Government agencies use contracting to execute complex projects that require technical expertise. Contractors have to go through an appraisal process that determines their suitability for the job. After appraisal, the most suitable applicant wins the contract. However, the contracting process can be subject to formal complaints. This calls for the establishment of mechanisms that resolve the arising disputes. Historically, there are two mechanisms for resolving formal disputes arising from business contracting: administrative and judicial processes.
The administrative means to resolving contract disputes are straightforward compared to the judicial process. The Contract Disputes Act of 1978 approves the use of administrative processes to resolve government contract disputes. The act, effective since 1st March, 1979, ensures fair and equitable treatment of contractors and government agencies. It also ensures that disputes are resolved through negotiation and equalizes the bargaining power of both parties. The disputes, initiated by either the government or the contractor, have to be registered with the contracting officer.
In compliance with the Contract Disputes Act of 1978, the contracting officer handles all the claims relating to contract disputes (Worthington & Goldman, 1998). Payment discrepancies that occur in contracts paid for using public funds are taken up with the Government Accountability Office (GAO). The GAO generates reports that give hindsight into the occurrence of government contract disputes, and the most effective means of resolving them.
An excellent example is the Government Accountability Office report regarding an air force liquid nitrogen contract. Robert White (the contractor) wrote to the Government Accountability Office to complain of how the government had breached on his contract by failing to order the amount of liquid nitrogen promised. Mr. White further claimed that the energy department had reactivated their gaseous nitrogen plant, thereby substantially reducing the amount of nitrogen ordered (Government Accounting Office, 1981). Moreover, Mr. White requested the Government Accountability Office to influence the closure of the gaseous nitrogen plant (Government Accounting Office, 1981).
The Government Accountability Office, rightly, ruled that the matter was not in their jurisdiction, and advised the contractor to take up his case with the contracting officer. A critical look into the issues presented by the contractor reveals how government contract disputes arise. Contract disputes arise when one of the parties reneges on the contract pact which results into loss of business for the affected party. The contract terms, signed by the contractor and the government agency, stipulate the amount of commodities and services to be presented and the frequency.
Payment terms and the frequency are also included in the contract agreement together with a timeframe showing activities to be undertaken within a specified period. The contractors, as well as, the government agency can excise their rights to report any anomalies contravening the contract terms (Worthington & Goldsman, 1998). The contractor and the government agency can reach a settlement instead of talking up the matter to court for litigation. In this case, the government had reneged on the contract terms by substantially reducing the amount of liquid nitrogen ordered from the contractor thereby resulting into loss of business.
Although the contractor was right in requesting Government Accountability Office to investigate the matter and make an independent ruling, the claim was addressed to the wrong agency. The first step to making a successful dispute is notifying the contracting officer, as stated in the Contract Disputes Act of 1978. The contractor’s dispute did not make a reference to the contracting officer in the letter addressed to the Government Accountability Office.
As a result, the recommendation provided by Government Accountability Office in this matter was forthright and realistic. Government Accountability Office, rightly, advised the aggrieved contractor to take up the matter with the contracting officer. Government Accountability Office is established to look into matters relating to the expenditure of public funds; their matters jurisdiction lies within matter related to payment. However, administrative matters relating to the breach of the contract can only be investigated by the contracting officer or the agency board established to investigate appeals relating to the contract.
In light of Government Accountability Office’s mandate, it is also overbearing to expect the Government Accountability Office to influence the closure of the gaseous nitrogen plant established by the energy department. Government Accountability Office does not have the legal power to adjudicate such petitions; such requests can only be met through a judicial process. Alternatively, a settlement can be obtained without using the judicial process, if both parties reach an agreement. The Contract Disputes Act of 1978 stipulates that negotiated settlements are binding to the contractor and the government agency.
The Government Accountability Office report on air force liquid nitrogen contract is appropriate to business students as it gives hindsight into the nature business disputes, and how to resolve them. The report highlights the mandate of oversight bodies that investigate contract disputes. It also gives an insight into the Contract Disputes Act of 1978 which is vital in resolving contract petitions. The most vital lesson learnt from this case is that, although a claim might be true, it should be addressed to the right authority. Therefore, the claiming agency needs to understand the appropriate channels to follow when taking up their dispute.
Apart from wasting a lot of time, a breach of the contract terms can lead to a contractor’s disqualification. In some cases, the contractor may pay have to pay a penalty for reneging on the contract agreement (Bishop, Crawford, & Reisman, 2005). On the other hand, government agencies may have to pay massive amounts of money for terminating the contract prematurely before expiry. Consequently, public resources go to drain in; as a result, stringent measures should in place to avoid wastage of public resources and ensure political non-interference (Bishop, Crawford, & Reisman, 2005). This gives the business contractor ample time to execute the job without fear. As a result, the contract terms should ensure fairness and equity.
Today, business enterprises and government agencies have to meet high public expectations when they deliver their goods and services. This necessitates contracting of technical experts who understand the nature of the project to be executed. Understanding the nature of business contracts is vital in avoiding loopholes that may result into loss of business, as well as, opportunities once the contract terms are agreed. In case of disagreements or breach of the contract terms, the aggrieved party should take up the matter with the contracting officer for adjudication. The complaint should be guided by legislative laws regarding contract disputes. However, contract disputes waste a lot of time and resources which can be avoided through meticulous planning of the contract terms and timely settlement of any cutting issues.
Bishop, R. D., Crawford, J., & Reisman, W. M. (2005). Foreign investiment disputes: Cases, materials and commentary. London: Kluwer Law International.
Government Accounting Office. (1981, October 13). National defense: Compalint Concerning air force liquid nitrogen contract. Retrieved Septmeber 5, 2012, from Legistorm: http://www.legistorm.com/showFile/L2xzX3Njb3JlL2dhby9wZGYvMTk4MS8xMA==/ful10537.pdf
Worthington, M. M., & Goldsman, L. P. (1998). Contracting with the federal government . Hoboken, NJ: John Wiley and Sons.