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Public Contract Law Journal

The Amazon-ization of Federal Procurement : Using the Uniform Commercial Code to Moderate an Inevitable Innovation

by Lauren Olmsted

Lauren Olmsted ([email protected]) is a third-year law student at The George Washington University Law School and the Editor-in-Chief of the Public Contract Law Journal. She would like to thank Hon. Kyle Chadwick for his continued guidance and insight. Most importantly, she would like to thank her loving boyfriend for his unwavering encouragement and patience throughout the writing process.

I. Introduction

The “Amazon effect” is coming to Washington, D.C.1 As Amazon and other e-commerce giants continue to disrupt the retail market, both online and in traditional brick-and-mortar stores, the commercial sector has undergone tremendous rapid technological advancement for nearly two decades.2 For the American consumer, digital marketplaces expand consumer choice, deliver product value, and offer near-instant gratification.3 In the first quarter of 2018 alone, the Census Bureau estimated U.S. retail e-commerce sales to be $123.7 billion.4 Yet despite spending over $50 billion annually5 to procure commercial goods, the government has largely been left sitting on the sidelines.6 With an e-commerce provision included in the recently enacted  National Defense Authorization Act (NDAA) for Fiscal Year 2018 (FY18),7 Congress signaled its readiness to similarly disrupt the federal acquisition regime.

The NDAA FY18, Section 846, Procurement Through Commercial E-Commerce Portals (“Section 846”), directs the  General Services Administration (GSA) in coordination with the Office of Management and Budget (OMB) to establish a federal  procurement program for commercial-off-the-shelf (COTS)  items8 using commercial e-commerce portals.9 Endeavoring to  harmonize federal buying power with commercial innovations  and best practices,10 Section 846 effectively welcomes Amazon  and other e-commerce behemoths with open arms. The  legislation represents a radical transformation from existing yet  outdated procurement policy in multiple ways, but particularly compelling is the mandate that the GSA strive to adopt the  standard terms and conditions of the e-commerce portals in  lieu of traditional government contract provisions. This  initiative belies a congressional desire to move away from  government-unique requirements in search of the proverbial Moby Dick of federal contracting-commercial efficiency. To  succeed, it is critical that the government implement Section  846 intelligently.

Buying commercially is not a novel idea in federal  procurement.11 As the GSA navigates this $50 billion crossroad in acquisition reform,12 it provides a timely opportunity to reexamine the application of the Uniform Commercial Code (UCC) to government contracts. Against the backdrop of Section 846, this Note examines the practicality and pitfalls of eliminating government-unique requirements in favor of  unfamiliar e-commerce provisions. Part II introduces the  concept of COTS acquisitions and discusses the legislative evolution of Section 846. Part III carefully compares the  standard terms and conditions of federal procurement  contracts with those of Amazon and Walmart, arguably the two  most well-known e-commerce platforms. Part IV posits key  challenges likely to arise from these e-commerce terms and the potential impact on federal procurement interests. Finally, Part  V proposes the GSA and the OMB should instead consider the  Uniform Commercial Code (UCC) as a moderated approach to  reforming the COTS acquisition scheme. This Note suggests the  UCC better meets the underlying intent of Section 846 and best  preserves the government’s unique procurement interests.  

II. How Did We Get Here?

The commercialization of the federal procurement marketplace has long been on the horizon.13 The hassles of traditional procurement methods are well-documented, frustrating, with bloated processes that promise longer delivery times and higher costs than those incurred by private businesses  purchasing the same goods.14 In pursuit of commercial  marketplace efficiencies, the federal government transformed  its regulatory structure throughout the latter twentieth  century.15 The following brief discussion of key procurement reforms imparts a useful contextual perspective of how Section  846 came to be and why it represents such a seismic shift in the  federal procurement landscape.

A. History of Commercial Item Acquisition

Major reforms regarding commercial item procurement can be traced to the General Services Administration (GSA) Federal Supply Schedule (FSS) program16 established in 1955.17 The FSS program leverages the government’s vast volume purchasing power to provide a simplified procurement process for commercial items and services.18 The GSA’s creation of the FSS program catapulted government efforts to streamline commercial item acquisition and, by 1994, had generated over $9 billion annually in commercial sales across 7,500 contracts.19 For nearly four decades after implementation, the GSA FFS program remained the primary mechanism for commercial item procurement. Yet, despite the government’s increased spending on commercial items, prospective suppliers remained  cautious of joining the procurement marketplace.20 Burdensome and intrusive laws, combined with onerous terms and conditions, acted as too great a barrier to entry.21

Congress responded to these concerns with passage of the  Federal Acquisition Streamlining Act (FASA) of 1994, a landmark  reform initiative that permitted commercial item  purchases in the open market.22 Prior to FASA, no clearly defined mandate or preference existed for commercial-item  acquisition.23 Congress intended FASA to establish a balance  between government-unique requirements and the growing  need to alleviate the burdensome procurement process faced  by federal contractors.24 The Act established a strong  preference to purchase commercial products “to the maximum  extent practicable,” as opposed to purchasing through the  complex bidding process required for government-unique  items.25

The Federal Acquisition Regulation, Part 12, implemented this  new statutory preference for an approach to commercial item  acquisition. Part 12 offered streamlined procedures for  commercial item 26 purchasing that finally permitted executive  agencies to take advantage of simpler procurement procedures consistent with customary commercial practices, as well as to  rely upon new “standard” terms and conditions that reflected  private business principles.27 FAR Part 12 incorporated free  market principles and provided the impetus for an explosion of  purchases under the GSA FSS, effectively kickstarting an  aggressive commercial revolution in U.S. federal procurement that continued throughout the 1990s and 2000s.28

B. The Legislative Evolution of Section 846

Despite the aggressive commercial revolution of the twentieth  century, the procurement industry continues to grapple with increasing federal regulations that fail to reflect customary commercial practices.29 The legislative evolution of Section 846  reflects this frustration.

House Armed Services Committee Chairman Mac Thornberry introduced the first iteration of the legislation that would become Section 846.30 Named Section 101 of the Defense Acquisition Streamlining and Transparency Act, this legislation required the Department of Defense (DoD) purchase certain COTS goods from commercial online marketplaces.31 Section 101 mandated the DoD enter into contracts with established e-commerce portals to purchase these goods.32 Government-led marketplaces and those existing primarily to serve government procurement needs were prohibited explicitly from qualifying;33 in addition, DoD had discretion to contract with a single marketplace provider without requiring full and open competition.34 Contracts that arose under this mechanism would be subject to the existing standard terms  and conditions of the online marketplace; government-unique  provisions would not be applicable.35

The House of Representatives’ version of NDAA FY18 incorporated this legislation, renaming it Section 801.36 This  version transferred implementation oversight from the DoD into GSA hands, subtly indicating a desire to utilize these portals governmentwide.37 It also required that GSA contract with more than one marketplace provider, thus preserving some form of competitive procurement.38 This version retained the requirement that federal agencies adopt the online marketplace’s standard terms and conditions, but did identify certain federal statutory requirements that would apply to the suppliers of COTS products.39

Following House and Senate NDAA Conference Committee negotiations, the e-commerce provision transformed into Section 846 and presented a number of significant changes.40 Unlike its predecessors, Section 846 no longer provides specific requirements for the selection of online marketplace providers or implementation of the program, instead deferring implementation until further study.41 It directs the GSA to conduct this delayed implementation in three phases: Phase 1 requires the creation of an implementation plan; Phase 2 calls for an analysis and resulting recommendations for changes and/ or exemptions to existing law needed to carry out successful program implementation; and Phase 3 involves the issuance of program guidance.42 Thus this final version of Section 846 reflects a more prudent approach to implementation that is cognizant of core federal procurement principles.

