GRANTED IN PART: March 31, 2016

GRANTED IN PART: March 31, 2016

CBCA 2294

AMERICOM GOVERNMENT SERVICES, INC.,

Appellant,

v.

GENERAL SERVICES ADMINISTRATION,

Respondent.

Brendan M. Lill of Hogan Lovells US LLP, Washington, DC, counsel for Appellant.

Jennifer L. Howard, Office of General Counsel, General Services Administration,

Washington, DC, counsel for Respondent.

Before Board Judges POLLACK, GOODMAN, and SHERIDAN.

POLLACK, Board Judge.

This appeal involves the claim of Americom Government Services, Inc. (AGS or

appellant) against the General Services Administration (GSA) for costs of providing Host

Nation satellite licenses and bandwidth services (HNAs) for use by the United States Forces

Korea (USFK). For purposes of this decision we will use the identification HNAs to

collectively refer to both the license and frequency segments of the services. Where we need

to differentiate, we will specifically reference one or the other. Appellant seeks recovery

under indefinite delivery indefinite quantity (IDIQ) contract GS-35F-0301N (contract) and

task order number 9T3APN018 (task order), both of which were between GSA and AGS. On

June 22, 2005, appellant invoiced GSA for the HNAs in the amount of $569,793.53, plus an

additional $10,000 for training and translation services. GSA approved the payment and paid

appellant the full invoice. After payment of the invoice, GSA realized the HNAs were not

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covered under the task order or any other contract instrument. GSA then sought to recoup the

money by deducting payments otherwise due appellant on other completed obligations. GSA

also returned $597,566.08 as unobligated funds to the Army. GSA closed out the task order

in May 2006.

While GSA does not deny that AGS provided HNAs and associated frequency services,

it denies AGS’s right to payment and questions the number of HNAs provided. GSA

contends that because the funds were not paid under a valid contract instrument and through

the authority of a contracting official, the payment was by mistake and appellant must bear

the consequences. GSA also raises defenses as to violating the cost ceiling on the contract.

Appellant initially claimed that the HNAs were covered under the task order, and that if not

covered, then there was an implied-in-fact contract. Finally, appellant ultimately asserted that

it was entitled to compensation under the theory of ratification.

On August 13, 2014, the Board ruled on cross-motions for summary relief in Americom

Government Services, Inc. v. General Services Administration, CBCA 2294, 14-1 BCA ¶

35,687. We ruled that as a matter of law, there was no express contract; determined that the

task order award was for no more than thirteen HNAs;, and determined that the task order did

not cover the added HNAs claimed. At the time of the motions, the only identified GSA

official to have a connection to the purchase of the HNAs was Ms. Elizabeth Bigger, who

approved the payment invoice for the work. We concluded that her actions as to the approval

of the invoice were not enough to create an implied-in-fact contract. We left unresolved the

matter of ratification, emphasizing that the record needed to be better developed before we

could render a decision.

On July 22 and 23, 2015, we held a hearing focusing on the issue of institutional

ratification. Significant evidence was presented at the hearing that had not been presented

previously, much of which is contained in this decision.

Witnesses

Most of the testimony was by telephone, with a number of key witnesses being

overseas. The following witnesses testified:

Roy Flores, an official with AGS at the time, testified as to his involvement with the

initial order for thirteen HNAs and as to AGS providing the HNAs, which are the subject of

the claim, to USFK. Appellant also called Don Rew, a principal of Integrated Satellite

Solutions (ISS), the Korean firm that provided the HNAs under subcontract to AGS. He

discussed interactions with USFK and AGS, the initiation of the purchase, what was

delivered, and when.

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GSA called Elizabeth Bigger, the GSA official who approved the invoice/voucher for

the HNAs in dispute. She testified as to that approval, her role in procurement for GSA, and

the operation of the GSA procurement office. GSA also called Mr. Joseph Smithey, the

contracting officer (CO) from 2005 into 2008. He was not the CO at the time of award, but

was at the time of the invoice, at the time of the discovery of the mistaken payment, and at the

time of the return of money to USFK. During the motions proceeding, he was not a focus of

either party. At the hearing, he addressed his role, the role of Ms. Bigger, and the roles of

GSA and USFK on this acquisition.

