What’s My Blanket Purchase Agreement Worth? Apparently, Not Much
By: Michael Hawkes
Published Date: June 4, 2019
Blanket Purchase Agreements (“BPAs”) are essentially charge accounts with qualified sources of supply. See, FAR 13.303-1. They are designed to be a simplified method of filling repetitive needs for supplies and services. The Government can use a BPA when it knows it will need the same supplies or services over and over again but is unsure when and how many of the supplies or services will be needed. The parties negotiate the key terms of the BPA upfront and then the Government makes purchases against the BPA.
Recently, the U.S. Court of Federal Claims (“COFC”) held that BPAs are not contracts for purposes of the Contract Disputes Act (“CDA”). McLeod Group, LLC v. United States, 142 Fed. Cl. 558 (2019). The CDA permits the COFC to hear appeals from final decisions of a contracting officer. However, in order for COFC to hear an appeal under the CDA, there must be an express or implied contract between the contractor and the Government.
In that case, McLeod Group, LLC (“McLeod”), a service-disabled veteran-owned small business, filed a complaint alleging breach of contract under its BPA with the Department of Homeland Security (“DHS”). In 2011, DHS conducted a competitive acquisition for agency-wide management consulting services following the agency’s internal investigation involving allegations of a hostile work environment. DHS eventually awarded the BPA to McLeod and issued seven task orders under the BPA.
Although the BPA expressly provided it was not a contract and “does not obligate any funds,” McLeod claimed that DHS acted in bad faith when DHS stopped issuing additional task orders to McLeod. McLeod alleged that DHS retaliated against McLeod by not awarding McLeod any additional task orders when McLeod declined to work with a prospective subcontractor under its BPA. McLeod submitted a certified claim alleging that DHS acted in bad faith, which claim was denied by the Contracting Officer. McLeod then appealed the Contracting Officer’s final decision to the COFC. The COFC dismissed much of the complaint for lack of jurisdiction.
In order to prove the existence of a contract, the contractor must show: (1) mutuality of intent; (2) consideration; (3) lack of ambiguity in the offer and acceptance; and (4) actual authority to bind the Government in contract on the part of the government official whose conduct is relied upon. Generally, BPAs are not considered contracts but rather are frameworks for future contracts that come into existence when a task order is placed. BPAs lack the required element of consideration because the contractor is not obligated to perform services or provide goods until the Government actually issues a task order against the BPA. Likewise, the Government does not have a contractual duty to the contractor until a valid task order is issued.
A BPA does not by itself create contractual duties between the parties. Indeed, the BPA in this case specifically stated that it was not a contract and that task orders would be placed against the BPA. It is the task orders issued under the BPA that provided the performance obligations between the parties.
The COFC rejected McLeod’s arguments that the BPA was an enforceable contract because it required McLeod to attend a post-award kickoff meeting and submit status reports regarding open task orders. The COFC concluded that these obligations were not significant enough to establish the existence of mutuality of consideration. While it was undisputed the seven task orders DHS issued under the BPA were contracts, the BPA itself was not, so the COFC dismissed the breach of contract claims related to the BPA.
Contractors who receive BPAs must bear in mind that the BPA generally is not a contract and does not require the Government to place orders against the BPA. Certainly, the COFC and boards of contract appeals will look to the express language of the BPA to determine if the parties intended the BPA to be a contract. However, if the BPA does not have any express language evidencing an intent to create a contract, then the BPA is simply intended to establish the terms and conditions of future task orders. It will be those future task orders that will define the parties’ rights and obligations.
* The author would like to acknowledge the contribution of Sabah Petrov, a law clerk in our Washington, D.C. office, to this blog.