III. Standard Terms and Conditions

Section 846 strongly encourages the federal government’s adherence to the existing standard terms and conditions of the online marketplace for purchases made on the portal.43 To determine whether this is a necessary or practical approach, there must be a comparison between the traditional FAR regulations of COTS contracts and the customary commercial terms used by e-commerce portals.

FAR 52.212-4 prescribes the standard terms and conditions applicable to COTS acquisitions.44 Of the nineteen paragraphs included in the clause, all can be tailored to meet the unique needs of the government with the exclusion of six.45 The analysis below examines key FAR 52.212-4 contract terms in the context of two online marketplaces — Amazon and Walmart — to determine how much consistency exists between the two.

A. Terminations for Cause and Convenience

Termination for cause terms, also known as default terminations, are commonplace in federal contracts.46 Widely considered a drastic remedy,47 the clause grants the contracting officer discretion to terminate a contractor for nonperformance, deficient performance, or failing to adequately assure the government of future performance.48 The defaulting contractor’s deficient performance is excused when the failed performance occurs due to causes beyond the contractor’s control and did not result from the party’s own fault or negligence.49 When the government opts to exercise its contractual right to terminate a contract for cause, the FAR grants all remedies “available to the buyer in the marketplace.”50 Notably, this includes a right to procure the same or similar goods from an alternate source; the clause requires the defaulting contractor to cover the government’s excess reprocurement costs.51

Alternatively, the government possesses the additional right to terminate a contract for its convenience.52 Considered the archetypal government-unique term,53 this clause allows the government to unilaterally terminate the contract, at any time and without cause, thus escaping liability for breach of the contract.54 The termination must be in the government’s best interest;55 however, the broad judicial interpretation of this requirement suggests the only limitations on the government’s right are bad faith and abuse of discretion.56 The termination-for-convenience clause precludes the contractor’s recovery of anticipated profits57 and thus effectively renders little to no benefit to the terminated contractor.

In stark contrast to the government terms, neither the Amazon nor Walmart “Terms and Conditions” explicitly reference contract termination, for cause or for convenience, by either party in the buyer-seller relationship.58 However, a review of various “Help Desk” articles revealed certain mechanisms by which a party can in effect unilaterally terminate an agreement  within limited circumstances. For example, Amazon permits either party to cancel an order before shipment.59 Presumably, sellers cannot terminate an agreement post-shipment.60 Buyers, on the other hand, can, in effect, “terminate” the contract by returning defective or unwanted item(s) for a refund in full or in part.61 Strictly imposed timeframes for product return — typically thirty days from date of receipt — and other conditions limit the efficacy of this remedy.62

B. Disputes Clause

One of the hallmarks of the federal procurement process is the distinctive dispute resolution process, incorporated by reference into commercial item contracts under FAR 52.212-4(d).63 This clause defines the rights and duties of both the government and the contractor when a dispute arises.64 Either party may initiate the disputes process when negotiation over a particular issue fails.65 The contracting officer has authority to make a final decision on the claim, and the contractor has the right to appeal an adverse decision66 to either the agency Board of Contract Appeals or the U.S. Court of  Federal Claims. However, the contractor may not abandon performance while the dispute is pending, except in cases of government breach.67

Existing online marketplaces provide distinctive dispute resolution terms and conditions that necessitate vastly different procedures and far more limiting remedies than those prescribed under FAR 52.212-4(d). For example, both the Amazon68 and Walmart69 terms expressly restrict the buyer to  binding arbitration for all disputes or claims that fail to qualify for small claims court. Amazon, however, recently included a new disclaimer for public sector entities. This new term states in part:

If you are a public sector entity and precluded by law from agreeing to any of the [disputes] provisions . . . as set forth above, then any disputes with you will be governed by the substantive laws of the sovereign under whose laws you were formed and the venue for any such dispute will be the venue required by the laws of such sovereign.70

While this term may benefit the government, it may intimidate marketplace sellers who fear becoming embroiled in litigation involving unfamiliar government contracting laws, regulations,  and processes. Non-negotiable choice of law clauses further  restrain the parties’ rights.71

The e-commerce portal terms also offer little insight into the disputes process between the government and third-party sellers. Amazon offers an “A-to-Z Guarantee” program that permits buyers to file claims with Amazon directly against sellers.72 Successful claims are eligible for refunds of both price and shipping costs, but only up to $2500 of the purchase price.73 Claims must be submitted prior to the established return deadline to be considered valid.74 While this program may be a useful mechanism in some situations, it fails to answer if or how the contracting agency can institute a formal dispute after the return deadline.75 The Walmart terms conspicuously fail to mention any dispute resolution procedures or remedies between the buyer and third-party sellers.76 This suggests that  federal executive agencies would suffer a severe degradation of bargaining power and be subject to non-negotiable dispute terms that provide ambiguous remedies. It is arguable that the  federal acquisition community and U.S. taxpayers would suffer from the opaqueness and lack of uniformity that this scheme imposes.

C. Inspection and Acceptance

FAR 52.212-4(a) describes the government’s rights related to inspection and acceptance of commercial items. This clause entitles the government to demand strict compliance with the contract requirements.77 Thus the government may inspect or test any of the delivered goods prior to acceptance and subsequently “require repair or replacement of nonconforming supplies or reperformance of nonconforming services at no increase in contract price.”78 If the contractor fails or refuses to do so, the government may terminate the entire contract.79 Furthermore, government acceptance of the commercial items is not final and conclusive.80

Amazon and Walmart present considerably ambiguous terms and conditions in comparison to FAR 52.212-4(a). Noticeably, neither company formally defines the terms or outlines parameters for the terms’ applicability.81 Instead, the conditions of these terms must be inferred from the applicable returns policy. For example, Amazon and Walmart provide a default return period of thirty days82 and ninety days83 respectively.  Each policy identifies specific items that are subject to more stringent conditions, such as the issuance of a refund being contingent upon unopened packaging for electronics.84 Thus, the commercial terms reflect an assumption that if a buyer did not return or report an unwanted, incorrect, or defective item within that prescribed timeframe, then the buyer has implicitly accepted that item.85

The Amazon and Walmart terms reflect quintessentially commercial practices for inspection and acceptance in the e-commerce realm. The government’s broad rights under FAR 52.212-4(a), on the other hand, maximize government flexibility in contract management86 to ensure the preservation of the public fisc. The extra constraints imposed by the commercial terms, such as being restricted to inspect and accept within a prescribed return window as opposed to the “reasonable” timeframe available under FAR 52.212-4(a), may subject the government to increased risks when making high-volume procurements of commercial items.

D. Excusable Delay

Appearing in FAR 52.212-4(f), the Excusable Delay provision addresses contractor liability for delayed performance. Based on widely recognized principles, contractor failure to provide timely delivery of goods “establishes a prima facie case of default.”87 The contractor then bears the burden to prove that the untimely delivery should be validly excused.88 Under this clause, nonperformance is excusable only if “caused by an occurrence beyond the reasonable control of the [c]ontractor  and without its fault or negligence. . . .”89 Significantly, a contractor who acts as a wholesaler is responsible for any unexcused failures by its suppliers.90

Of the e-commerce portals, Amazon offers language that closely aligns with that of FAR 52.212-4(f),91 while Walmart does not  address late delivery92 at all. In addition to its standard delays provision, Amazon includes a subset of terms and conditions for its “Guaranteed Delivery” program. This program, a component of Amazon’s Prime delivery scheme, guarantees certain delivery dates and speeds for applicable products.93 Amazon will provide a refund on shipping fees if it fails to fulfill the guaranteed delivery.94 Certain requirements must be met for a buyer to take advantage of this remedy; notably, Amazon asserts that “[t]he guarantee does not apply if we miss our promised delivery date because of an unforeseen circumstance outside of our control, such as a strike, natural disaster, or severe winter storm.”95 This language closely parallels that of FAR 52.212-4(f), except for Amazon’s requirement that the circumstances be unforeseen.

