AMERICAN BAR ASSOCIATION

SECTION OF PUBLIC CONTRACT LAW

MINUTES of November 15, 1997 Council Meeting

The November 15, 1997 meeting of the Section Council was held at the El Dorado Hotel in Santa Fe, New Mexico. Council and Section members who attended the meeting are identified in Attachment 1.

The meeting of the Council was called to order by the Section Chair, Ms. Marcia Madsen, at 8:35 a.m.

Introduction of New Council Members

The Section Chair, identified the new members of the Council and officers: Hubert J. Bell, Jr. (Council Member); John E. Preston (Council Member); Alexander W. Purdue (Council Member); Patricia A. Meagher (Budget & Finance Officer); and Gregory A. Smith (Secretary).

Approval of Minutes

The minutes of the August 2, 1997 and August 5, 1997 Section Council meetings were approved as presented in the meeting Agenda.

Report of the Ad Hoc "Other Transactions" Working Group

The report and recommendations of the Ad Hoc Other Transactions Working Group was presented by the Co-Chairs, Judge Ruth C. Burg and Mr. Scott Pickens. The Working Group members included Mr. William Bierbower, Mr. Tim Coburn, Mr. Stan Dees, Ms. Agnes Dover, Mr. Don Featherstun, Mr. Robert Gomez, Mr. Harvey Gordon, Mr. Richard Kuyath, Mr. Alan Land, Ms. Holly Svetz, Mr. Dennis Trosch, Mr. Carl Vacketta, Mr. William Woods and Ms. Donna Yesner. The presentation slides are Attachment 2.

Judge Burg described the history of the Working Group and the nature of the eight recommendations that were being presented to the Section Council. She described the process that was used to reach the consensus recommendations that were being presented. Mr. Pickens followed by providing a summary of the use of "other transaction" instruments ("OTs") pursuant to 10 U.S.C. § 2371, Section 845 of the FY 1994 Defense Authorization Act, and Section 804 of the FY 1997 Defense Authorization Act. He further described a March 1997 Department of Defense legislative proposal that would have permitted the Department of Defense to enter into OTs for follow-on pilot production programs. Mr. Pickens described a Department of Defense Inspector General audit report that was issued in March 1997 and a new review contemplated by the Inspector General. Finally, Judge Burg and Mr. Pickens then summarized the basic issues identified and discussed by the Working Group leading to the development of the Working Group's eight recommendations.

Judge Burg and Mr. Pickens presented the eight recommendations on an individual basis at the request of the Section Chair. The text of the original recommendations are included in the November 6, 1997 Report of the Working Group, which is Attachment 2 at pp. 9-11.

Preamble and Recommendation No. 1

It was moved and seconded (Burg/Menaker) that the Preamble to the Working Group's recommendations as a whole and Recommendation No. 1 be approved by the Section. A discussion of Recommendation No. 1 followed. Some viewed the recommendation as creating an unnecessary limitation on the use of OTs, while others argued that the Department of Defense should be prepared to explain why an OT was used rather than a procurement contract.

The motion passed. The Preamble and Recommendation No. 1, as approved, states:

The Section supports the continued use of other transactions as authorized by Section 845 (of Pub. L. 103-160), as amended by Section 804 (of Pub. L. 104-201) as an experimental method of contracting, subject to the following limitations:

Recommendation No. 2

It was moved and seconded (Burg/Dees) that Working Group Recommendation No. 2 be approved by the Section. A discussion of the recommendation followed. As part of the discussion a number of alternative expressions of the recommendation were discussed. Ultimately, an amendment to the recommendation was moved and seconded. The motion to amend the recommendation was passed.

Recommendation No. 2, as amended, was then approved by the Section Council. Recommendation No. 2, as amended and approved, states:

2.Cost sharing is not required as a condition to using §§ 845/804 "other transaction" authority. Required cost sharing, if any, should be limited to an amount comparable to the relative amount of commercial benefit which the contractor may receive.