GSA called as well several other witnesses. Russell Wong, a GSA computer specialist

from 2003 to 2006, testified primarily as to the use of MIPRs (military interdepartmental

purchase requests). Mr. Philip Kwong, who was a major with USFK at the time, spoke

regarding the supply of the HNAs, but not the specifics of the procurement. Mr. Stephen

Durrett, the CO who issued the final decision, and Ms. Josephine Valentin, of the GSA

finance office, provided limited testimony as to their respective roles.

Mitchell Stevens testified and he appeared to be cooperative with both parties. He had

operated as a contractor employee for USFK, and while not a government employee,

essentially ran the operation as to procurement actions on the satellites. He was involved in

both the formation of the initial task order for the HNAs and further implementation. He

addressed why the items were needed; the intent of USFK at the time of contracting; GSA

interaction with USFK, including what was provided to USFK and GSA, and when. He was

not on the project at the time GSA discovered the payment error or returned the money.

Mr. Paul Nagasawa merits comment, even though he was not a witness. He was the

head of, and managed, the GSA Korean procurement office and was Mr. Smithey’s

supervisor. He did not participate in day-to-day procurement and was not a CO, but he was

the designated official for receiving the funding document (the MIPR) that was supposed to

provide money for the disputed HNAs. GSA sought Mr. Nagasawa’s participation in the

proceedings, but he declined.

Facts

In August 2003, GSA issued a request for quotations (RFQ) for commercial satellite

services in support of USFK. The RFQ was to serve as a basis on which quotations could be

solicited and task orders awarded under the GSA Federal Supply Schedule (FSS). The

original task order was awarded in the amount of $2,914,339. A segment of the award was

for HNAs. Each HNA had two components–a five-year license and a yearly usage or

frequency charge. In order for USFK to operate a satellite terminal in Korea, USFK had to

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have an associated HNA license in operation. With that in place, GSA and USFK could then

pay a yearly frequency fee for usage.

The statement of work (SOW), set out in the RFQ, contained the following language:

International Commercial Satellite Services: Provide Host Nation

Authorizations (HNA) in Korea; Negotiate and provide HNA, Transponder tax,

and local frequency licensing IAW [in accordance with] Korean Military

Information and Communications (MIC) for each terminal and within each

province region; Provide ROK [Republic of Korea] installation service at each

site; Training and Translations with Korea host nation, Negotiate and provide

Korean training instructors, translation of technical manuals, and technical

translator services for meetings between ROK and American technicians and

managers.

AGS submitted a proposal to GSA that contained pricing for thirteen HNAs (the fiveyear license and one-year frequency charges for each HNA). The licenses were priced at

$7000 each and the frequency charges at $5000 per year. The HNAs were to be used with

terminals. Terminals were not part of the AGS proposal. In an attempt to address adding

additional HNAs, AGS placed an asterisk by its price quote and provided, “Additional

Terminals can be added at a cost of $5,000 per terminal.” The wording “additional terminals”

in this context referred to the HNAs and not terminals (hardware) themselves. While only

thirteen HNAs were initially procured, USFK intended to add later a significant number. The

initial thirteen were a test sample. Mr. Stevens confirmed that all parties, including GSA,

were aware at the time of award of an anticipated need for more HNAs.

On August 28, 2003, GSA awarded task order 9T3APN018 to AGS. The award

included the thirteen HNAs and the associated one-year frequency services. David Williams

was the GSA CO for the task order. The order identified the initial period of performance as

October 1, 2003, through September 30, 2004. The task order period was later extended to

May 31, 2005, through issuance of four modifications. Notwithstanding the GSA recoupment

action in 2006, GSA and USFK continued to use the HNA five-year licenses until they

expired.

At the time of award, GSA advised AGS that the task order would be incrementally

funded via modification to a full ceiling price of $5,115,611, based on availability of funds.

The task order provided that the contract was not to exceed the total task dollar value ceiling.

The award provided that any work done or expenditures made, beyond the increments of the

funding obligated to the contractor, would be at the contractor’s risk. At the time GSA paid

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for the disputed HNAs under the invoice, it does not appear that the cost ceiling had been

reached.

