Contracting new ideas

In recent years, many government agencies have placed a high premium on innovation in contracting as a means to get things done outside the typical procurement process. In response, some companies have found themselves participating in some very unusual arrangements.

In many instances, they have worked well. In others, the unique approaches have had some unexpected results. A recent decision by the U.S. Court of Federal Claims provides an interesting example of an innovative technique that didn't work out.

In this case, Data Marketing Co. (DMC) of Virginia sued the United States for allegedly breaching a joint venture agreement between the company and the National Technical Information Service (NTIS), stating that the parties were supposed to cooperate in the distribution of Defense Department procurement information to prospective contractors through a fee-based Technical Data Package Management Information System. Similar agreements are common among private companies, but highly unusual for government agencies.

Under the agreement, NTIS was to obtain required information from DOD and provide it to DMC so that the data could be included in the information system.

However, according to a lawsuit the company filed, shortly after the arrangement commenced, DOD breached its part of the deal by supporting a competing procurement gateway system, thereby intentionally withholding data feeds from the department to the information system and directing NTIS to terminate its joint venture agreement with DMC. The court ruled against the company on each issue.

Initially, the court found that because the department was not a signatory to the joint venture agreement between DMC and NTIS, and because each federal government agency is considered to be a separate legal entity, DOD had not been a formal party to the agreement and therefore could not have breached it.

Even so, the court still addressed the company's specific allegations.

First, the court determined that there was nothing in the joint venture agreement's terms that prohibited the government from supporting a competing venture.

Second, the court found that although DOD had interrupted the data feed, this could not be the basis for a lawsuit because the joint venture agreement exempted DOD from liability for any interruption in service. According to the court, it didn't matter that DOD actually caused this particular interruption.

Third, the court ruled that, because the joint venture agreement allowed any party to withdraw at any time with notice to the other parties, the government had a unilateral right to cancel the joint venture agreement for any reason whatsoever without penalty.

This decision is a warning to companies considering innovative contracting arrangements to be sure they understand what they are entering into.

Peckinpaugh is senior counsel for Com-puter Sciences Corp. in Reston, Va. This column represents his personal views.


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