Recommendation No. 3

It was moved an seconded (Burg/Churchill) that Working Group Recommendation No. 3 be approved by the Section. A discussion of the recommendation followed. The recommendation, as originally proposed, was adopted by the Council:

3.The present practice of permitting either party to terminate the other transaction on terms that are fair to both parties should be a requirement.

Recommendation No. 4

It was moved and seconded (Burg/Dees) that Working Group Recommendation No. 4 be approved by the Section. A discussion followed during which the Working Group representatives stated that the recommendation was not intended to limit the government's ability to seek design to price contract approaches, but that it was intended to preclude fixed price contracts including those relying upon ceiling prices. The recommendation was amended accordingly, and passed as amended. The recommendation, as passed, states:

4.Parties to an other transaction should not be required to guarantee a fixed (or not to exceed) price for follow on or other quantities until the costs and risks are sufficiently certain to reach such a fixed price for production quantities.

Recommendation No. 5

It was moved and seconded (Burg/Gamboa) that Working Group Recommendation No. 5 be approved by the Section. A discussion followed. The Working Group had determined that it was not clear in many instances which statutes were applicable to other OTs. However, there were comments from those who believed that this recommendation would add unnecessary baggage to the OT process. An amendment was offered to substitute the word "agencies" in the original recommendation with "Department of Defense." The amendment was accepted, and the recommendation, as amended, states:

5.The Department of Defense should analyze and report to the Congress which statutes, if any, should apply to other transactions and whether any changes in these statutes are warranted in light of the use of other transactions.

The amended recommendation was passed.

It was moved and seconded (Burg/Churchill) that Working Group Recommendation No. 6 be approved by the Section. A discussion followed during which various amendments to the original recommendation were suggested. Ultimately, an amendment proposed by Mr. Menaker was accepted. The recommendation, as amended, states:

6.In connection with statutory and Department of Defense reporting requirements, it is suggested that the Department of Defense describe and analyze any benefits to the parties in reduced costs, reduced time and increased quality, and describe, to the extent possible, the factors that achieved those benefits.

The amended recommendation was passed.

Recommendation No. 7

It was moved and seconded that Working Group Recommendation No. 7 be approved by the Section. A lengthy discussion followed during which the original recommendation was amended as follows:

7.The Department of Defense should issue the regulations required by 10 U.S.C. § 2371(g) with appropriate distinctions between other transactions entered under 10 U.S.C. § 2371 and those under Section 845/804.

Further discussion followed during which commenters noted that the amended recommendation would go beyond the requirements of the statute and unnecessarily added to the requirements surrounding implementation of other transactions. The recommendation, as amended, was voted upon by the Council and failed to pass. The recommendation was not approved.

Recommendation No. 8

It was moved and seconded (Burg/Morrison) that Working Group Recommendation No. 8 be approved by the Section. During the discussion that followed, the current need for the recommendation was questioned by a number of commenters. A motion to table the motion was made and passed. The recommendation that was tabled stated:

8.Any extension of Section 845/804 authority to production should be limited in scope to specific programs in which the prototypes were developed under other transaction authority and for a limited period (e.g., three years).

At the conclusion of the discussion of the Working Group recommendations, Ms. Madsen thanked all of the Working Group members for their substantial efforts over the past year. Judge Burg commented that she was glad to see that the recommendations were the subject of a substantial and healthy debate.

Termination for Convenience Project

Mr. Alan Gourley and Mr. Rick Claybrook presented the report and recommendation of the Termination Subcommittee of the Federal Claims & Remedies Committee and the Judicial Remedies Committee. See Agenda, Tab 2. Mr. Claybrook described the recommended revision to the FAR termination provisions, specifically identifying the changes to the current recommendation that were made to the original revisions that were discussed by the Council at the meeting of August 2, 1997.

