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Public Contract Law Journal

Public Contract Law Journal Vol. 50, No. 4

Speed or Safety: Clarifying the Value Judgments of Risk Aversion Versus Commercial Contracting at the Federal Circuit

Sarah Barney


  • Following the Federal Circuit’s decisions in Palantir and K-Con, Congress must establish safeguards to balance the values of protecting the government from liability with the prioritization of efficiency and inclusiveness through commercial contracting.
  • The Christian doctrine, derived from the 1963 United States Court of Claims case G.L. Christian & Associates v. United States, prioritizes conservative contracting through risk aversion but may be incompatible with modern procurement practices.
  • Congress should add Federal Acquisition Regulation (FAR) language that clarifies a contract designation for the purposes of litigation and create a panel to help outline guidance for agencies.
Speed or Safety: Clarifying the Value Judgments of Risk Aversion Versus Commercial Contracting at the Federal Circuit
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In 2018, the United States Court of Appeals for the Federal Circuit heard Palantir USG, Inc. v. United States and K-Con, Inc. v. Secretary of the Army, two cases which gave differing perspectives on the dominant values of the procurement system. In Palantir, the Federal Circuit held the Army responsible to the commercial contracting preferences set forth in the Federal Acquisition Streamlining Act, promulgating a view of a U.S. procurement system that should prioritize a more efficient, simplified acquisition. This view is not in line with the Court’s ruling in K-Con, which defends the government’s responsibilities as a sovereign ruler and the value of risk-aversion by using the Christian doctrine to read in a bond clause to a previously commercial contract. Given the ideological tension between these two opinions, Congress must set forth regulatory clarifications about how contracts will be treated for the purposes of litigation in order to encourage commercial participation by vendors with inexpensive and easily accessible goods. Additionally, Congress should seek guidance on how to better define the expectations of commercial market research to allow the agencies to correctly justify their decisions to opt for developmental contracts.

I. Introduction

Maintaining the federal procurement system requires a continual balancing of the U.S. government’s contrasting roles as both a sovereign ruler and a party to contracts with the ethical ideals that accompany those positions. The procurement system developed based on the value of risk-aversion, consequently granting the federal government unique privileges as the ruling body in order to avoid mass liability. However, as the scope of federal procurement grew, so did the system’s complexity, eventually requiring more streamlined procedures in the name of practicality. Congress subsequently promoted efficiency and fiscal responsibility as two of the predominant values of the contracting system through legislation like the Federal Acquisition Streamlining Act of 1994 (FASA). FASA outlined a statutory preference for the procurement of commercial items whenever possible to simplify the acquisition process and constrained the U.S. government’s autonomy to enter into developmental contracts without first exploring commercial options.

This commercialized vision of the procurement system is in tension with antiquated common law practices, such as the Christian doctrine’s inclusion of previously absent clauses into government contracts, that developed to decrease the government’s risk in traditional contracting. Recent decisions of the United States Court of Appeals for the Federal Circuit have indicated an ideological inconsistency in the Court’s attitude toward the dominant values of the procurement system. The Court has protected two separate visions of the U.S. procurement system: one that is rooted in the government’s historical need for protection from contract liability, and another that involves a more efficient, commercial model in the face of expansive federal contracting.

The principles guiding the decisions issued in Palantir USG, Inc. v. United States and K-Con, Inc. v. Secretary of the Army regarding Congress’ vision of the procurement system highlight the need for regulatory clarification. On one hand, K-Con’s treatment of a commercial contract and subsequent use of the Christian doctrine prioritizes the protection of the federal government from cost and performance liability over the ease and efficiency of commercial contracting. On the other hand, the Palantir decision envisions a system that values more effective and inclusive practices through the promotion of commercial acquisition.