Excusable delays are unlikely to present significant challenges to federal agencies in the context of COTS purchases via e-commerce portals. Most likely, the government buyer will simply terminate the contract upon notice of the delay and reprocure from another contractor-seller. However, the lack of uniformity amongst portals is concerning nonetheless.

IV. Areas of Conflict and Why There Is Cause for Concern

Although the federal policy governing commercial item acquisition critically requires modernization, the above assessment plainly evidences discrepancies between traditional government contracts and commercial marketplace terms and conditions. Before a full embrace of e-commerce terms and conditions, the GSA and OMB must consider the following challenges and implications that may arise.

A. Reduction of Federal Bargaining Power

Executive agencies will likely incur a noticeable reduction in bargaining power following the adoption of e-commerce terms and conditions. Traditionally, the government’s bargaining power far outweighs that of any contractor because the agency drafts procurement contracts to meet the agency’s own  needs.96 Incorporation of standard FAR rights and remedies  reflects the governmental responsibility to serve the public interest.97 The contractor possesses little power to negotiate and must accept this unequal bargaining power as a condition of doing business with the government. A transition to the use of e-commerce terms and conditions will noticeably shift the balance of power towards the e-commerce portal owner, such as Amazon or Walmart.

B. Lack of Uniformity Among E-Commerce Portals

The variance in the terms and conditions of e-commerce portals threatens a lack of uniformity in the rights and remedies available to the government and contractors. Congress did not address the issue of marketplace inconsistency in drafting Section 846.98 With no overarching guidance, it is difficult to identify standard or customary e-commerce practices, and it is possible that starkly different terms may exist across portals. While this may promote competition and encourage innovation among portal owners, it is an undesirable reality for the government buyer who must now consider dispute and acceptance procedures, for example, in addition to price and value.

This scenario raises additional concerns when one considers that rank-and-file government buyers, often untrained in making legal assessments between various rights and remedies available, will be eligible to purchase COTS items from these portals. Rather than focusing on cost and value comparisons between like products on the portals, these employees also will have to discern the potential impact of each portal’s provisions relating to buyer rights and remedies. Ultimately, this is a radical departure from the traditional FAR clauses, which attempt to impose some tendrils of consistency across government contracts of like items. It makes little sense to encumber employees when the underlying policy goals of Section 846 include procurement efficiency and mitigation of bloated,  burdensome processes.

C. Looming Death of Federal Dispute Procedures?

The adoption of e-commerce portal terms and conditions risks upending the long-established contract disputes process. The FAR dispute procedures involve timelines, procedures, and available remedies that are in stark contrast to the secretive arbitration proceedings that often exist as the sole remedy in commercial marketplaces.99 The government would face two  critical consequences if forced to operate under such a regime: (1) the government would forfeit contracting officers’ traditional authority over claims arising out of the procurement;100 and (2) in light of an adverse arbitral award, the government would possess no right to appeal in a court of law.101 Given the inherent secrecy of arbitral proceedings, the government also will lack any useful precedent upon which it can rely.

Currently, the FAR mandates that disputes arising under COTS acquisitions are subject to the Contract Disputes Act.102 Unless and until this is modified, the GSA and the potential e-commerce portal awardees cannot contract out of this requirement. While this certainly helps with the choice of forum concern, it does little to assuage fears held by contracting officers, the boards of contract appeals, and the court — which must now potentially render dispute-related decisions based on unfamiliar and untested e-commerce terms.

V. Using the Uniform Commercial Code to Chart the Way Forward

Accomplishing Section 846’s mandate to incorporate more commercial terms and conditions will be no easy feat.  Significant disparities between existing FAR COTS regulations and the e-commerce provisions make reconciliation difficult. As one notable scholar points out, “Many of these differences derive from significant governmental policies and cannot easily be jettisoned simply to promote commercial behavior.”103 To successfully move forward with Section 846, the GSA and the OMB should find a middle-ground approach that innovates the COTS procurement scheme while recognizing the government can never be a typical consumer.

The Uniform Commercial Code can provide such a moderated approach. This author posits that the select incorporation of UCC provisions, in full or in part, into the forthcoming Section 846 e-commerce portal contracts will reduce government-specific regulation and further embrace commerciality, yet maintain adequate power in the hands of the sovereign.

A. The UCC Generally

Article 2 of the Uniform Commercial Code is a comprehensive set of model laws that governs the commercial sale of goods.104 Adopted in all but one U.S. jurisdiction,105 the Code seeks to simplify, modernize, and harmonize commercial law across jurisdictions to facilitate the free flow of commerce.106 In terms  of underlying principles, Article 2 is the ideological distant cousin of FAR Part 12. Grounded in party-neutral contracting presumptions, the UCC determines the rights and obligations of the contracting parties based on values of fairness and reasonableness, in light of accepted business practices.107 In contrast, the FAR seeks to fulfill specific public policy objectives.108

The Code grants parties flexibility to negotiate the specific terms and conditions of their contracts, with little in the way of  mandatory requirements.109 UCC § 2-301 defines outright the core obligations of the contracting parties: the seller’s obligation is to “transfer and deliver [the goods],” while the buyer’s obligation is to “accept and pay in accordance with the contract.”110 The remaining Code provisions provide additional rights and obligations as well as various gap fillers, such as course of performance,111 course of dealing,112 and trade usage.113

B. Overcoming Historical Rejections of the UCC

Historically, the U.S. federal government has rejected incorporating the UCC model terms. The traditional reluctance to apply the UCC stemmed in part from several significant court decisions that emphasized the government’s sovereignty114 and dismissed strict incorporation of state law outright.115

Incident to its rights as a sovereign entity, the government possesses implied authority to enter into contracts.116 These rights allow Congress to prescribe the substantive and procedural policies of federal contracting.117 One court succinctly explained that “it is settled [law] that the federal government may exact, from those with whom it does business, compliance with standards or requirements different from those [prevailing] in the marketplace generally.”118

In 1943, the Supreme Court held in Clearfield Trust Co. v. United States that federal law governs federal procurements.119 The Court emphasized that the decision’s underlying rationale derived from the federal government’s need to have its commercial dealings subject to uniform law.120 As the Court stated, “The application of state law . . . would subject the rights and duties of the United States to exceptional uncertainty.”121 More recently, the drafters of FAR Part 12 considered, but elected not to adopt, the UCC model terms in full.122 This decision reflected an understanding that purely commercial principles could not sufficiently address the unique issues that arise when contracting with the federal government.123 Instead, the government remains beholden to certain government-unique requirements, laws, and regulations.124

However, the wide enactment of the UCC in the modern era125 eliminates the concerns raised by the Court and paves the way for government consideration once again. Generally, when the United States is acting as a contracting party, and no federal statute or policy commands otherwise, the boards of contract appeals and the courts will impose the standard commercial law that governs private contracting parties, particularly the UCC, against the government.126 Although application of the Code is inconsistent amongst the forums,127 it continues to be frequently relied upon to interpret the rights and obligations of parties under a government contract.128

C. UCC Advantages for Online COTS Acquisitions

The UCC, as an attempt to integrate the best practices of commercial law, manifests several advantages over both the FAR Part 12 regulations and prevailing e-commerce terms. Of particular significance is the UCC’s potential ability to stabilize the bargaining power of the involved parties, establish uniformity amongst the various online commercial marketplace terms and conditions, and support the existing government contracts dispute framework.

