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"Depends" Theory-Privity of Contract Law

April 15, 2019

 

Good morning and God Bless! In Federal acquisition there are a few theories, as a business owner, that can help you understand the processes.  The first is called, Procurement Dynamics, which is the process of obtaining services or supplies to support an organization’s Mission (Cable, 2016). The next what, I call “depends” Theory.  Every procurement dynamic in a federal acquisition is governed by a law or regulation.  The essential regulation is called 48 CFR or FAR.  Once you read through the FAR, you notice many exceptions to any rule, so has acquisition professionals, there are multiple ways to obtain a service or supplies. Years ago, my first response became, it “Depends” in riposte to a procurement dynamic question.

    Recently,  I provided some input into a BLOG on privity of contracts.  Privity of Contract Law is referred to a contractual relationship between parties  (USlegal, 2019).  Privity of  Contract Law is teaching that prevents a third party that has no contractual relationship with other parties to affect the terms of the contract. Most federal procurement professionals always believe that a subcontractor has no privity of contract law because the relationship is between the Federal Government and the Prime contractor is general idealist procurement dynamic terms.  Remember it “depends’ on the individual contract, what was the terms and conditions, and the processes the contracting officer in the award.   In governance, always remember there's an exception to every rule,  so it “depends.”   

    There have been changes to provide additional guidance and support in subcontracting contracting program, which was in Small Business Jobs Act (SBJA) of 2010, which is an amendment to the Small Business Act of 1953.  one example, amend SBJA~125.3 (c)(1)(iii) or FAR 19.704 (a)(14)-“Assurances that the contractor will not prohibit a subcontractor from discussing with the contracting officer any material matter pertaining to payment to or utilization of a subcontractor.”  At first glance, this governance would bring the privity of contract law into the subcontractor, but SBA noted this change would not conflict with the premise of privity of contract law because of the law address performance of the prime. 

    The exceptions or “depends” to the privity of contract law are implicit or explicit in nature.  For examples, Estes Express Lines v. The United States (Griggsby, 2017), noted a subcontractor can hold privity of contract law. This particular case law was overpayment issues that the subcontractor. The new updates in FAR 19.704 allow a KO to address payments issues. Estes Express Lines v. The United States cases law goes further and states a subcontractor can hold privity on contract. Always,  remember every individual contract provides a different situation and governance changes with every Congressional situation.  I hope these words help; always remember it “depends.” Passing on a little Knowledge.

 

 

Reference

 

Cable, C. L. (2016). The relationship between U.S. Federal Governments cost estimates, service contract costs, and cost overruns. Ann Arbor, University of Phoenix. 10011628: 109. Retrieved from http://dissexpress.umi.com/ 

 

USLegal. (2019). Privity of Contract Law, Retrieved from https://definitions.uslegal.com/p/privity-of-contract/

 

Federal Register. (2013). 78(136). Retrieved from https://www.govinfo.gov/content/pkg/FR-2013-07-16/pdf/2013-16967.pdf

 

Griggsby, L. (2017) Estes Express Lines v. The United States. In the United States Court of Federal Claims, No. 11-597C.  Retrieved https://ecf.cofc.uscourts.gov/cgi-bin/show_public_doc?2011cv0597-55-0.

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