In the face of discord regarding the guiding principles of the procurement system, this Note argues that Congress should clarify the expectations of commercial contractors through Federal Acquisition Regulation (FAR) clauses and advisory direction. This guidance would push agencies to contract using methods that ensure maximum risk aversion without compromising the necessary efficiency of commercial contracting. Part I of this Note provides an introduction to the tensions between the competing ideologies of today’s procurement system. Part II tracks the evolution of the federal government’s unique status in the procurement system through practices like the common law Christian doctrine. It then expands on the congressional mandates for commercial contracting that developed as a response to the inefficient and complex procurement system that emerged in the late twentieth century. Part III explores Palantir’s promotion of efficiency and fiscal-responsibility in contracting and K-Con’s prioritization of the federal government as a sovereign ruler who is allowed, and sometimes obligated, to contract based on risk-aversion principles. Part IV then compares the messages the Federal Circuit disseminated through Palantir and K-Con regarding the Court’s opinion on the predominant values of the procurement system and the government’s role in promoting those values. Part V concludes by outlining areas of regulatory clarification necessary to balance the efficiency and competition promoted by Palantir with the risk-aversion seen in K-Con. Such suggestions for clarification include additions to the FAR that increase transparency in commercial contracting and the creation of an official panel to provide recommendations for more effective definitions of market research in federal acquisition.

II. The Development of the Christian Doctrine as a Governmental Risk Aversion Technique and the Rise of Commercial Contracting

A. The Christian Doctrine

From its inception during the Revolutionary War, the U.S. procurement system has sought to protect the government from the risks associated with contracting, utilizing requirements like responsibility criteria for selecting contractors and terminations for convenience. This foundational concern for shielding the federal government from contract liability manifests in the penalties for defrauding the federal government in the original False Claims Act of 1863. As the procurement system developed, the common law continued to champion unique exceptions for executive agencies, such as the Christian doctrine, that ensured the government was protected from monetary or performance losses. The Christian doctrine derives from the 1963 United States Court of Claims case G.L. Christian & Associates v. United States, in which the Department of the Army terminated a housing contract that did not contain any provisions about the government’s right to terminate for convenience. The Court of Claims ultimately found that the termination clause, as a standard provision tied to the obligation of government funds, was automatically incorporated into the housing contract as a matter of law. The Court held that the clause reflected a “deeply ingrained strand of public procurement policy,” namely the historical importance of terminations for convenience in times of war and the necessary responsiveness they provided to the uncertainties of military housing contracts. The Christian doctrine highlights a unique aspect of government contracting—the government is allowed to incorporate binding terms into an agreement that a contractor is not on notice of via the contract itself.

The Christian doctrine carves out a distinctive class of clauses that a court can read into a contract as a matter of law, regardless of their inclusion in the original contract. Broadly, such a clause must be (1) mandatory and (2) represent “a deeply ingrained strand of public procurement policy.” Courts base the analysis of each element on “whether procurement policies are being ‘avoided or evaded,’” not on the conduct of the party omitting a clause or whether the clause’s omission was intentional. The “mandatory” requirement in the first prong of the test presumes that anyone contracting with the government agreed to statutorily required clauses as a result of accepting federally appropriated funds, regardless of if the clause is actually written into the contract. Historically, courts and boards have found clauses “mandatory” where they are prescribed by the Code of Federal Regulations in regard to a government contract. Beyond clauses explicitly required by Congress in statutes and regulations, courts have also upheld clauses are mandatory when they address “major issues” pertaining to cost and pricing data, direct pre-award negotiation procedures, or enforce the implementation of socioeconomic policies like the Buy American Act. Additionally, courts and boards have elevated the importance of a “less fundamental or significant mandatory procurement contract clause[]” when the clause is “not written to benefit or protect the party seeking incorporation.”

After establishing that a clause is “mandatory,” courts then assess whether a clause meets the second prong of the Christian doctrine, determining if the clause expresses a “deeply ingrained strand of public procurement policy.” As in analysis of the first prong, courts have taken cues from Congress as to what constitutes an established value in the procurement community, and incorporated clauses that are required under statutes like the Competition in Contracting Act (CICA). In determining whether a clause that falls outside of congressional directives rises to the requisite level of significance, courts look to the original purpose of the clause on an ad hoc basis, but use indicators like time and subject matter to analyze importance. For example, the Court of Federal Claims (COFC) failed to find that a clause spoke to a deeply ingrained principle when the purported standard had only existed for a short amount of time. Additionally, courts have rejected arguments that clauses protecting public accountability in other fields of governmental action, such as the economy, constitute ingrained procurement policies. In contrast, contested clauses that protect the government from risk of financial loss do protect a value sufficiently ingrained in public policy to merit Christian doctrine applicability.