The Korean government required that HNAs and the frequency services be provided

under the auspices of a local Korean company, which was to operate as the in-country agent

for the contractor. ISS was AGS’s chosen in-country agent for the purposes of obtaining

HNAs for the Defense Intelligence Agency network terminals. ISS had been acting in that

capacity since 2003 and had provided the initial thirteen HNAs to AGS. GSA was not the

only entity that could contract for HNAs for use in Korea. However, GSA was the sole

ordering source or partner for HNA services that were to be used and procured for USFK.

The purchases of satellite services for USFK was done through what GSA described

as an assisted acquisition, involving USFK and the GSA office in Korea. GSA had a

financing office in San Francisco which ultimately issued payment based on the GSA office

in Korea approval. The San Francisco office had no role in contract management.

Under the USFK/GSA assisted acquisition, USFK identified for GSA what USFK

wanted, provided funding for purchases through what was identified as MIPRs, and asked

GSA to provide execution of purchase instruments. Once award was made, GSA played a

very minor role in management of the procurement and essentially was a conduit for payments

and a source for adding modifications. GSA’s acquisition assistance agreement with USFK

called for a four percent fee on the total contracted through GSA’s efforts.

A MIPR is a funding document that was utilized by USFK as a means for providing

funds to GSA, so that GSA could secure work wanted by USFK. MIPRs typically contained

a description of the work being funded. Once the funds were made available to GSA through

a MIPR, USFK anticipated that GSA would take the steps necessary to secure the items in a

proper contractual manner. Mr. Stevens testified that as to the HNAs in issue, once USFK

sent the November 3, 2003, MIPR that included funding for additional HNAs, USFK thought

it (USFK) was clear to proceed on securing more HNAs, up to that number. He testified that

everyone knew (prior to initial award) that the initial thirteen HNAs would be inadequate and

more would be needed.

USFK provided GSA with three MIPRs for services under task order 9T3APN018.

They were, in order of issuance, MIPR3HOAF00354, MIPR4BOAF00096, and

MIPR5DOAF00305. MIPR3HOAF00354 was dated April 30, 2003, and provided for

satellite services for the USFK J2 CIVN program.

Thereafter, USFK issued

MIPR4BOAF00096 on November 3, 2003. That MIPR identified funds for forty-eight local

license fees at $5500 each, as well as funds for a separate line item, designated as host nation

approval of forty-eight units, with each unit listed at $7000. The items priced at $5500 were

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for one-year frequency fees, and the items listed at $7000 were for the HNA multi-year

licenses. The two items totaled in excess of $500,000. USFK anticipated that once it

provided funding to GSA through the November 2003 MIPR, GSA would do whatever was

necessary to ensure that the work was properly contracted for, so that USFK could purchase

the needed items. In this case, however, GSA took no action as to the November 2003 MIPR

and it did not assign the dollars designated for the added HNAs into either the existing task

order or another instrument to effectuate the purchase. GSA does not dispute that USFK

provided the funds in the November 2003 MIPR for purposes of adding more HNAs. GSA,

however, denies appellant is entitled to any money, because GSA never converted or assigned

the money to a contract instrument. The third MIPR issued plays no role in the dispute.

Accordingly, it is not discussed.

Notwithstanding the fact that GSA failed to act on the November 2003 MIPR, USFK

had intended that MIPR to be used by GSA to fund the securing of additional HNAs. As Mr.

Stevens explained, USFK thought that once it presented the MIPR to Mr. Nagasawa, it could

proceed to purchase the services funded. For that reason, USFK and Mr. Stevens, who was

acting on its behalf, expected that the money provided in the MIPR would be paid under the

AGS contract. That is why USFK proceeded to secure the items and have AGS bill against

the task order.

MIPRs are funding and not contract documents. They are solely between USFK and

GSA. AGS was not a party to the MIPRs. There was no evidence that AGS knew of the

specifics of the MIPRs.

Both Mr. Smithey and Ms. Bigger confirmed that GSA was to prepare contract

documents when needed. Even though GSA had been involved in the initial preparation of

the SOW for the existing task order and despite the fact that “everyone” (as testified to by

Mr. Stevens) knew at the time of the original SOW that thirteen HNAs would be inadequate,

GSA took no action to create a contract instrument for the work sought under the November

2003 MIPR. Further, GSA appeared to take no role in monitoring or managing the work, but

seemed to rely entirely on USFK to manage the project and deal with any issues.

