Authority: no good deed goes unpunished

Army Lawyer, Jan-Feb, 2003

A black-letter rule of government contracting provides that only an agent with actual authority may bind the government to a contract. (1) A recent Armed Services Board of Contract Appeals (ASBCA) case demonstrates how strictly the ASBCA apples this rule. (2) In Portable Water Supply Systems Co. (PWSS), the ASBCA denied relief to a contractor who entered into an agreement with a senior official from the Agency for International Development (AID) to provide desperately needed drinking water for refugees in the wake of the humanitarian crisis that struck Central Africa in 1994. (3) Although opinions differed significantly concerning the various understandings the parties reached, it was clear that AID procured the services of PWSS with the knowledge and consent of various high-level officials. (4)

In July 1994, the media was focusing the world's attention on the Rwandan refugee crisis and the potential cholera epidemic facing refugees in Goma, Zaire. (5) At this time, PWSS was a recently formed company that specialized in providing water supply equipment and emergency water supply systems. In the wake of developing events, the president of PWSS, Frank T. Blackburn, contacted Senator Dianne Feinstein's Chief of Staff, Hadley Roth. Blackburn informed Roth that PWSS possessed the means and expertise to provide a clean water supply for Goma, and thus prevent a potentially massive cholera epidemic. (6) Following the receipt of this information, Roth talked to Senator Feinstein, who apparently called President Clinton. The Senator's office then contacted Brian Atwood, the Administrator of AID, and eventually Gerard Bradford, the Assistant Director for Operation Support, Office of Foreign Disaster Assistance (OFDA), who initiated negotiations to secure the services of PWSS. (7)

During the negotiations, but before deploying to Zaire, the parties preliminarily agreed the government would reimburse PWSS under a standing emergency equipment rental contract PWSS had with the U.S. Forest Service. (8) The parties never agreed to a new contract before the government mobilized PWSS and airlifted the company's personnel and equipment to Goma. (9) Upon arrival, PWSS encountered an environment where bodies literally lined the streets, and physical security was of paramount concern. The State Department tasked U.S military personnel to provide security for PWSS's operation. Within hours of its arrival, PWSS was providing potable water, and within days it was producing 3000 gallons per hour. (10)

As PWSS proceeded with its performance, Bradford realized that the OFDA needed to formalize a contract for PWSS's services. (11) The authorities gained control of the cholera epidemic during the negotiations, and U.S. military officials informed Blackburn and the OFDA officials that the military would soon pull out of the area. (12) As the military's departure neared, Blackburn received a facsimile copy of the proposed contract from the OFDA; Blackburn signed the contract on 22 August 1994. The contract did not allow for any profit on equipment PWSS sold to the government, or for other expenses for which Blackburn later sought recovery. Blackburn testified that he felt he had no choice but to sign the contract because he could not acquire physical security or other goods and services from local merchants unless he could demonstrate that he had the money to pay them. (13)

Several months after the completion of contract performance, PWSS invoiced the AID. The invoice, in the amount of $186,979, included costs for the operation of eight water purification units "as required by agreement with Gerald Bradford." (14) On 30 April 1996, the contracting officer denied the claim. On 1 May 1996, PWSS appealed the decision to the ASBCA. (15) At the hearing, PWSS sought recovery for equipment expenses under the Forest Service contract, as opposed to the contract executed on 22 July 1994. PWSS reasoned that during the negotiation phase, Bradford and Blackburn intended to use that contract as the means of payment. In support, PWSS argued that "even [when] not formally warranted, contracting officers have the authority to bind the government and permit [sic] the government to a financial obligation premised on the circumstances and exigencies of the matter at hand" (16)

The ASBCA first examined whether the parties had anything remotely resembling a binding contract before PWSS's departure for Goma. The board held that the parties did not establish mutual assent because they attached materially different meanings to each other's manifestations. As such, even if Bradford had actual authority to bind the government, the parties never achieved the requisite meeting of the minds to form a contract. (17) The board next examined whether Bradford had the authority to bind the government to a contract. Citing Federal Crop Insurance Co. v. Merrill, (18) the board applied the age-old rule that only those who have actual authority can bind the government. (19) Although Bradford did have a warrant for small purchases under $25,000, the board concluded that the appellant failed to show that Bradford or any other government employee involved had an express delegation of authority to enter into a contract of the sort contemplated by Blackburn. (20)