The scope of a contract

The following question was raised by a contractor: In deciding whether an

existing contract may be modified to include a new item, government contracting

officers like to talk about the contract's "scope." What makes up the scope

of a contract?

The scope of a contract is not defined in regulations but is a fact-specific

inquiry based on precedents. The relevant cases are those in which a competitor

has filed a bid protest arguing that the ostensible modification is so far

outside the original competition for the contract that it should be considered

a new contracting action for which other companies should be allowed to

compete.

The General Accounting Office often seemed to apply a fairly strict

scrutiny in its consideration of these cases. In more recent years, however,

GAO has appeared to defer to an agency's determination that a modification

is within the scope of a particular contract.

Part of the reason for the shift is a change in the way many contracts

are written. In the past, most contracts were narrowly focused on specific

government requirements. More recently, many contracts have been awarded

to address broader program needs. A modification is more likely to be found

to be within the scope of a broadly written contract.

Furthermore, GAO seems to accept more readily allegedly out-of-scope

modifications since the Court of Appeals for the Federal Circuit issued

its decision in AT&T Communications Inc. v. Wiltel. The court found

that a $100 million modification adding a new type of transmission services

to one of the FTS 2000 contracts was within the scope of the contract, reversing

a decision by the General Services Board of Contract Appeals.

In general, a modification is considered to be outside the scope of

an existing contract when there is a "material difference" between the contract

as modified and the contract as it existed before the modification. In Access

Research Corp., GAO noted that: "Evidence of a material difference between

the modification and the original contract is found by examining any changes

in the type of work, performance period and costs between the contract as

awarded and as modified."

However, in Hughes Space & Communication., GAO approved a contract modification

to a satellite communications services contract that added a new service

to the contract. The agency added system pre-emptible satellite transponder

leases to a contract that had previously specified no pre-emptible transponder

leases. Even so, GAO found the agency actions reasonable.

In Excide Corp., GAO found that a delivery order issued under an existing

requirements contract for a quantity in excess of the contract's order limitation — and to be delivered after the expiration of the contract — was not beyond

the scope of the contract. According to GAO, the contract permitted orders

in excess of the limit, the total quantity ordered did not significantly

exceed the contract's estimated quantity and the contract did not prohibit

deliveries after the contract's expiration date. GAO found that a 13 percent

overrun in ordering was insignificant in terms of the contract's scope,

noting other cases in which 30 percent and 25 percent overruns were found

acceptable.

Indeed, the few cases in which a modification has been found to be outside

the scope of a contract in recent years have involved procurements in which

the contracts were very narrowly drawn. The protests were sustained only

when the agency tried to add a new type of work to a contract that specifically

excluded that kind of work. For example, in Sprint Communications Co., GAO

sustained a protest against a decision to acquire telecom transmission services

by modifying a management services contract because the contract specifically

stated that transmission services would be acquired from other contractors.

GAO's flexibility has made it easier for agencies to satisfy their needs

through existing contracts. Moreover, the number of protests against supposed

out- of-scope modifications — and the percentage of those protests that

are sustained — have dropped dramatically in the last few years.

Peckinpaugh is corporate counsel for DynCorp, Reston, Va., and formerly

a member of the government contracts section for Winston & Strawn, Washington,

D.C.

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