As best as can be determined, GSA, despite approving the invoice for over $500,000

worth of HNAs, was unaware until early 2006 that AGS had provided more than the initial

thirteen HNAs.

Mr. Smithey stated this was an assisted acquisition and as such, GSA relied upon

USFK. If USFK wanted to communicate operational requirements for GSA to purchase, then

USFK would send the funding and work description to Mr. Nagasawa, head of the GSA

Korea procurement office, who would then assign it to GSA contracting personnel. Mr.

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Smithey stated that if the MIPR was assigned to him, he would assign the matter to Ms.

Bigger, noting that she functioned as a contract specialist, working alongside him. The

November 2003 MIPR, providing funding for forty-eight additional HNA licenses and

frequency services, was sent to Mr. Nagasawa. Though we have no testimony that it was

forwarded, absent evidence to the contrary, we conclude that the MIPR would have been

provided to Mr. Smithey’s attention. Why it was not processed thereafter by the GSA was

not addressed during the hearing.

Once Mr. Smithey assigned a matter to Ms. Bigger, she was to contact the requiring

activity to get the documentation necessary to formulate and then implement any needed

contract action. It was Ms. Bigger’s role to put together specifications, review quotations,

and prepare all documents, both pre- and post-award. She was identified by various

witnesses as the primary contact person at GSA for USFK. She also was assigned the role

of approving invoices, although she described the function as a mechanical operation, relying

entirely on USFK for any verifications. Mr. Smithey testified he had no role to check

invoices for contract compliance.

Ms. Bigger had no contracting authority, and according to Mr. Smithey, she would

have consulted with him if contracting authority was needed. There was no evidence as to

any conversations or inquiries between Ms. Bigger and Mr. Smithey as to the invoiced

HNAs, discovery of the invoice paying error, or the return of money to USFK. The

methodology that was described revealed that in the case of contracts with USFK, Mr.

Smithey essentially turned matters over entirely to Ms. Bigger. Then, she essentially relied

upon USFK to take care of matters and conducted no independent review or management.

Evidence at the hearing supports that Ms. Bigger held a more significant procurement

role than that described at the time we ruled on the motions in August 2014. She was then

portrayed as an administrative functionary, essentially handling paper, with no substantive

involvement. However, her role was more substantial. Also, at the time of the motions, there

was no focus on Mr. Smithey, who was the CO not only at the time the invoice was paid, but

also the CO at the time of the return of the money to the Army, the recoupment of funds from

AGS, and during the period of continued use of the licenses.

While USFK expected that by the end of 2003 it would need more HNAs than the

thirteen initially secured, it did not require more until some time in 2004. By that point,

USFK had conducted testing and decided not to move forward with the thirteen HNAs it had.

Then, during the first half of 2004, USFK, in a completely separate transaction, having no

GSA involvement and without GSA knowledge, purchased fifty terminals (hardware)

through a contract handled by the Department of the Interior (DOI). Mr. Stevens was heavily

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involved in this terminal purchase. That purchase created a need for more HNAs, because

each terminal needed an HNA to operate.

At some point in July 2004, Mr. Stevens, acting for USFK, contacted ISS to secure

additional HNAs. He testified that USFK believed that because it had provided GSA funding

for the added HNAs, USFK could proceed with securing them from the vendor (AGS) under

the task order and needed no further GSA approval. Therefore, he contacted ISS directly.

He stated he sought forty-eight HNAs, as that quantity was reflected on the November 2003

MIPR. ISS proceeded to provide the items starting in 2004 and continuing through 2005,

billing AGS as items were being provided. In the period of 2004 through June 2005, ISS

billed AGS for forty-nine HNA licenses (billing as they came on line). ISS billed a slightly

smaller number of frequency services. The accumulated total bill was $579,793.52. AGS

then invoiced that sum on invoice 90037154, dated June 22, 2005. The work was identified

on the invoice, under the service description, as Host Nations

Agreement/Licensing/Frequency Taxes at $569,793.53. There was also a separate charge of

$10,000 for training and translation services. The invoice did not show a quantity, but rather

a lump sum. We do not have evidence as to whether AGS attached the underlying bills from

ISS.