While the Christian decision introduced a commitment to protecting the federal government from liability in contracting, the doctrine received mixed treatment in the government contracting community. For the decade following the Christian decision, the contract boards read in only one mandatory clause, deciding the rest of the Christian claims brought during that period on other grounds. The Armed Services Board of Contract Appeals (ASBCA) eventually began incorporating clauses in the doctrine’s aftermath. The ASBCA and other boards used the Christian doctrine to incorporate clauses for default determination, post-award protest standards, terminations for convenience, Fair Labor Standards Act and Service Contract Act price adjustments, and use of government property. However, given the seemingly one-sided protection of the Christian Doctrine, it has become a popular target of conversation and critique by the private sector. As the courts and appeals boards began integrating the Christian Doctrine into their analyses of contracting conflicts, the procurement landscape was also facing impending changes with legislation like FASA.

B. FASA and Other Congressional Commercial Contracting Measures

Leading up to the implementation of FASA in 1994, the government procurement system faced mass inefficiencies due to “an intricate combination of statutes, prescriptions, and contract requirements that regulated controls over the price and quality of items that were being produced to government-unique specifications.” The convoluted system was rooted in the evolution of the U.S. procurement scheme which, prior to the Civil War, sought to develop a manufacturing base that would ease foreign reliance and that actively preferred “make” over “buy.” In the late twentieth century, the continual procurement of goods that required from-scratch development was costly, time consuming, and isolated an entire marketplace of off-the-shelf products that could potentially meet the government’s needs. Additionally, commercial companies were hesitant to do business with the government because of the complexity of the process and uniquely-governmental statutory requirements that potentially put vendors at higher cost or performance risk.

Congress introduced legislation leading up to FASA that communicated a partiality for commercial contracting. CICA, passed in 1984, stated that federal agencies should “promote the use of commercial products whenever practicable.” This position was reaffirmed by the Preference for Nondevelopmental Items Act of 1987, which mandated that the Department of Defense (DoD) prioritize the use of commercial acquisition wherever possible. Though the Act was repealed by the passing of FASA, it highlighted a continuing trend in Congress’ inclination towards commercial procurement.

Congress passed FASA in an effort to address the inefficiencies that plagued the government procurement system and solidify the legislature’s commercial preference in government procurement. Prior to FASA, the Advisory Panel on Streamlining and Codifying Acquisition spoke specifically to the need for clarification of what constituted a “commercial item,” as well as the issues presented by laws that applied only to contracting with the federal government and the barriers those laws created to commercial industry participation.

Pursuant to FASA, Congress requires that executive agencies, to the maximum extent practicable, use commercial items to meet their needs. In enacting the legislation, Congress acknowledged that “[t]he purchase of proven products such as commercial and nondevelopmental items can eliminate the need for research and development, minimize acquisition leadtime, and reduce the need for detailed design specifications or expensive product testing.” The goal of FASA was, in part, to “facilitate the acquisition of commercial products” and “improve the efficiency and effectiveness of the laws governing the manner in which the government obtains goods and services.” Following FASA, Congress continued to reaffirm its clear-cut preference for commercial acquisition in other areas of procurement, seen in the Clinger-Cohen Act of 1996, which outlined the federal government’s preference for commercial items in the procurement of information technology.

FASA set forth requirements for enacting its commercial preference, such as requiring preliminary market research before “developing new specifications,” soliciting bids, or awarding task or delivery orders that exceeded the simplified acquisition threshold. The FAR defines “market research” as “collecting and analyzing information about capabilities within the market to satisfy agency needs.” This may include “obtaining information specific to the item being acquired,” but will vary from procurement to procurement based on factors such as “urgency, estimated dollar value, complexity, and past experience.” Using that research, agency officials are required to determine whether a procurement could be fulfilled by a commercial item, with or without modifications, or if the solicitation itself could reasonably be modified to use commercial items to fulfill the agency’s needs. Through this condition, the government is obligated to take the pulse of the commercial community before creating a solicitation that would require the costly and time-exhaustive development of new items.