1. Stabilizing Bargaining Power

Congress’s proposed adoption of prevailing e-commerce terms and conditions threatens to destabilize the government’s bargaining power as it relates to COTS procurements. Under a typical government contract, federal agencies possess superior bargaining power.129 Through the FAR and other regulations, the government dictates nearly all aspects of federal procurement agreements130 to protect the public funds used to pay for these expenditures. The broad adoption of the standard commercial marketplace terms and conditions will swing the pendulum of bargaining power into the portal’s control. The UCC can rebalance this inequity.

The UCC Article 2’s “definition of freedom of contract rests upon the assumptions . . . that parties possess relatively equal bargaining power, knowledge, and skill and that enforcement of bargains as made will maximize utilities and promote efficiency in the marketplace.”131 The UCC provisions adopt a party-neutral stance132 based on commercial fairness. In the context of Section 846, the use of certain UCC provisions, such as the bilateral termination for convenience, will help restore the relative bargaining positions of the parties and avoid  unjustifiable advantages. While the government will lose bargaining power in any shift towards the adoption of more commercial practices and terms, including under the UCC, it remains more advantageous than the alternative.

The issue of unequal bargaining power extends to the third-party seller and e-commerce portal owner relationship. For example, “small businesses have also claimed that they lack  equal bargaining power, knowledge, and sophistication in transactions with powerful merchants and are in need of protection.”133 Online marketplaces control the entry conditions for third-party sellers, who have no power to negotiate those terms or resulting duties and obligations.134 As a result, new contractors, already cautious of embarking into a contracting relationship with the government, may be further disinclined to participate in this initiative. The incorporation of particular UCC provisions can safeguard third-party sellers from  unconscionable terms and subtly encourage marketplace competition while doing so.

2. Establishing Uniformity Across E-Commerce Portals and Contracts

Clear inconsistencies exist amongst the various terms and conditions of commercial online marketplaces.135 Contracting under such terms all but guarantees the inconsistency in outcomes and remedies that the Supreme Court disavowed seventy-five years ago.136 The UCC can impart greater certainty and comprehensiveness into the standard terms and conditions of the forthcoming Section 846 contracts to the benefit of all contracting parties.

Like the FAR,137 the UCC endeavored to introduce much-needed uniformity and coordination into a vastly disparate area of commercial law.138 The resulting provisions are consistent yet flexible and foster a stronger sense of commercial stability.139 Enabling federal agencies, contractors, and the boards of contract appeals and the courts to confront issues “from the same common conceptual perspective with the same set of rules is a vast improvement over the situation that would prevail if there were . . . disparate sets of [presumptions, rights, and remedies across the participating online marketplaces].”140 Limiting erroneous variations across the terms and conditions will generate greater efficiency and cost reductions in the procurement process.141 Furthermore, standardizing and streamlining contract performance and enforcement promotes commerce,142 which has the potential to attract more contractor participants and subsequently foster competition on the portals.

3. Supporting the Government Contracts Dispute Resolution Framework

The potential integration of customary e-commerce terms with the dispute resolution framework for government contracts established under the Contract Disputes Act is perhaps the most nebulous and concerning component of Section 846. Congress provided no guidance in this regard,143 leaving all parties involved — from the procuring agency and contractor to the boards and the courts — to seemingly interpret for themselves how these commercial terms apply. The UCC provisions should be adopted, where appropriate, to provide consistency and precedential support to the resolution of contractual issues.

The government and the contractor, as the parties involved in the dispute arising out of the contract, are most at risk from the application of unfamiliar contracting provisions. The UCC, however, as the predominant source of uniform commercial law for seventy-five years, vastly benefits the contracting parties who can litigate based on the familiar, well-known principles of the Code,144 rather than the ill-defined and untested terms devised by e-commerce portal owners. By infusing more certainty into the disputes process and enabling the contracting parties to better anticipate risk, the UCC offers a substantive advantage over ill-defined e-commerce terms.

The UCC provisions can also ease the burden of the boards of contract appeals and the courts. The Code is familiar to both forums,145 and there is a history of interpreting and applying UCC principles to the resolution of government contracts where no federal law prevailed.146 In addition, the UCC supplies vast precedential support147 to assist the boards and courts with a consistent, yet flexible, application of these commercial terms to COTS contract disputes.

D. Application of the Model UCC Provisions

UCC Article 2 represents a middle ground between current government contract COTS clauses and the customary e-commerce portal terms. Considering the Code’s vast offering of benefits just discussed, the GSA and the OMB should first consider the adaptiveness of these commercial provisions to meet the needs of Section 846. Only where the UCC does not offer an appropriate provision should the GSA look to adopting the e-commerce portal terms and conditions. Presented below is a brief application of UCC provisions to demonstrate where specific terms may be well-suited for inclusion in Section 846.

Unlike in government contracts, the unilateral termination for convenience term is seldom present in Article 2 agreements.148 Courts have rejected the extension of this “near carte-blanche power to terminate” to private parties.149 While the government’s broad termination right may be considered incidental to its sovereign immunity, private parties require a more stringent limitation on the right to terminate to render a contract non-illusory.150 The UCC, however, recognizes bilateral termination for convenience agreements between the parties. For example, UCC § 2-309 provides a bilateral termination right upon reasonable notification for supply contracts of indefinite duration.151 In the context of e-commerce portals, reasonableness can be defined simply — notice given by the terminating party should always be reasonable if delivered prior to the anticipated order shipment date.152 The terminating party  under the UCC may terminate for any reason, so long as the decision is consistent with the principles of good faith and fair dealing.153 In mimicking the UCC’s bilateral convenience termination principle, the GSA can find middle ground that would provide the government with a clearer understanding of when convenience terminations are permissible.154 This bilateral right is consistent with e-commerce terms that permit either party to cancel the sale prior to item shipment.155

The UCC provisions related to inspection and acceptance of goods are scattered throughout Article 2. UCC § 2-513 describes the buyer’s right to inspection of goods. Similar to FAR 52.212-4(a),156 this provision permits the buyer to inspect goods “at any reasonable place and time and in any reasonable manner” prior to payment or acceptance.157 It is irrelevant that  e-commerce transactions require payment prior to delivery and inspection; as one court noted:

An agreement between the parties that payment by the buyer is a condition to receipt of the goods, merely reflects the common commercial practice that payment and delivery are concurrent conditions, and it is not an adequate expression of a buyer’s intent to waive his or her right to inspect the goods prior to payment.158

If the buyer rejects nonconforming goods, the buyer may recover inspection costs from the seller.159

Another UCC provision permits the buyer to accept the nonconforming goods in whole or in part.160 Notably, the UCC defines the implicit and explicit buyer actions that constitute acceptance of the goods.161 It also establishes the buyer’s right to revoke acceptance of the goods where the buyer discovers a defect post-inspection and acceptance, provided the buyer promptly notifies the seller upon defect discovery.162 These provisions will be useful in bridging the gap between the FAR’s definition of acceptance163 and the inferred acceptance that predominates e-commerce164 terms and conditions.