GSA paid the invoice in full on September 15, 2005, for $579,793.52. According to

AGS, at that point, GSA still had $1,105,464.72 in available funds of the $5,115,611 total

funding level. The parties stipulated (at the time of filing of motions) to the contents of the

approval form that was signed and paid by GSA:

GSA transaction records note the following for AGS Invoice 90037154:

“Client Date Reviewed: 8/14/2005”, “Client Authorization, Accepted”

Accepted by Elizabeth Bigger at 8/23/2005 11:43:44 PM. See IT-Solutions

Shop Acceptance Information Invoice 90037154, attached as Attachment 1.

In August 2005 Elizabeth Bigger was a Technology Project Adviser working

for GSA Federal Technology Service, Asia Business Team.

Ms. Bigger was the only GSA official taking part in the approval. When she paid the invoice

against the task order, she believed it was a valid payment. GSA did not contend that the

payment was invalid, until later. GSA has never provided an explanation as to what triggered

its notice of the error and identified no individual associated with the discovery. No notice

of the payment error was provided to AGS, and GSA did not notify AGS when it started its

recoupment.

According to the stipulation of the parties and testimony of Ms. Bigger, the invoice

had first been approved by USFK, before being signed off by GSA. It appears that Ms.

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Bigger had no information other than USFK approving payment. While the invoice did not

break down numbers of licenses or frequency charges, the invoice was clear that the payment

was for HNAs. At the time of approval of the invoice, the only HNAs under contract were

the thirteen that had been earlier provided. Ms. Bigger acknowledged that she approved

payment, without any independent GSA review as to either the furnishing of the services or

whether the work was covered under an existing contract. GSA’s lack of a review function

was consistent with practice throughout this task order. In the GSA/USFK relationship, GSA

relied entirely upon USFK to approve, verify, and manage USFK procurement of the satellite

services and associated HNAs.

Ms. Bigger testified that she would check the system to make sure that she did not

have any open invoices that had been approved by the client. After client approval, she

would make sure it was hers (GSA’s) and she was supposed to click on it. She said that “she

might” just check to make sure the correct numbers were in the right places as far as the task

order number or anything like that. She did not “review any of the actual meat of the invoice

of the work or anything like that.” It was an administrative-type review. She stated she

would just receive the invoice with no supporting documentation and if the GSA finance

office in San Francisco requested additional documentation, then either San Francisco or the

user would handle the matter. She stated that she was not verifying that the work invoiced

was for work that was actually performed, noting that if it was not performed then the client

would not approve it. If USFK said it was “okay,” then she simply clicked “okay,” and that

was sufficient to get the payment through the San Francisco computer. She said that she

understood that only invoices that were expressly against a written contract would be

submitted, but testified she would have had no sense as to whether the work had been

submitted under an express written contract. GSA assumed if there was a problem, USFK

would pick it up.

Mr. Smithey confirmed that the office policy was to rely on the using agency (USFK),

and once an invoice came in, if user said it was “okay,” then it was sent ahead to the San

Francisco office for payment, with no further independent review. It was his understanding

that Ms. Bigger would look the invoice over to make sure everything was in conformance

with the contract terms and conditions, and then she would submit if for payment. He did not

see invoices. He identified Mr. Stevens as the individual at the using activity who would be

the reviewer for USFK and thought Mr. Stevens was a government employee. He said it

would be a mistake to approve an invoice for work that was not in an express written

contract, but said that if it was submitted into the GSA computer system, then surely the

requiring activity and information technology manager would have known that.

Mr. Stevens testified that at least forty-eight HNA licenses would have been in place

by late 2005. That appears generally consistent with the invoices and compilation sheet

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provided at the hearing which showed forty-nine HNAs provided by June 2005. Mr. Stevens

did not directly address frequency charges, but those generally were put in place soon after

the HNA was activated.

GSA, the only party that would have the information, provided no specific date for its

discovery of the unauthorized payment, nor did it specifically identify the first date for

recoupment. Nevertheless, the evidence establishes a window during which GSA would

have certainly discovered the payment error and during which GSA would have begun

recoupment. The window runs from November 2005, the date on which GSA says it made

its last affirmative payment to appellant (before discovering the error), and May 2006, when

GSA closed out the contract. GSA knew about returning funding at some point in January

2006. At that point GSA realized that it had over $500,000 in what appeared to it to be

unobligated funds. By March 2006, GSA returned the money, and by May 2006, GSA

moved to close out the contract. We do not have a specific date for the start of the

recoupment, but find it logically had to occur before close out, as we find it inconceivable

that the GSA office in Korea would have been able to sort out unobligated funds, been

willing to close out the task order and contract, and done so without knowing that it had

overpaid and that it intended to recoup the payment. Further, there has been no evidence

presented by GSA to suggest that it learned of the error at a point after the task order was

closed out. Moreover, because GSA was the only party that could establish the date of

notice, we choose to make any inference in this matter in favor of the appellant.