Contemporary changes to the procurement system place antiquated common law principles in tension with the system’s current values. The Christian doctrine developed in an era that pre-dated widespread commercial contracting, and its implementation in a commercial contract setting potentially runs counter to the values of efficiency and simplicity within the modern procurement system. While the scale of the federal government’s contracting practices necessitates a certain degree of risk aversion, the large number and value of contracts in question also justify tailoring the use of antiquated practices more specifically to appropriate circumstances. The need for a more proficient and cost-effective government procurement system to serve the public interest prompted the passage of FASA and subsequent similar legislation. In contrast, continued use of the Christian doctrine prioritizes conservative contracting through risk aversion, even if that results in commercial vendors refusing to do business with the government because of practices unique to contracting with the government. As a result, the Christian doctrine may be incompatible with modern procurement practices, frustrating not only the legislative intent in contemporary procurement statutes but the functionality of the system itself.

III. The Federal Circuit’s Decisions in Palantir and K-Con

The Federal Circuit heard both Palantir and K-Con in 2018, but close readings of the two cases reveal an ideological tension between their value judgments. Palantir suggests that the Federal Circuit’s commitment to the efficiency and inclusion achieved by FASA’s mandate of commercial contracting should supersede risk aversion claims by federal agencies. On the other hand, the use of the Christian doctrine in K-Con toread in clauses to a commercial-turned-construction contractexempts the federal government from the normal expectations of contracting parties to uphold its unique sovereign privileges that the government maintains as a sovereign.

A. Palantir

In Palantir,the Federal Circuit deferred to FASA’s preference for commercial contracting by holding the Army accountable to statutorily required market research. The case stemmed from a pre-award bid protest challenging the Army’s solicitation of a singular platform to consolidate the Army’s military and intelligence capabilities, including the “development of new data architecture.” In preparation for the solicitation, the Army performed an independent market study which ultimately recommended a hybrid approach of creating a Cloud Infrastructure Platform and purchasing “[t]urn-[k]ey” commercial products.

Additional Army analysis concluded that a hybrid approach to the procurement was feasible because a similar program was being utilized by the DoD. A month later, however, the Army determined that certain system components could not be commercially acquired. The Army then released a Determination & Findings for the single source award, claiming that the developmental aspect of the solicitation was an important risk mitigation tactic that justified the development, versus the purchase, of the system.

The Army’s subsequent solicitation sought a single indefinite-delivery, indefinite-quantity contract for the design and development of the system. After the Government Accountability Office (GAO) denied Palantir’s pre-award protest, Palantir filed a protest at the COFC alleging that the Army violated FASA by failing to solicit the system commercially and failing to determine if the system could be procured commercially. The COFC ultimately held that the Army had failed to ascertain whether commercial items met, or could have been modified to meet, agency needs, and that failure was a violation of FASA’s market research requirements.

On appeal to the Federal Circuit, the Army argued that the COFC had (1) imposed heightened market research obligations on the Army and (2) ignored the presumption of regularity that accompanies agency procurement decisions. The Federal Circuit affirmed the COFC’s ruling, finding that an in-depth determination of whether commercial items existed that could satisfy agency needs, or could be modified to satisfy agency needs, was required under 10 U.S.C. § 2377(c)(2). Therefore, the Court was not enforcing heightened market research standards, but merely imposing requirements laid out in FASA. Additionally, the Federal Circuit highlighted the fact that the Army was on notice that they should be investigating the capability of commercial items to meet agency needs based on their market survey.

The Palantir decision indicated the Federal Circuit’s commitment to the congressional mandate and industry preference for commercial items through the expectation it placed on the Army to explore all commercial options. In Palantir, the Court conducted a step-by-step analysis of how Palantir’s existing commercial capabilities could have been modified to meet agency needs, elevating the desire for a more effective system over the Army’s concern about the risks associated with a purchased system. Affirmed by the Federal Circuit, the COFC held the Army accountable, not only for seeing if commercial items existed that could fulfill agency needs, but for seeing if reasonable modifications to the system could make the contract a commercial item contract, at least in part. While FASA statutorily requires market research into the potential that commercial items can meet agency requirements if they are reasonably modified, the emphasis that the Federal Circuit placed on the Army’s failure to investigate modified commercial items demonstrates the extent of the measures that the Court expected the agency to take in prioritizing commercial procurements.

The Federal Circuit also addressed the Army’s failure to discuss why it was rejecting data from its market study. While no documentation of such justifications is required under FASA, the Act does state that an agency’s “record must be sufficient to permit meaningful judicial review consistent with the Administrative Procedure Act.” The Federal Circuit interpreted the “sufficiency” requirement as creating a substantive threshold, rather than affording the government leniency because of its status. The Federal Circuit’s insistence that agencies exhaust all commercial avenues, including modified requirements that may be the result of extensive market research, positions Palantir as a foundational case for a pro–efficiency Court.

