013).

[16]   Id.

[17]   Id.

[18]   Darst, Brian, “The Christian Doctrine at 50: Unraveling the Federal Procurement System’s Gordian Knot” (October 2013).

[19]   Wyatt, John B., “The Christian Doctrine Born Again, But Sinfully Confusing,” 33 Cont. Mgmt. 22, 65 (Nov. 1993).

 

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