While these provisions may be strong candidates for inclusion in Section 846 contracts, other UCC provisions should be excluded. For example, UCC § 2-508 grants the seller an opportunity to cure non-conforming goods rejected by the buyer in specific circumstances, such as if the seller reasonably believed the tendered goods were acceptable under the contract terms.165 If the seller expends more time to cure the improper tender than the government would have spent to procure elsewhere, such a requirement could inhibit the policy aspirations that drove Section 846 enactment: expeditious and efficient COTS procurement. In addition, the nature of typical e-commerce transactions — which permits termination for nonconformance or because the buyer simply changed her mind — hardly implicates the underlying intent of UCC § 2-508 to protect sellers “against surprise as a result of sudden technicality on the buyer’s part.”166

As another example, UCC § 2-711 grants the buyer a voluntary choice to cover if the seller fails to deliver or repudiates the contract or if the buyer rightfully rejects any goods.167 The concept of cover is absent from the e-commerce scheme,168 and it threatens to intimidate potential contractors from participating on the portals, thus diminishing competition. This is a circumstance where the GSA and the OMB should then consider the correlating e-commerce term for use in the Section 846 contracts.

VI. Conclusion

Section 846, Procurement Through Commercial E-Commerce Portals, stands to be more than an experimental online buying initiative. It has vast potential to catalyze a paradigmatic shift in commercial item acquisition, resulting in much-needed innovative procurement processes and technology. Yet to avoid stumbling in its rush to embrace the ‘Amazon’ effect, the GSA and OMB must first find the appropriate balance between expected market freedom and existing federal regulations and requirements. The UCC can contribute meaningfully to the solution.

The UCC is uniquely suited to provide a moderated approach to the government’s pursuit of more commerciality in its acquisition processes and policies. Careful appropriation of specific UCC language into the forthcoming Section 846 marketplace terms and conditions may yield a greater balance of bargaining power,169 improved uniformity across portal  terms and conditions,170 and a clearer and more consistent disputes process.171 Additional advantages include improved contracting efficiency and increased competition stemming from greater contractor participation.