It was moved and seconded that the recommended revisions be approved by the Section. The recommended revision appears in the Agenda at Tab 2. Mr. Allan Joseph thereafter suggested an amendment to the recommendation, which was accepted and discussed at substantial length. Commenters suggested that the form of the recommended revisions should not focus on "bad faith" since such terminology would incorrectly imply that contracting officers routinely acted in bad faith. It was recognized by others that the use of the words "bad faith" was intended to address and effectively change the decisions in a series of court decisions in which the term was at issue. Additional amendments to the recommended revisions were suggested and discussed, including reversion to language relying upon the term "good faith."

Rather than continue to discuss potential word changes, the motion was tabled by vote of the Council. Following the report of the Health Care Contracting Committee (See next item), the Council voted to remove the motion from the table. A new amendment to the opening paragraph of the original recommended revisions was presented by Mr. Joseph and accepted along with an amendment to subparagraph (iv) of the recommendation that had been suggested by Ms. Wittie. The recommended revisions to the FAR termination provisions, as amended, were voted on by the Council and passed. The opening paragraph and subparagraph (iv), as amended and passed, were as follows: (the recommendation as a whole is otherwise unchanged and appears in the Agenda, Tab 2)

Opening Paragraph:

An assertion by the contractor that the government when terminating for convenience or default has acted in bad faith shall be assessed objectively based upon standards applicable to private parties in commercial contracts. Among other things, this means that the government, whether knowingly or not, may not attempt to recapture an opportunity foreclosed at the time of contracting.

* * *

(iv)Termination for convenience to reflect changes in, but not elimination of, the actual needs of the government is appropriate, unless the change arises under and can be addressed by one of the remedy granting clauses of the contract.

The Section Chair thanked the members of the Termination Subcommittee for the considerable time and effort expended in preparing the recommended revisions.

Health Care Contracting Committee Report

Ms. Stephanie Pontzer Gilson, Chair of the Health Care Contracting Committee, reported on the activities of the committee. A more detailed version of Ms. Gilson's report appears at Tab 13 of the Agenda. Ms. Gilson reported generally on the Committee's efforts to coordinate activities with the Health Care Law Section by concentrating the committee's activities on matters involving procurement. The committee's meetings have been extremely well-attended and have included a number of outside speakers. A primary purpose of the meetings is to provide a forum for education of Section members regarding unique aspects of health care contracting. Ms. Gilson also noted the creation of a joint task force consisting of members of the Health Care Contracting Committee and the Accounting, Cost & Pricing Committee to address accounting issues arising in the context of the health care contracts.

Model Procurement Code Project

Ms. Margaret McConnell and Mr. Tom Madden reported on the status of fund raising efforts for the current Model Procurement Code project. They reported that the Section was one third of the way to the $300,000 budgeted for the project. Various fund raising options were identified, and it was the sense of the Council that the fund raising efforts should continue. The Section Chair stated, however, that before further fund raising efforts were undertaken, clarification is to be obtained regarding ABA fund raising rules or guidelines.

"Share Our Wealth" Campaign Report

A report of the results of the "Share Our Wealth" Membership Campaign was provided by Ms. Lynda T. O'Sullivan and Ms. Linda T. Maramba. A more detailed description of the results of the campaign appear at Tab 10 of the Agenda. Ms. O'Sullivan noted that the winner of the campaign competition was Mr. Jerry Walz who is to receive a set of CD-ROMs donated by Federal Publications as the top prize.

Federal Claims & Remedies and Judicial Remedies Committees Joint Report

Mr. Rich Rector and Mr. Alan Gourley, Chairs of the Federal Claims & Remedies Committee and the Judicial Remedies Committee respectively, reported on the joint activities of their two committees. A more detailed description of their activities appears at Tab 25 of the Agenda. Messrs. Rector and Gourley highlighted the fact that the committees had established a two tier Working Group to look at the Contract Disputes Act after twenty years of experience. There would be a "working" level and an advisory level consisting of senior members of the Section who participated in Section activities prior to and at the time the CDA was passed. The ultimate work product of the "CDA at 20" Working Group is likely to be a monograph. The past performance project is also still under way with an analysis of the survey results being the next step in the project.