Notwithstanding GSA’s recoupment of the money paid for the HNAs, USFK

continued to use the licenses until the expiration of their five-year term. In contrast, and

because the frequency services of the HNAs ran for a single year as opposed to a five-year

term, depending upon the date of activation, many of the one-year frequency charges would

have been fully utilized by early 2006. Based upon the ISS compilation of installation and

the invoices that ISS submitted to AGS, we find that fifteen of the one-year charges would

have remained active as of April 2006. It is our understanding that USFK continued to

thereafter use the licenses and to pay frequency charges; however, the frequency charges for

subsequent years were compensated under another contract and are not in issue in this claim.

In May 2006, GSA officially closed out the task order. There is no evidence to show

that at any point between November 2005 and May 2006, GSA took any action to notify the

appellant of GSA’s discovery of the payment error, of its conclusion that the HNA purchase

was not properly authorized, and of its recoupment of money from other AGS contracts. That

lack of notice continued, with the matter only coming to light because the appellant’s

accounting firm found a discrepancy in payment in its audit in November 2006.

Notwithstanding its failure to notify the appellant, GSA, in briefing, asserts that the appellant

failed to notify it on the close-out form in May 2006 that there was a payment problem. The

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appellant did not indicate that there was a problem or that money was still owed, because the

appellant did not realize it was being short paid on other invoices until late 2006. Further,

while we have found that the appellant’s interpretation of the SOW was not accurate, there

is no question that the appellant and evidently USFK (Mr. Stevens) thought that the existing

contract or the furnishing of MIPR money covered the work.

In November 2006, after the appellant’s accountant discovered a discrepancy between

what the appellant had provided and what was paid, GSA and AGS held a meeting, which

is memorialized by an e-mail message. The message reflects that discussions were held

between the appellant and GSA as to short payments and that Mr. Smithey may have

participated in the discussions. Even if he did not participate, he was copied on the e-mail

message discussing the meeting. Thereafter, exchanges took place well into 2008, as AGS

attempted to secure payments it believed were due. At some point in 2008, Mr. Smithey

advised the appellant to submit the matter as a claim, and the appellant did so on March 18,

2008, seeking $597,456.80. Once the claim was filed, it was assigned to a different CO and

exchanges continued. In 2010, the matter was re-assigned to Mr. Durrett as the CO.

GSA turned to Mr. Stevens for information, and he responded with an e-mail message

dated June 21, 2010. He said that in 2005, GSA had contracted for forty-eight HNAs and

frequency licenses (citing to the November 2003 MIPR), and USFK executed up to fortyeight installations that year. He further expressed the opinion that AGS must have had billing

problems, for they did not bill in the task order year for $597,566.08. He continued that GSA

then sent the un-billed funding back to 8th Army and finally that no one in the CIVN Divn

program was aware the funds were returned.

In addition to Mr. Stevens’ statement as to the number of HNA licenses provided, the

record contained invoices that had been submitted to AGS by ISS for the disputed items, as

well as a compilation sheet which identified the location of HNAs and when they were

activated. GSA did provide some limited evidence as to the number of HNAs that were

provided and when they were installed. However, we found that information to be

inconclusive. In contrast, we found the numbers provided by Mr. Stevens and those

identified in the ISS invoices to be more accurate.

On November 15, 2010, the CO issued a final decision denying the March 18, 2008,

claim, citing lack of evidence from AGS regarding the existence of a contract and proof of

payment.

Appellant filed a timely appeal.

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Discussion

In our August 2014 ruling on cross-motions for summary relief, we found there was

no express contract between the appellant and GSA for providing the HNAs in dispute and

no legally binding implied-in-fact contract created by GSA’s acceptance and payment of the

June 2005 HNA invoice. We left open the matter of ratification. While additional evidence

was offered at the hearing, we affirm our earlier ruling as to there not being an express

contract created by the payment of the invoice. Accordingly, we now turn to the issue of

ratification.