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  1. The “Amazon effect” is described as the e-commerce retailer’s dramatic impact and evolution of the commercial online retail marketplace, resulting in the rapid disruption of the traditional brick-and-mortar regime. See Lin Grosman, What the Amazon Effect Means for Retailers, Forbes (Feb. 22, 2018), https://www.forbes.com/sites/forbescommunicationscouncil/2018/02/22/what-the-amazon-effect-means-for-retailers/#76efefe82ded.
  2. Id.
  3. See generally id.
  4. The U.S. Census Bureau adjusted this estimate for seasonal variation. Quarterly Retail E-Commerce Sales: 1st Quarter 2018, U.S. Census Bureau News (May 17, 2018), https://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf.
  5. The GSA estimates the annual government-wide demand for commercial products is at least $50 billion. Procurement Through Commercial E-Commerce Portals, 82 Fed. Reg. 59619, 59619 (Dec. 15, 2017).
  6. See infra Part 2.
  7. The NDAA FY18 authorizes $634.2 billion in DoD funding and includes over seventy-five acquisition-related provisions. National Defense Authorization Act of 2018, Pub. L. No. 115-91, 131 Stat. 1283 (2017).
  8. COTS goods are a subset of commercial items, defined as “any item of supply (including construction material) that is . . . (i) [a] commercial item; (ii) [s]old in substantial quantities in the commercial marketplace; and (iii) [o]ffered to the [g]overnment, under a contract or subcontract at any tier, without modification, in the same form in which it is sold in the commercial marketplace.” FAR 2.101. Standard office supplies such as staplers and desk chairs are prime examples of COTS items.
  9. Pub. L. No. 115-91, § 846 (2017). Industry insiders dubbed Section 846 the “Amazon amendment” given the overwhelming likelihood that the GSA will award a contract to Amazon. See David Dayen, The “Amazon Amendment” Would Effectively Hand Government Purchasing Power Over to Amazon, Intercept (Nov. 2, 2017), https://theintercept.com/2017/11/02/amazon-amendment-online-marketplaces; see also Ali Breland, Monopoly Critics Decry ‘Amazon Amendment,’ The Hill (Nov. 9, 2017), http://thehill.com/policy/cybersecurity/359514-monopoly-critics-decry-amazon-amendment.
  10. U.S. Gen. Servs. Admin., Procurement Through Commercial E-Commerce Portals: Implementation Plan 3 (2018).
  11. See infra Sections II.A.
  12. Procurement Through Commercial E-Commerce Portals, 82 Fed. Reg. 59619, 59619 (Dec. 15, 2017).
  13. See, e.g., Comm’n on Gov’t Procurement, Report of the Commission on Government Procurement, Part D: Acquisition of Commercial Products 1–2 (1972); see also Section 809 Panel, 1 Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 38 (2018).
  14. Since the 1970s, various commissions encouraged increased use of the commercial marketplace, see id., and of commercial buying practices to improve efficiency and yield potential cost savings. See President’s Blue Ribbon Comm’n on Defense Mgmt., Final Report: A Quest for Excellence 81–83 (1986); see also Dep’t of Defense Acquisition Law Advisory Panel, Streamlining Defense Acquisition Laws (1993). For a recent report, see Section 809 Panel, 1 Report of the Advisory Panel on Streamlining and Codifying Acquisition Regulations 283 (2018).
  15. See, e.g., 60 Fed. Reg. 48206 (Sept. 18, 1995).
  16. See FAR 8.402; see also 7 U.S. Gen. Servs. Admin., Multiple Award Schedules (MAS) Program Desk Reference 16 (2017).
  17. See Jean Marceau Lohier & Ronald Falcone, The Formation, Evolution & Devolution of Commercial Items Acquisition in the U.S. Federal Government, Part 1 of 3: A History of Federal Acquisition Reform Involving Commercial Items, Contract Management 14 (May 2015).
  18. FAR 8.402(a); see also Office of Inspector General, U.S. General Services Administration, Procurement Reform and the Multiple Award Schedule Program 9 (2000).
  19. Procurement Reform and the Multiple Award Schedule Program, supra note 18, at 9.
  20. See H.R. Rep. No. 103-545, pt. 2, at 104 (1994) (“Companies have found it difficult to sell commercial products to the Federal Government because of the complex web of procurement requirements, e.g., requirements for cost data and other financial information, audit rights, government-unique terms and conditions, and unlimited Government rights to technical and proprietary data. Such practices are uncommon, if nonexistent, in the private sector.”).
  21. Id.
  22. Federal Acquisition Streamlining Act of 1994, Pub. L. No. 103-355, 108 Stat. 3243 (codified in scattered sections of 10 U.S.C. and 41 U.S.C.).
  23. This lack of policy contributed to a decade of public outcry for commercial procurement reform. During the 1980s, national media reported several procurement “scandals” that allegedly exposed the use of taxpayer dollars for ludicrously overpriced commercial goods. In reality, the steep prices resulted from adapting the products to meet specific government-unique requirements. Nonetheless, the highly negative public exposure prompted lawmakers to address the growing need for further regulation of commercial item procurement. See, e.g., Steven V. Roberts, Congress; The Provocative Saga of the $400 Hammer, N.Y. Times (June 13, 1984), http://www.nytimes.com/1984/06/13/us/congress-the-provacative-saga-of-the-400-hammer.html; Charles Mohr, Lists Show Price Problems Persist in Military Parts, N.Y. Times (Sept. 12, 1984), http://www.nytimes.com/1984/09/12/us/lists-show-price-problems-persist-in-military-parts.html; Jack Smith, $37 Screws, a $7,622 Coffee Maker, $640 Toilet Seats; Suppliers to Our Military Just Won’t Be Oversold, L.A. Times (July 30, 1986), http://articles.latimes.com/1986-07-30/news/vw-18804_1_nut.
  24. S. Rep. No. 103-258, at 1–2 (1994), as reprinted in 1994 U.S.C.C.A.N. 2561, 2562 (“[FASA] would revise and streamline the acquisition laws of the Federal government in order to . . . facilitate the acquisition of commercial products, enhance the use of simplified procedures for small purchases, clarify protest procedures, eliminate unnecessary statutory impediments to efficient and expeditious acquisition, achieve uniformity in the acquisition practices of federal agencies, and increase the efficiency and effectiveness of the laws governing the manner in which the government obtains goods and services.”).
  25. To further encourage private sector participation, FASA broadly defined commercial items and exempted the acquisitions from certain statutory requirements, such as the cost accounting standards. See Pub. L. No. 103-355, 108 Stat. 3243 (1994).
  26. See FAR 12.000.
  27. FAR 12.301(a) provides: “In accordance with [Section 8002 of the FASA] . . . , contracts for the acquisition of commercial items shall, to the maximum extent practicable, include only those clauses—(1) Required to implement provisions of law or executive orders applicable to the acquisition of commercial items; or (2) Determined to be consistent with customary commercial practice.” Id.
  28. Lohier & Falcone, supra note 17.
  29. Id.
  30. Defense Acquisition Streamlining and Transparency Act, H.R. 2511, 115th Cong. § 101 (2017).
  31. Id.
  32. Id. § 101(b)(1).
  33. Id. § 101(i)(1).
  34. Id. § 101(a).
  35. Id. § 101(e).
  36. National Defense Authorization Act for Fiscal Year 2018, H.R. 2810, 115th Cong. § 801 (2017).
  37. Id.
  38. Id.
  39. These statutory requirements included suspension and debarment provisions, certain provisions of the Berry Amendment, and Ability One. See id.
  40. H.R. Rep. No. 115-404, at 489 (2017) (Conf. Rep.).
  41. Id.
  42. Id. at 490–91.
  43. Section 846 provides that “[a] procurement of a product through a commercial e-commerce portal used under the program . . . shall be made, to the maximum extent practicable, under the standard terms and conditions of the portal relating to purchasing on the portal.” National Defense Authorization Act for Fiscal Year 2018, Pub. L. No. 115-91, § 846(g), 131 Stat. 1283 (2017).
  44. FAR 52.212-4.
  45. Per FAR 12.302(b), the following six paragraphs cannot be tailored: (1) Assignments; (2) Disputes; (3) Payment; (4) Invoice; (5) Other compliances; and (6) Compliance with laws unique to Government contracts.
  46. The “Termination for Default” clause applies to all federal acquisitions, whether or not expressly incorporated into the contract terms. See John Cibinic, Jr. et al., Administration of Government Contracts 791 (5th ed. 2016).
  47. Id.
  48. See FAR 52.212-4(m). Per FAR 49.402-3(f), the contracting officer should consider seven factors to determine if a default termination is appropriate: (1) the contract terms and applicable laws and regulations; (2) the contractor’s specific failure and excuses for the failure; (3) the availability of the supplies from alternate sources; (4) the urgency of the need and the time required to acquire the supplies from alternate sources, compared to when delivery could be made by the contractor; (5) the degree of essentiality of the contractor and the effect of a default termination upon the contractor’s capability as a supplier under other contracts; (6) the effect of a default termination on the contractor’s ability to liquidate guaranteed loans, progress payments, or advance payments; and (7) other pertinent facts and circumstances.