Law Student Liaison

Ms. Madsen introduced and welcomed to the Section Mr. Chima Ucheya, the Section's Law Student Liaison.

Section Web Page Presentation

Mr. Jerry Walz conducted a brief demonstration of the capabilities of the Section's ABA homepage. The slides used by Mr. Walz are Attachment 3. He emphasized the role of the Electronic Access Committee in coordinating additions and changes to homepages. He showed examples of a number of the committee homepages.

Privatization and Outsourcing Committee Report

Ms. Agnes Dover, Chair of the Privatization and Outsourcing Committee, provided a report of the committee's activities. A more detailed description of those activities appear at Tab 28 of the Agenda. Ms. Dover summarized the types of issues that were under discussion by the committee at its monthly meetings. These included contractual and environmental issues surrounding outsourcing efforts.

Experimental Procurement Processes Committee Report

Mr. Mike Hordell reported on the activities of the Experimental Procurement Processes Committee. He stated that the committee had decided that its principal role should be educational, acting as a forum for the exchange of information regarding new procurement processes.

Program Committee Report

Mr. John Burkholder reported that the November 14, 1997 program had been one of the best the Section had put on, and he attributed the number of attendees (at least in part) to the fact the program was described on the Section's homepage. Thanks for the success of the November 14, 1997 program go to Mr. Craig Othmer and Ms. Patty Meagher who were the Program Co-chairs. Mr. Burkholder also previewed the Fourth Annual Federal Procurement Institute to be held in Annapolis, MD on March 12-13, 1998.

Government and Public Sector Lawyers Division Liaison Report

Mr. Rob Schaefer reported on a presentation made by Judge Mary Ellen Coster Williams to the Government and Public Sector Lawyers Division regarding the activities of the Section of Public Contract Law. Joint activities between the Section and the Division that were discussed included the possible exchange of articles for the organizations’ newsletters, a program concerning ethics issues affecting Federal employees, and the establishment of a military lawyers conference.

International Procurement Committee Report

Mr. Mike Mutek, Chair of the International Procurement Committee, reported on the committee's recent activities, a more detailed summary of which is included in the Agenda at Tab 23. Mr. Mutek noted that the committee had revised its mission statement to move beyond issues associated with the export of defense equipment. He stated that the committee was looking at programs concerning two topics: (i) the World Bank's Anti-Bribery Initiative; and (ii) global teaming on information technology projects.

FAR Part 15 Rewrite Report

Mr. John Pachter reported on the contents of the FAR Part 15 Rewrite final rule, noting a substantial number of changes that were made in the final rule that reflected comments made by the Section. He specifically thanked the many people who contributed to the various comments the Section submitted. The Section Chair, Ms. Madsen, noted and thanked Mr. Pachter for all the effort he and those who supported him were able to put into the comments.

Construction Division Report

Mr. Hugh Bell reported on the activities of the Construction Division that appears in greater detail at Tab 21 of the Agenda. Specifically, he noted that the Division Chairs were meeting by telephone on a periodic basis. A principal subject of discussion is the construction program that is to be part of activities at the annual meeting in Toronto in August 1998. Mr. Bell further noted a report by Mr. Doug Patin regarding activities of the Construction Claims Committee and a program they contemplated for the spring of 1998.

Committee Chair Training (West Coast)

Mr. David Churchill reported that the tentative date for committee chair training on the West Coast is January 24, 1998. The training would probably take place in Los Angeles. Further information will be supplied in the near future.

Adjournment

The Chair entertained a motion to adjourn, which was made, seconded and passed. The meeting was adjourned by the Section Chair at 12:50 p.m.