Ratification is the adoption of an unauthorized act resulting in that act being given

effect as if originally authorized. It validates a formerly unauthorized contractual action.

Restatement (Second) of Agency § 82 (1958); Williams v. United States, 127 F. Supp. 617

(Ct. Cl. 1956); Parking Co. of America, GSBCA 7654, 87-2 BCA ¶ 19,823. Paying a claim,

based on ratification, is an extraordinary remedy and the appropriateness of ratification is

very much fact driven, with no specific factual pattern being required. Janowsky v. United

States, 133 F.3d 888 (Fed. Cir. 1998); Silverman v.United States, 679 F.2d 865 (Ct. Cl.

1982). Ratification is utilized in appropriate cases to deal with unauthorized commitments

benefitting the Government for which a contractor could otherwise not be paid. As stated in

Janowsky, which overturned a lower court decision involving a claim against the Federal

Bureau of Investigation, one of the situations that will support ratification is one in which an

agency overreaches by allowing the continuation of the services and benefits but denies

payment. In issuing its decision, the Court stated that the lower court had erred “when it

dismissed the Janowskys’ implied-in-fact contract claim without considering whether the

agency ratified the proposed contract with the Janowskys by allowing the sting operation to

continue and by receiving the benefits from it.” 133 F.3d at 892.

Relief through ratification is an exception to the otherwise black letter law as

enunciated in Federal Crop Insurance Corp. v. Merrill, 332 U.S. 380, 384 (1947), the

seminal case which sets out the proposition that the Federal Government can only be bound

by those with actual authority.

An earlier unauthorized commitment does not have to be expressly authorized to be

ratified. A commitment can be ratified by the actions or inactions of a government official

having contracting authority, even though that official was not involved in the earlier

unauthorized commitment. B.V. Construction Inc., ASBCA 47766, et. al., 04-1 BCA

¶ 32,604; Kumin Associates, Inc., LBCA 94-BCA-3, 98-2 BCA ¶ 30,007 (1997); Carter

Pierce Mechanical Services, Inc., LBCA 91-BCA-1, 98-2 BCA ¶ 30,009 (1997); Parking Co.;

W. Southard Jones, Inc. ASBCA 6321, 61-2 BCA ¶ 3182. The Government can be bound to

pay for otherwise unauthorized contract work, even where neither the initial commitment nor

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the ratification was carried out by an official empowered with contracting authority.

Janowsky; Silverman.

The Government can ratify an otherwise unauthorized contract commitment through

constructive means or through a direct affirmative act. Williams; Nu-Way Concrete Co. v.

Department of Homeland Security, CBCA 1411, 11-1 BCA ¶ 34,636 (2010); Sinil Co.,

ASBCA 55819, et al., 09-2 BCA ¶ 34,213; Parking Co. Constructive notice can be created

by an official observing an activity and then failing to take appropriate action, or when an

official allows someone without authority to be his/her eyes and ears or cedes control to a

subordinate, thereby allowing that person to act in his or her stead. In appropriate instances,

knowledge of the subordinate can be and is imputed to the contracting official. See B.V.

Construction; Healthcare Practice Enhancement Network, Inc., VABCA 5864, 01-1 BCA ¶

31,383; Sociometrics, Inc., ASBCA 51620, 00-1 BCA ¶ 30,620 (1999) (board could draw no

conclusion other than the CO representative was the eyes and ears of the CO); Urban

Laboratories, Inc., ASBCA 24905, 84-3 BCA ¶ 17,515 (imputing to the absent CO

knowledge of food service officer who was responsible for certifying invoices, among other

contract management duties and citing the CO reliance on this individual during the contract).

Constructive notice can be established where an official knew or should have known of a

matter but allowed it to continue. Silence or inaction may constitute adoption, including the

failure of an authorized representative to curtail a contractor’s activities. Parking Co.; W.

Southard Jones.

In Healthcare Practice Enhancement, 01-1 BCA at 154,987, the VABCA addressed

constructive notice in the context of ratification, where it stated:

We conclude that in cases in which a Government official, though lacking in

actual authority, enters into an agreement with a contractor to provide

something of value that the Government needs and receives as a benefit, and

either an authorized CO knew or should have known about it . . . or the nonauthorized Government official who entered the agreement was a senior or high

level official . . . then the Government is liable to compensate the contractor.