  49. FAR 52.212-4(m).
  50. FAR 12.403(c)(2). Regardless of the remedy or remedies the government exercises, the defaulting contractor is strictly limited to recovering compensation for fully completed goods accepted by the government. FAR 52.249-8.
  51. FAR 12.403(c)(2).
  52. FAR 52.212-4(l).
  53. See Cibinic, supra note 46, at 941 (“In no other area of contract law has one party been given such complete authority to escape from contractual obligations.”).
  54. The Termination for the Government’s Convenience clause for commercial item contracts states that “[t]he [g]overnment reserves the right to terminate this contract, or any part hereof, for its sole convenience.” FAR 52.212-4(l).
  55. FAR 12.403(b).
  56. See Krygoski Constr. Co. v. United States, 94 F.3d 1537 (Fed. Cir. 1996); Torncello v. United States, 681 F.2d 756 (Ct. Cl. 1982); Kalvar Corp. v. United States, 543 F.2d 1298 (Ct. Cl. 1976).
  57. FAR 12.403(d).
  58. See Amazon Business Accounts Terms & Conditions, Amazon.com, https://www.amazon.com/gp/help/customer/display.html?nodeId=202025510 (last updated June 22, 2018); Walmart.com Terms of Use, Walmart.com, https://help.walmart.com/app/answers/detail/a_id/8#19 (last updated Nov. 28, 2017).
  59. For buyer cancellations, see Amazon Cancel Items or Orders, Amazon.com, https://www.amazon.com/gp/help/customer/display.html/ref=help_search_1-9?ie=UTF8&nodeId=201976060&qid=1523250607&sr=1-9 (last visited Apr. 9, 2018). For seller cancellations, see Amazon Seller Returns, Refunds, Cancellations & Claims, Amazon.com, https://sellercentral.amazon.com/gp/help/external/help.html?itemID=200198080&language=en-US&ref=efph_200198080_cont_69126 (last visited Apr. 9, 2018).
  60. This is inferred from the lack of marketplace policy or system discussing such terminations.
  61. See Amazon About Our Return Policies, Amazon.com, https://www.amazon.com/gp/help/customer/display.html?nodeId=15015721 (last visited Apr. 9, 2018).
  62. Id.
  63. The Contract Disputes Act of 1978 codified the disputes process and is applicable to all disputes arising under or relating to a government contract. See Cibinic, supra note 46, at 1132.
  64. FAR 52.233-1.
  65. The contractor’s main remedy against the government is its right to institute a formal “Disputes” claim under this provision. FAR 52.233-1(g).
  66. FAR 52.233-1(f).
  67. FAR 52.212-4(d) (“The Contractor shall proceed diligently with performance of this contract, pending final resolution of any dispute arising under the contract.”).
  68. Conditions of Use, Amazon.com, https://www.amazon.com/gp/help/customer/display.html/ref=ap_footer_condition_of_use?ie=UTF8&nodeId=508088 (last updated May 21, 2018).
  69. Walmart.com Terms of Use, supra note 58.
  70. Amazon Business Account Terms & Conditions, supra note 58. Amazon added this term on June 22, 2018. The timing of this inclusion hints at Amazon’s intent to maximize its suitability to receive one of the e-commerce portal contract awards.
  71. See, e.g., id. (imposing a choice of law clause limiting arbitration to the laws of the United States and California).
  72. About A-to-Z Guarantee, Amazon.com, https://www.amazon.com/gp/help/customer/display.html/ref=help_search_11?ie=UTF8&nodeId=201889410&qid=1523393831&sr=1-1 (last visited Apr. 9, 2018).
  73. Id.
  74. A-to-Z Claim Conditions, Amazon.com, https://www.amazon.com/gp/help/customer/display.html?nodeId=541260 (last visited Apr. 9, 2018).
  75. For example, when the government discovers defects in a shipment of goods the day after the return deadline passes, it is unclear whether the e-commerce terms and conditions provide the government with a mechanism to revoke its implied acceptance of the goods and obtain a refund or correction.
  76. See Walmart.com Terms of Use, supra note 58.
  77. FAR 52.212-4(a).
  78. In general, the government may test a subset of the tendered goods to ensure conformity with the contract specifications. The government is liable for the costs of testing unless the goods are non-conforming; in that case, the contractor is responsible for the tests’ costs as well as replacement under the contract. Id.
  79. Id.
  80. If the government discovers a defect post-acceptance, it may revoke its acceptance and demand repair, replacement, or reperformance from the contractor. This remedy is available only if the government exercises its right within a reasonable time post-discovery of the defect or before the item condition changes substantially. See FAR 52.212-4(a)(1)–(2).
  81. See Amazon Business Accounts Terms & Conditions, supra note 58.
  82. See About Refunds, Amazon.com, https://www.amazon.com/gp/help/customer/display.html?nodeId=201819300 (last visited Apr. 9, 2018).
  83. See Return Policy, Walmart.com, https://help.walmart.com/app/answers/detail/a_id/9 (last visited Apr. 9, 2018).
  84. See, e.g., id.
  85. Id.
  86. See generally Kathryn Dean Checchi, Federal Procurement and Commercial Procurement Under the U.C.C.—A Comparison, 11 Pub. Cont. L.J. 358, 377 (1980).
  87. See Nuclear Research Corp. v. United States, 814 F.2d 647, 650 (Fed. Cir. 1987).
  88. See DCX, Inc. v. Perry, 79 F.3d 132, 134 (Fed. Cir. 1996).
  89. FAR 52.212-4(f).
  90. FAR 52.212-4(f) is interpreted as being consistent with the “longstanding common law rule that contractors generally are liable for the unexcused actions of their subcontractors.” General Injectables & Vaccines, Inc. v. Gates, 527 F.3d 1375, 1378 (Fed. Cir. 2007).
  91. Amazon Business Accounts Terms & Conditions, supra note 58. At the time of writing this Note, the Amazon Business Terms and Conditions stated that “[Amazon] will not be liable for any delays in delivery or failure to perform . . . by reasons, events or other matters beyond [Amazon’s] reasonable control.” On June 22, 2018, Amazon updated its Terms and Conditions to remove this disclaimer.
  92. The Walmart Terms and Conditions include a general disclaimer of liability for delays but provide no guidance as to a buyer’s rights. See Walmart.com Terms of Use, supra note 58.
  93. About Delivery Guarantees, Amazon.com, https://www.amazon.com/gp/help/customer/display.html/ref=hp_left_v4_sib?ie=UTF8&nodeId=201910130 (last visited Apr. 9, 2018).
  94. Guaranteed Delivery Terms and Conditions, Amazon.com, https://www.amazon.com/gp/help/customer/display.html/ref=help_search_1-2?ie=UTF8&nodeId=201910260&qid=1523322471&sr=1-2 (last visited Apr. 9, 2018).
  95. Id.
  96. See infra Section V.C.I.
  97. Id.
  98. National Defense Authorization Act for Fiscal Year 2018, Pub. L. No. 115-91, § 846, 131 Stat. 1283 (2017).
  99. See supra Part III.
  100. Under the strictures of the Contracts Dispute Act, the contracting officer has authority to issue a final decision on all contractor claims made against the federal government. 41 U.S.C. § 7103 (2012).
  101. See, e.g., Walmart.com Terms of Use, supra note 58 (stating that use of the Walmart platform constitutes a waiver of the individual right to sue in court and to trial by jury).
  102. See supra note 63.
  103. Steven L. Schooner, Commercial Purchasing: The Chasm Between the United States Government’s Evolving Policy and Practice, in Public Procurement: The Continuing Revolution 137 (2003).
  104. U.C.C. § 2-102 (Am. Law Inst. & Unif. Law Comm’n 2002). The American Law Institute and the National Conference of Commissioners on Uniform State Law first published the UCC in 1952, following ten years of revisions. The UCC is not federal law but instead provides a legal framework for commercial transactions involving the sale of goods. See Ass’n of the Bar of the City of New York, Report on the Proposed Uniform Commercial Code 1–3 (Jan. 20, 1953).
  105. All states and the District of Columbia have adopted Article 2, with the exception of Louisiana. See generally Chadwick L. Williams, Not So Good: The Classification of “Smart Goods” Under UCC Article 2, 34 Ga. St. U. L. Rev. 453, 455 (2018); Schooner, supra note 103, at 144.
  106. U.C.C. § 1-103.
  107. See generally id.; Ass’n of the Bar, supra note 104, at 1–3.
  108. FAR 1.102.
  109. “The obligations of good faith, diligence, reasonableness, and care . . . may not be disclaimed by agreement.” U.C.C. § 1-302(b).
  110. U.C.C. § 2-301.
  111. Course of performance considers the parties’ pattern of conduct in performing the particular contract at hand. U.C.C. § 1-303(a); U.C.C. § 2-208(1).
  112. Course of dealing considers the parties’ pattern of conduct as it relates to previous transactions and establishes a common basis of understanding for interpreting the parties’ conduct. U.C.C. § 1-303(b).
  113. A trade usage is any practice or method of dealing having such regularity of observance in a place, vocation or trade as to justify an expectation that it will be observed in regard to the transaction at hand. U.C.C. § 1-303(c).
  114. See, e.g., United States v. Tingey, 30 U.S. 115, 128 (1831); United States v. Winstar Corp., 518 U.S. 839 (1996).
  115. See Clearfield Trust Co. v. United States, 318 U.S. 363 (1943) (finding the contract arose out of federal activity therefore federal law applies); United States v. Allegheny Cty., 332 U.S. 174 (1944).
  116. See Tingey, 30 U.S. at 128 (holding the United States “may, within the sphere of the constitutional powers confided to it . . . enter into contracts not prohibited by law, and appropriate to the just exercise of those powers”).