Respectfully submitted,

Gregory A. Smith

Secretary

American Bar AssociationAttachment No. 1

Marcia MadsenSection Chair

Dave ChurchillSection Chair-Elect

Gregory A. SmithSection Secretary

Patricia MeagherBudget & Finance Officer

Hubert J. Bell, Jr.Council Member

Tony GamboaCouncil Member

Kent MorrisonCouncil Member

Laura K. KennedyCouncil Member

Craig OthmerCouncil Member

John PrestonCouncil Member

Al PurdueCouncil Member

Mary Ellen Coster WilliamsCouncil Member

Patricia H. WittieCouncil Member

Allan JosephBd. Gov. Liaison

Marshall DokeSection Delegate

John T. KuelbsImmediate Past Chair

Frank H. Menaker, Jr.Previous Past Chair

John S. PachterPast Chair

Ruth C. BurgPast Chair

Donald GavinPast Chair

Donald J. KinlinPast Chair

C. Stanley DeesPast Chair

Thomas J. MaddenPast Chair

Robert D. WallickPast Chair

Chima UcheyaStudent Liaison

Marilyn NeforasSection Director

Ernestine RoblesSection Assistant

David DowdChair, Operations Division

Greg BinghamVice Chair - Accounting, Cost & Pricing

Bob MurphyCo-Chair - Emergency Issues

Norm ThorpeVice Chair - R&D Committee

George MackeyChair - Region II

Rob SchaeferVice Chair - Arizona - Region VII

Vice Chair - Privatization and Outsourcing

Committee

Mark ColleyChair, Bid Protest Committee

Lynda T. O’SullivanChair, Accounting, Cost & Pricing Committee

David Glater

Buel WhiteVice Chair, Judicial Remedies

Stephanie GilsonCo-Chair, Health Care Contracting Committee

David HammondVice Chair, Health Care Contracting Committee

Agnes DoverChair, Privatization Committee

Maryanne LavanCo-Chair, Annual and Quarterly Meetings

Peter BalchChair, Federal Subcontracting

Lloyd WeinermanVice Chair, Health Care Contracting Committee

Anne Donohue

William H. Murphy

Alan PetersonChairman, Tucker Alan

Maggie McConnellCo-Chair, MPC Committee

William KovacicVice Chair, Law Educators Committee

Michael J. KramerMember of R&D Subcommittee

Linda T. MarambaVice Chair, Region III

Joy E. SturmInternational & Commerce Products & Services Committee

Paul E. Van MaldeghemSection Member

Karen KinlinVice Chair, Conflict of Interest

King R. CulpVice Chair - International Procurement

Jay Gallagher

Carol Park Conroy

Mike LoveChair, Federal Division

Scott PickensChair, R&D Committee

Andy Brannick

Doug PatinConstruction Claims Committee

Herman LevyVice Chair, Regulatory Coordinating Committee

Richard P. RectorChair, Federal Claims & Remedies

Carl VackettaEditor, Public Contract Law Journal

Dick KuyathVice Chair, R&D

Jerry WalzVice Chair Electronic Access and Bid Protest Committees

Don DurkeeVice Chair, Conflict of Interest & Ethics

Craig KingVice Chair, Debarment

John Ingraham

Dan AllemeierMember

Michael HordellVice Chair, Experimental Procurement Processes

Mark LangevinVice Chair, Accounting, Cost & Pricing Committee

John BurkholderCo-Chair, Annual & Quarterly Programs

Barbara A. PollackChair, Books & Monograph Committee

Arleigh V. ClosserVice Chair, Books & Monographs

Jose AguirreVice Chair, Construction Claims

James TaylorMember

John JonesVice Chair, Book Committee

Peter FaganVice Chair, Region VII

Michael W. MutekChair, International Procurement

Lisa Price

Dennis Staats

Mark HansonVice Chair, Construction Contracts

Jack FrieryVice Chair, Subcontracts

John Gereski

Alan W.H. GourleyChairman, Judicial Remedies