Contracting Officer Podcast Slides Knowledge & Insights From Contracting Officers

What is an Unauthorized Commitment? Episode 056 What is an Unauthorized Commitment? Original Air Date: December 6, 2015 Hosts: Kevin Jans & Paul Schauer

Formatting notes Hyperlinks: Blue font indicates hyperlinks – presentation must be in ‘Slide Show’ mode to activate the link Red bold font indicates a point of emphasis Green bold font indicates CO’s personal comment or perspective

Introduction Purpose of this podcast: To discuss Unauthorized Commitments, per FAR 13.5 The Unauthorized Commitment (with its “partner in hassle,” the Ratification) Can be the bane of the contracting process They cost both sides time Can cost both sides money Can get people into real trouble Many times, it’s lack of knowledge that creates these problems

When do Unauthorized Commitments happen? Acquisition Time Zones (from Podcast Episode 003) Requirements Zone Market Research Zone RFP Zone Source Selection Zone (or sole source) N/A – these happen in Contract Administration phase(s)

What is a Unauthorized Commitment? FAR Part 1.602-3 -- Ratification of Unauthorized Commitments. Unauthorized commitment = an agreement that is not binding because the Government representative who made it lacked the authority to enter into that agreement on behalf of the Government. Ratification = the act of approving an unauthorized commitment (by an official who has the authority to do so).

What is a Unauthorized Commitment? (b) Policy. Agencies should take positive action to preclude, to the maximum extent possible, the need for ratifications. Although procedures are provided in this section for use in those cases where the ratification of an unauthorized commitment is necessary, these procedures may not be used in a manner that encourages such commitments being made by Government personnel. The head of the contracting activity, unless a higher level official is designated by the agency, may ratify an unauthorized commitment. This may be delegated but not below the Chief of the Contracting Office.

What is a Ratification? (c) Limitations. Ratifications may only be exercised when -- Supplies or services have been provided to and accepted by the Government, or the Government otherwise has obtained or will obtain a benefit 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 CO; The deal has to be otherwise good

What is a Ratification? The CO reviewing the unauthorized commitment determines the price to be fair and reasonable; The CO 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

Example of Unauthorized Commitment & Ratification US Air Force “Mandatory Procedures” MP5301.602-3 - Ratification of Unauthorized Commitments, Procedure for Processing Ratifications 1. The CO initiates an investigation by getting the documentation and evidence of the unauthorized commitment.

Example of Unauthorized Commitment & Ratification 2. The commander of the organization that had the UA provides the CO the following w/in 30 days: a. Report on the circumstances of the UA and a statement on corrective actions taken to prevent a recurrence b. Signed statement from the person who made the UA c. Relevant documentation of the recciept of the of and benefit to the government, contractor correspondence and invoice, funds availability, etc.).

Example of Unauthorized Commitment & Ratification 3. The CO analyzes the documentation and, if ratification is appropriate, prepares a file containing: a. Statement of the contracting officer that summarizes the case (there’sa template) b. Legal opinion. c. Contractor's invoice with relevant correspondence. d. The report by the organization exaplining the unauthorized commitment (see the template)

Example of Unauthorized Commitment & Ratification 4. The ratification statement reads substantially as follows: “Pursuant to the authority vested in me by AFFARS 5301.602-3(b)(2), I hereby ratify the act of (name, title, grade, and organization), who on or about (date) authorized (company name) to (commitment). The dollar value of the transaction is (dollar amount). Ratification is deemed to be in the best interest of the government and is within the authority and limitations of FAR 1.6 and supplements thereto.” 5. For ratification of unauthorized commitments equal to or greater than $30,000 of appropriated funds, the contracting officer must forward the file through the wing commander for review by the MAJCOM/DRU/HQ AFICA/AFRCO SCO.

Example of Unauthorized Commitment & Ratification US Department of Health & Human Services 301.602-3 Ratification of unauthorized commitments. (2) The HCA is the official authorized to ratify an unauthorized commitment – but see paragraph (b)(3) of this section. (3) The HCA may redelegate ratification authority for actions up to $150,000 to the Chief of the Contracting Office (CCO). No other redelegations are authorized.

Example of Unauthorized Commitment & Ratification (c) Limitations. (5) The concurrence of legal counsel concerning an unauthorized commitment is optional. If a contracting activity determines that a legal review is necessary, the HCA or CCO shall coordinate the request for ratification with the Office of General Counsel (OGC), General Law Division (GLD). (e) Procedures. (1) The individual who is responsible for the UA shall provide the reviewing CO all records and documents concerning the commitment and a complete written statement of facts, including:

Example of Unauthorized Commitment & Ratification a description of the requirement; the estimated or agreed upon price; an explanation of why the contracting office was not used and why the proposed contractor was selected; a list of other sources considered; and a statement as to whether the contractor has commenced work or an item has been delivered. (3) If the HCA or CCO approves the ratification request, the CO shall issue a purchase order or contract, as appropriate, upon return of the approved ratification document and file.

Why are Unauthorized Commitments & Ratifications important? If you don’t like “paperwork”, then don’t have an Unauthorized Commitment It costs time It costs money It’s annoying (you’re cleaning up a mess…) The CO has a lot of responsibility, and a UC circumvents that. That can lead to all kinds of problems: Spending more money than has been made available Contractors doing work that’s outside the contract SOW/PWS Ratifications are OPTIONAL (CO does NOT have to ratify them) Who pays then? The “offending party”

Why Should Government Care? A UC is a time vampire It erodes the trust of the acquisition team It costs time and money Whether we like it or not, we have a “process” Skipping the process creates a mess… like a UC and Ratification Want your CO to lean forward to help you… don’t do a UC!

Why Should Government Care? COs: Want your customer to not have a UC? Educate them on it. They likely have no idea that large chunks of the Regulations cover this. Could impact careers Authority is vested in COs for a reason…

Why Should Industry Care? You are creating work (???) They are under pressure to bring in business…. but this is shady contracting You may get paid… but you may not You may get paid… but create ‘soft’ problems with people What if it’s not ratified? It could cost both money AND time! It’s a time vampire!

Why Should Industry Care? Contractors are “supposed” to raise the red flag here… does that industry PM know what this is? What you don’t know CAN hurt you!

Summary Most UCs are honest mistakes Remember: only the CO can spend money The ratification process is long and painful – try to avoid it These are paperwork heavy (designed to be painful) The alternative is people just spending money wherever they want (not going to happen), so learn the UC and Ratification process Or better yet, just avoid the UC!

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