In the instant case, the facts largely fit within the parameters of Janowsky, in that GSA

clearly allowed USFK to continue using the HNA licenses, thereby taking the benefit at no

cost. Clearly, GSA knew by early 2006, and certainly by May 2006, that USFK was using

licenses that had not been properly procured. Janowsky makes it clear that the Government

cannot continue to receive the benefits and expect not to pay for them.

The remaining matter is GSA’s contention that even if benefits were received, no one

with either actual or constructive authority knew the benefits were continuing and still being

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14

received. That position ignores the overwhelming evidence that although Mr. Smithey was

a non-participant, he clearly ceded his role to Ms. Bigger. The fact that he did not expressly

delegate contracting authority to her does not here relieve GSA from liability. Someone at

GSA had to be involved in the discovery of the mistaken payment, the arrangement for

recoupment, and the return of the money. We know it was not Mr. Smithey, and lacking

evidence from GSA otherwise, we conclude it had to have been Ms. Bigger. Whatever Ms.

Bigger knew or should have known is imputed to Mr. Smithey. Otherwise the Government

would experience an undeserved windfall.

We make one final point. GSA discovered the error in payment by early 2006, when

most of the five-year license term remained and with many licenses having almost four years

left to run. There was no reason why GSA could not have stopped using the services. Unlike

a road that has been paved too wide, where there is no practical way to undo the extra work,

the services here were divisible and GSA and USFK did not have to leave the licenses in

place. GSA could have stopped the use or deactivated the licenses. That of course would

have resulted in USFK not having the license for the remaining years. If USFK still wanted

the use of the licenses, it could have paid for them. The fact that the initial payment may have

been made in error, and the fact there was no authorized contract, does not give the

Government the right to continue to use the licenses for free. AGS is entitled to be paid for

the forty-nine licenses identified by ISS in invoices. In deciding as we do, we base the right

to compensation on GSA/USFK’s continuing use of the licenses.

As to the first-year frequency charges, we allow some, but not full recovery. At the

time GSA discovered or should have discovered the error in early 2006, most of the first-year

frequency charges had been either fully or substantially provided. A number, however, had

not expired and as to those, GSA took no action to stop the usage. Based upon the ISS

compilation and invoices ISS submitted to AGS, we find that in fifteen instances (using April

2005 as a baseline for the start), USFK continued to benefit from the frequency charges past

the date of GSA notice. Appellant is entitled to be paid for those charges that continued, after

GSA notice.

Quantum

Neither party offered significant evidence on the issue of quantum. In determining

quantum, we use the forty-nine HNAs identified by ISS in its invoices. ISS billed AGS at

$7000 per unit and AGS paid ISS that rate. There was no testimony as to whether the $7000

figure would have changed if the duration of a license had been four years rather than five.

We therefore allow quantum based on the invoiced amount of $7000 for each of the forty-nine

HNAs, totaling $343,000, plus interest from the date of the certified claim. We also allow

compensation for fifteen frequency charges at $5000 each, totaling $75,000.

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Other issues

GSA argues that the claim cannot be paid because the task order contained a ceiling

price which AGS was not to exceed and that payment of the sum would have violated that

ceiling price. Appellant offered evidence that at the time of the payment of the invoice that

the ceiling was not exceeded. Further, it appears that the unused money for HNAs from the

November 2003 MIPR was still available until its return, in 2006. Neither party provided

witnesses or evidence at the hearing as to this defense. In this instance, GSA has presented

the matter as a shield, but has not provided supporting evidence to justify the cost ceiling as

a bar to the claim. GSA cannot prevail on that defense.

Decision

Accordingly, we GRANT IN PART the appellant’s claim, as to the five-year HNA

licenses in the amount of $343,000. We also grant the claim as to fifteen of the yearly

frequency charges for $75,000. We DENY the claim as to the remaining first-year frequency

charges. Interest is to run from the date of the certified claim until the date of payment.

________________________________

HOWARD A. POLLACK

Board Judge

We concur:

ALLAN H. GOODMAN

Board Judge

PATRICIA J. SHERIDAN

Board Judge