  117. See B&G Enterprises, Ltd. v. United States, 220 F.3d 1318, 1323 (Fed. Cir. 2000).
  118. See U.S. Brewers Ass’n, Inc. v. EPA, 600 F.2d 974 (D.C. Cir. 1979).
  119. Clearfield Trust Co. v. United States, 318 U.S. 363 (1943).
  120. See id.
  121. Id.
  122. See generally Schooner, supra note 103.
  123. See, e.g., id.
  124. Id.
  125. See Amazon About Our Return Policies, supra note 61.
  126. See, e.g., Torncello v. United States, 681 F.2d 756, 762 (1982) (“The government contracts as does a private person, under the broad dictates of the common law.”); Government Systems Advisors, Inc. v. United States, 21 Cl. Ct. 400, 407 (1990) (“Whenever the United States casts off its cloak of sovereign immunity to engage in a business-type activity with a business-minded purpose, it must be treated as engaging in commercial activities and comply with the usual and ordinary responsibilities and duties of a private commercial contractor.”).
  127. Compare United States v. Wegematic Corp., 360 F.2d 674 (2d Cir. 1966) (following the U.C.C), with GAF Corp. v. United States, 932 F.2d 947 (Fed. Cir. 1991) (rejecting the creation of rights under the U.C.C. where not explicitly incorporated in the contract).
  128. See Conoco Inc. v. United States, 35 Fed. Cl. 309, 322 (1996) (“Although the federal government’s procurement procedures are carefully governed by statute and regulation, the formation and administration of government contracts are, for the most part, consonant with the principles of common law contracts.”).
  129. Practical Law, Federal Government Contracts Toolkit, Westlaw, https://content.next.westlaw.com (search for “Federal Government Contracts Toolkit”).
  130. Id.
  131. Caroline Edwards, Article 2 of the Uniform Commercial Code and Consumer Protection: The Refusal to Experiment, 78 St. John’s L. Rev. 663, 691 (2004). In addition, the UCC defines the term “agreement” as a “bargain” of the parties in fact. U.C.C. § 1-201(3).
  132. See supra Section V.A.
  133. See Edwards, supra note 131, at 664.
  134. See surpa Part IV.A.
  135. Id.
  136. See supra Section V.B.
  137. “The Federal Acquisition Regulations System is established for the codification and publication of uniform policies and procedures for acquisition by all executive agencies.” FAR 1.101.
  138. See supra Section V.A.
  139. Id.
  140. George A. Hisert, Uniform Commercial Code: Does One Size Fit All?, 28 Loy. L.A. L. Rev. 219, 219 (1994). Contracting parties also will benefit from standardized commercial expectations, improved risk management, and less speculation.
  141. Id. at 226–27.
  142. Id. at 219.
  143. National Defense Authorization Act of 2018, Pub. L. No. 115-91, § 846, 131 Stat. 1283 (2017).
  144. See supra Section V.A.
  145. See supra Section V.B.
  146. See, e.g., Franklin Pavkov Const. Co. v. Roche, 279 F.3d 989 (Fed. Cir. 2002) (relying on the Uniform Commercial Code to provide gap filler terms to determine the parties’ respective obligations regarding Government Furnished Property delivery).
  147. This author acknowledges that UCC precedence varies amongst the jurisdictions that have adopted and adapted the Code to meet state needs. However, this Note maintains that these decisions still provide useful insight into the appropriate interpretation of various provisions to fact-specific scenarios.
  148. See Handi-Van, Inc. v. Broward Cty., 116 So. 3d 530, 539 (Fla. Dist. Ct. App. 2013) (holding that private parties may expressly agree to incorporate unilateral termination for convenience provisions into a contract so long as adequate consideration is provided).
  149. Questar Builders, Inc. v. CB Flooring, LLC, 978 A.2d 651, 669–70 (Md. 2009).
  150. See, e.g., id.
  151. U.C.C. § 2-309(2). Some courts define reasonableness in the context of trade usage and “opportunity for recoupment.” Delta Servs. & Equip., Inc. v. Ryko Mfg. Co., 908 F.2d 7, 11–12 (5th Cir. 1990). In Delta, the issue was not reasonableness but whether an indefinite contract existed at all. Delta, the exclusive distributor of vehicle wash equipment, sought injunctive relief to prevent the manufacturer from terminating the business relationship when Delta failed to meet its sales quota. Delta alleged the contract was not of indefinite duration, thus not terminable at will. The court emphasized that “[t]he fact that the contract state[d] limited grounds for immediate termination, does not transform it to one of definite duration” Id. at 11–12.
  152. Notice could be as informal as the buyer or seller clicking a “cancel order” button on the portal, which triggers delivery of an automated termination notice to the other party.
  153. Harris Corp. v. Giesting & Assocs., Inc. 297 F.3d 1270, 1272–73 (11th Cir. 2002) (“Termination for convenience clauses may not be used to shield the terminating party from liability for bad faith or fraud.”). This clause is similar to the FAR principle that “[i]n the absence of bad faith or a clear abuse of discretion, the contracting officer’s decision to terminate a contract for the convenience of the government is conclusive.” Krygoski Const. Co. v. United States, 94 F.3d 1537, 1543 (Fed. Cir. 1996) (quoting John Reiner & Co. v. United States, 325 F.2d 438, 442 (Ct. Cl. 1963)). The UCC distinguishes between contract termination and contract cancellation. Contract cancellation stems from one party’s breach; contract termination involves a non-breach event. Contract cancellation does not require reasonable notification. Compare U.C.C. § 2-106, with U.C.C. § 2-309.
  154. Such language might be useful when a government buyer places an indefinite, recurring order with a seller on one of the proposed portals.
  155. See supra Section III.A.
  156. FAR 52.212-4(a) is the “Inspection/Acceptance” clause for commercial item contracts.
  157. U.C.C. § 2-513(1). “‘Reasonableness’ is defined in light of custom of the trade, past practices between the parties and other relevant circumstances.” Checchi, supra note 86, at 365. In relation to e-commerce portals, “reasonableness” could be implicitly understood as inspection upon receipt of delivery, thus granting the government its right to inspect the goods without burdening contractors with the possibility of a pre-shipment inspection.
  158. Liverpool v. Baltimore Diamond Exch., Inc., 369 Md. 304, 331 (2002). Cf. Morgan Buildings and Spas, Inc. v. Dean’s Stoves and Spas, Inc., 58 Conn. App. 560 (Conn. App. Ct. 2000) (“[A] seller must establish acceptance by the buyer of goods sold and delivered, as well as the failure of the buyer to fulfill his payment obligation.”).
  159. U.C.C. § 2-513(2).
  160. U.C.C. § 2-601.
  161. “Acceptance of goods occurs when the buyer (a) after a reasonable opportunity to inspect the goods signifies to the seller that the goods are conforming or that he will take or retain them in spite of their non-conformity; or (b) fails to make an effective rejection . . . but such acceptance does not occur until the buyer has had a reasonable opportunity to inspect them; or (c) does any act inconsistent with the seller’s ownership; but if such act is wrongful as against the seller it is an acceptance only if ratified by him.” U.C.C. § 2-606(1).
  162. U.C.C. § 2-607(2)–(3). A buyer, after discovering or should have discovering the nonconformity, must revoke acceptance within a reasonable period. B.P. Dev. & Mgmt. Corp. v. P. Lafer Enters., Inc., 538 So.2d 1379 (Fla. 5th DCA 1989) (finding the buyer of Christmas tree decorations failed to revoke acceptance within a reasonable period when the buyer attempted to rescind the contract six months after discovering defects in the goods).
  163. See supra Section III.B.
  164. Id.
  165. U.C.C. § 2-508(1)–(2). In T.W. Oil, Inc. v. Consolidated Edison Co., 57 N.Y.2d 574 (1982), the court addressed whether U.C.C. § 2-508 requires the buyer to consider the seller’s attempt to cure a defective tender. After the buyer rejected oil cargo for nonconformance and refused the seller’s offer to cure, the seller sought to recover damages incurred. The court determined that a valid offer to cure under § 2-508(2) must meet objective criteria to trigger the seller’s statutory right: “(1) a buyer must have rejected a nonconforming tender, (2) the seller must have had reasonable grounds to believe that this tender would be acceptable . . . , and (3) the seller must have “seasonably notified” the buyer of the intention to substitute a conforming tender within a reasonable time.” Id. at 583. Finding all criteria met, the court held the buyer deprived the seller of its right to cure within a reasonable time. Id. at 584; see also Allied Semi-Conductors Intl. v. Pulsar Components Int’l, 907 F. Supp. 618, 625 (E.D.N.Y. 1995) (rejecting seller-plaintiff’s argument that “an offer to make conforming goods available, without more, preserves the seller’s rights under U.C.C. § 2-508”).
  166. U.C.C. § 2-106, cmt. 2.
  167. U.C.C. § 2-711(1).
  168. The buyer may be entitled to a refund or item replacement, but there is no right to cover for the reprocurement of goods via these portals. See supra Section III.A.
  169. See supra Section V.C.I.
  170. See supra Section V.C.II.
  171. See supra Section V.C.III.