B. K-Con

The Federal Circuit’s advocacy for the simplification and inclusion of commercial contracting in Palantir is in tension with its use of the Christian doctrine in K-Con. The Court in K-Con prioritized the use of uniquely governmental allowances to alleviate federal risk, which undermines a more effective procurement system. The Federal Circuit’s decision in K-Con converted a commercial contract into a construction contract and then utilized the Christian doctrine to read in unenumerated bonding clauses. This prioritized the government’s ability to protect itself from cost or performance liability over the efficiency of commercial item contracting.

In September 2013, K-Con and the Army entered into two contracts for pre-engineered metal buildings. Both solicitations were issued under commercial-contract General Service Administration forms with no express requirement that K-Con provide performance and payment bonds. Similarly, both solicitations also lacked the performance and payment bonds clauses that are required for construction contracts.

The Army then instructed K-Con to provide performance and payment bonds in accordance with FAR 28.102 before the Army could issue its notice to proceed. K-Con was unable to supply those bonds until two years later, and K-Con subsequently submitted a request for equitable adjustment for costs and labor incurred. The contracting officer denied K-Con’s request for compensation on the grounds that the bonding requirements in FAR 58.228-15 were incorporated into the contracts at the time they were awarded under the Christian doctrine. The ASBCA upheld the contracting officer’s decision.

On appeal at the Federal Circuit, the Court held that K-Con’s contracts were “patently ambiguous” as to whether they were commercial or construction contracts, pointing to language in the contracts that referenced construction, as well as the inclusion of construction-specific clauses, such as the Davis-Bacon Act. In light of these inconsistencies, it was incumbent on K-Con to clarify the type of contract they were operating under, even though the contract was established using a standard commercial contracting form.

The Court then performed an analysis of the first prong of the Christian doctrine, asking whether the clause at issue was “mandatory.” The Miller Act requires performance and payment bonds in construction contracts exceeding $100,000, so the Federal Circuit held that the bonding requirements were statutorily mandated even though they were not incorporated into the contracts textually or by reference. The Court then moved to the “deeply ingrained policy” second prong of the Christian doctrine and found that the bonds represented a longstanding desire to protect the government and subcontractors from performance and cost liability, a justification that constituted an established procurement value.

Through its conversion of a standard commercial contract into a construction contract that required heightened business requirements, the K-Con court prioritized governmental risk avoidance over the ease and efficiency of commercial contracting. The entirety of the Army’s usage of the Christian doctrine to read in bonding requirements hinged on the conversion of the contract from a commercial contract to a construction contract. The Court’s identification of a patent ambiguity, an ambiguity that is “facially inconsistent,” required an in-depth examination of the use of the words “design and construction” and specific FAR regulations used in the commercial contracting forms. The Court therefore performed a detailed analysis of an allegedly facial inconsistency in order to keep the door open for the Army to read in bonding requirements.

The Court found that the contractor, K-Con, had a duty to seek clarification regarding whether or not the contracts, though entered into under a standard commercial form, were actually for construction, and thus subject to heightened FAR requirements. Debatably, K-Con would have felt no need to clarify the classification of a contract entered into using a commercial form prior to the government demanding specific payment pursuant to uniquely governmental clauses. The Federal Circuit’s initial act of converting a commercial contract into a construction contract so that the agency can read in government specific requirements speaks to a risk-averse procurement system that is willing to bend the norms of commercial contracting in order to provide the government with cost and protection insurance. Such actions may reaffirm commercial vendor fears that contracting with the government puts businesses at the government’s whim, requiring the procurement system as a whole to resort to more complex contracts for simple acquisitions.

Contracting in a way that reduces governmental liability is not a novel or undesirable procurement approach and appears in a variety of practices; governmental clauses, such as at-will termination, highlight the continued commitment to protecting the government throughout the contracting process. Against this backdrop, it is not illogical that the Federal Circuit would opt for an analysis of the case that bolstered defenses against vulnerabilities in K-Con. However, the evolution of the procurement process to embrace commercial contracting and its efficiency and fiscal responsibility is ideologically in tension with more conservative approaches to contracting that feature risk-aversion practices through uniquel governmental clauses such as the Christian doctrine.

IV. The Attitudes Toward Dominant Values of the Procurement System Represented in Palantir and K-Con

Palantir and K-Con highlight different views on what the top priority of the procurement system should be, one view being rooted in a historical need for protection from contract liability while the other envisions evolution in the face of expansive commercial offerings. This Part first walks through the government’s contrasting roles as both a sovereign entity and an administrative contracting agent. Then, it explores how those roles are manifested in each of the Federal Circuit’s decisions.

A. The Federal Government as Both Political Leader and Contracting Party

In K-Con, the U.S. government was permissively treated as a sovereign entity that reserves the right to condition its business based on its status; as such, the Court deferred to practices such as the Christian doctrine that are incompatible with the desire to make contracting with the government more straightforward. Congress acknowledges the government’s unique role as a leader in the very fact that the power to sue the government under the Tucker Act is an exemption from sovereign immunity, containing provisions for national defense and national security. Courts also grant the government special allowances when it makes decisions in a governing capacity for the general welfare under the Sovereign Acts Doctrine. These privileges are an attempt to manage “the [g]overnment’s need for freedom to legislate with its obligation to honor its contracts.”

However, in Palantir, the Court opted for an efficient approach to contracting that embraces the evolution of procurement towards commercial contracting, actively treating the government as a more typical contracting party by refusing to defer to the agency’s opinion. Congress’ continued statutory authorization of contracting, as well as contracting’s regulatory policies and procedures, highlights the governmental view of itself as a contracting party. Similarly, the Supreme Court has consistently and explicitly held the U.S. government to the same standards as those privy to private contracts.

The balancing of the government’s commitment to its sovereign responsibilities and the necessity of commercial contracting to simplify a complex federal procurement system results in a balancing of values. K-Con, extending the idea of the government-as-sovereign, promotes risk aversion through the Christian doctrine over the efficiency and predictability promoted by commercial contracting. In contrast, Palantir upholds the current trend toward more straightforward procurement through its requirement that agencies consider market-available items, even if it comes at the risk of the U.S. government having to make modifications to its desired product. Framed for their prioritized values, K-Con stands in line with past Christian doctrine decisions that prioritize the safety of the government in contracting over predictability, competition or efficiency, while Palantir upholds an opposing view of the procurement system as one that has made efficiency through commercial contracting its cornerstone. Therefore, Palantir and K-Con speak not only to the competing identities of the U.S. government, but also the competing values championed by those roles.

B. Palantir and K-Con Manifest the Government’s Differing Roles Through the Values They Prioritize.

Palantir expresses a preference for systematic efficiency by requiring the government to perform extra work in its preparation of certain solicitations if that effort facilitates increased instances of commercial procurement. Not only did the Federal Circuit walk through the ways in which the procurement process could have resolved the Army’s claim that aspects of the solicitation could not be acquired commercially, but the Court also extensively documented how the Army was on notice of the potential commercial options. Therefore, in prioritizing the ease of commercial procurement, the Court willingly advocated for a more cost efficient and less developmental acquisition scheme. While not ruling on the same issue, the Federal Circuit demonstrated continued commitment to the commercial mandates of FASA in CGI Federal Inc. v. United States. In CGI Federal Inc., the Federal Circuit held that certain contractual terms were “inconsistent with customary commercial practice[s]” and therefore violated FASA as promulgated in FAR Part 12.

The Court in Palantir viewed the government more as a contracting party than a sovereign owed deferential treatment in an effort to promote commercial procurement. FASA broadly outlines an array of requirements regarding the type of research the government must do prior to a complex solicitation, as well as what agencies must do with that information. In Palantir, the Federal Circuit acknowledged that “there is no statutory or regulatory requirement for agencies to document their determinations” in reference to FASA’s commercial market research mandate; however, the Court in Palantir did not give the government the flexibility of this precedent. Congress has repeatedly granted the federal government a certain degree of leniency due to its status, including a “presumption of regularity” that accompanies governmental agency decisions. Therefore, Palantir breaks from precedent that treats the government with a deferential privilege by rejecting the government’s argument that the Federal Circuit is substituting its judgment for that of the agency in the name of simplified and fiscally responsible procurement.

In contrast, the Court in K-Con actively converted a commercial contract into a construction contract, allowing it to utilize the Christian doctrine to prioritize the federal government’s control and autonomy in contracting over the continued use of an efficient, commercial contracting vehicle. K-Con established its sovereign preference even before the Court performed a Christian doctrine analysis in its first step of converting a commercial contract into a construction contract, demonstrating a hesitancy to embrace the assumption that commercial contracting is the preferred method of procurement promulgated by FASA. Prior Christian doctrine cases outlined scenarios where the contractor was on-notice of the applicable required contractual clauses; here, K-Con was on notice about mandatory clauses that would apply to a commercial contract, not a construction contract. Therefore, K-Con speaks to the Court’s commitment to risk aversion via the conversion of a commercial contract into a construction contract and the further financial protections for the U.S. government provided by construction contracts.

Additionally, the cases manifest different views of the government by holding the parties to different levels of responsibility. In K-Con, the Federal Circuit hinged the conversion of a commercial contract into a construction contract largely based on the fact that K-Con had failed to seek clarification in the face of an ambiguity. In contrast, Palantir rewarded the contractor’s voluntary communications with the government, identifying those communications as evidence of the Army’s failure to fully explore commercial options. There was no stringent requirement that the agency document their decision to opt for a non-commercial approach, and the Court acknowledged that agency procurement decisions are normally awarded wide deference. The Federal Circuit, however, still gave more weight to the civilian party’s efforts to supply a commercial good than to the government’s privilege in making discretionary determinations in regards to how to contract. Therefore, the cases demonstrate different standards of behavior in terms of communication: K-Con required the civilian contractor to bear the brunt of the burden in protecting themselves from uniquely-governmental loopholes, such as the Christian doctrine, whereas Palantir held the government to a higher standard of justification based on civilian contractor communications. While not in direct conflict, the cases highlight an ideological split in Federal Circuit opinions that will continue to create tension in commercial contracting through the lack of transparency regarding when vendors are subject to higher, more protective requirements.

V. Congress Should Add FAR Language that Clarifies a Contract Designation for the Purposes of Litigation and Create a Panel to Help Outline Guidance for Agencies.

This Part presents two options for addressing the tension between the priorities demonstrated by the Federal Circuit’s decisions in order to ensure the procurement system can maximize the participation of commercial vendors without putting the government at extensive risk of cost or performance liability. Section A explores the addition of FAR language that would clarify a contract’s type, and thus the applicability of uniquely governmental requirements, for purposes of litigation. Section B proposes the creation of a panel to further outline an agency’s needed commercial market research in order to uphold FASA’s mandate without increasing governmental liability.

A. Congress Should Add Language to the FAR That Clarifies a Contract Type for Litigation Purposes.

Congress acts as the gatekeeper to the federal government’s sovereign power, demonstrated by the requirement that the legislating body must clearly waive sovereign immunity in order for a party to bring suit against the U.S. government. Therefore, Congress is the most authoritative source of clarification in balancing competing values of efficiency and risk aversion. Congress is aware that it must legislate in such a way that its intent is understandable, as courts must perform statutory interpretation when confronted with circumstances that statutes did not anticipate or on which they are silent. The current ideological tension between the government’s wish to contract efficiently via commercial items and safely via risk-averse practices such as the Christian doctrine, however, pit a congressional statute against a common law development. Therefore, congressional clarifications must address procurement practices from the front-end to prevent conflicts from reaching the courtroom in the first place.

FAR clarification regarding when a contract will be treated exclusively as a commercial contract for purposes of litigation could potentially mitigate contractor fears that their presumably commercial contracts are actually subject to more extensive requirements without exposing the government to any heightened risk.While FAR Part 12 excludes commercial acquisition from certain government-specific contracting requirements, a more explicit clause that identifies the contract’s type, such as a commercial contract or a construction contract, could help avoid accusations of ambiguity in the first place. The applicability of this clause would be a proactive measure to avoid confusion between parties about whether or not government-specific clauses, such as bonding requirements, are appropriate. In this way, commercial contracts would still be subject to the requirements laid out in the FAR, but contractors would be on notice of those specific mandatory requirements.

The FAR’s plethora of remedy granting clauses are intended to allocate risk prior to contract performance. Thus, a FAR clause that identifies the contract type for the sake of litigation would help encourage commercial contractors to participate in efficient and lucrative contracting with the government without concern that their contracts may be converted into higher-liability agreements. For example, the FAR mandates that government contracts include a Disputes Clause dictating the terms of future litigation. Accompanying that clause with a statement of contract classification (as commercial, construction, or research & development) would appropriately put both the contractor and government on notice about the government-specific requirements that accompany each contract, as outlined in the FAR.

Commercial contracts may be identified by the clauses they include if they use clauses from the commercial suite of the FAR. or by the context in which they are formed if they are Federal Supply Schedule acquisitions. K-Con highlighted the ability of the Court to find ambiguity in even seemingly straightforward commercial contracting forms. Therefore, a contract classification clause would ensure that contractors are protected from antiquated common law practices while also encouraging the government to proactively mitigate risk. A regulatory requirement of contract classification for litigation purposes addresses both the values of efficiency and risk aversion in the procurement system. Clear guidelines on the applicable FAR clauses and requirements for a given contract ensure that commercial contractors are comfortable doing business with the government, that congressional preferences for streamlined contracting are upheld, and that the government is practicing proactive risk-aversion in its contracting by choosing commercial vehicles only when subsequent liability is tolerable. This is not to say that such a classification would preclude commercial contracts from risk-averse government practices, but it would ensure that contractors are on notice about expected requirements. Commercial contractors could then confidently offer the government cheaper, ready-made products, fulfilling FASA’s vision of simplified procurement.

B. A Panel Should Be Created to Outline Specific Requirements for the Exploration of Commercial Options to Encourage the Use of Commercial Items Without Exposing the Government to Undue Risk.

Just as Congress created the Section 809 Panel to identify means of “streamlin[ing] and improv[ing] the defense acquisition system,” Congress should similarly mobilize a group charged with releasing guidance on expectations for commercial contracting. The panel would be tasked with promulgating guidance regarding what steps and documentation are necessary to satisfy the market research standard in the FAR.

For example, a price threshold or certain percentage of developmental pieces in a solicitation could require more specific written documentation of the commercial avenues that an agency explored in its decision-making process. While the FAR’s current definition of what constitutes market research leaves contracting officers with appropriate discretion to fulfill agency needs, the panel could create more specific requirements in terms of documenting surveys and industry investigation, both of pre-existing commercial items and of items that could be reasonably modified to meet agency needs. Such direction on documentation would be especially relevant for agencies seeking to opt out of commercial item contracting, as no such documentation requirements currently exist beyond the requirement that a record that be “sufficient to permit meaningful judicial review consistent with the Administrative Procedure Act.” Although a softer form of market research requirements exist in the FAR, more specific instructions would help to avoid conflicting messages from courts regarding vaguer concepts.

Panel guidance on the requirements, both in substance and documentation, would mitigate accusations, similar to those made in Palantir, of agencies failing to consider commercial avenues. The panel’s guidance would not only help to ensure that agencies avoid liability from a litigation standpoint, but more explicit market research guidelines would potentially increase the efficiency and cost-effectiveness of government contracting by utilizing previously unknown commercial options.

In the event that an agency has concerns about the liability associated with procuring commercially, the panel could also suggest more overt criteria and documentation for the use of non-commercial items. While the Army released a Determination of Non-Commercial Item[s] following Palantir’s claim, it was too little and too late to justify their decision to the Federal Circuit. Agencies should be empowered to make legitimate decisions about when non-commercial items are needed to fill agency needs, and more specific standards about the content of Determinations of Non-Commercial Items would lower the risks of litigation, delayed performance, or items’ failure to meet agency needs.

VI. Conclusion

Following the Federal Circuit’s decisions in Palantir and K-Con, Congress must establish safeguards to balance the values of protecting the government from liability with the prioritization of efficiency and inclusiveness through commercial contracting. The Federal Circuit has manifested two different value statements via Palantir and K-Con, one that embraces contemporary calls for efficiency and cost-effectiveness through commercial contracting and another that ensures minimum liability for a political entity managing the public welfare using common law practices like the Christian doctrine.

Additional FAR clauses on contract classification and more specific guidance on market research requirements would allow commercial contractors to confidently deal with the government while also providing instruction to agencies on how to justify the use of non-commercial items. These measures can help to ensure that the efficiency and low liability sought respectively in Palantir and K-Con are not lost due to the ideological tension stemming from the Federal Circuit’s decisions in these two cases.