Chapter 3
The Contracting Officer as Defendant
Contracting Officer’s Financial Liability to the Government
The Agency’s Financial Liability to the Public
An Act by a Government Employee
Negligence or One of the “Nonenumerated” Intentional Torts
Within the Scope of the Employee’s Duties
A Contracting Officer’s Liability
Contracting officers always run the risk of being sued by somebody for something—just like anyone else. What is a contracting officer’s financial liability for what they do at work?
This chapter discusses liability from several perspectives: a contracting officer’s liability to the government, the agency’s liability to a member of the public for something a contracting officer did as part of their job, and then the contracting officer’s liability to members of the public for what they did while a government employee.
CONTRACTING OFFICER’S FINANCIAL LIABILITY TO THE GOVERNMENT
There’s good news for contracting officers on this issue, and it’s not intuitive. Even though a contracting officer approves contracts and gets heavily involved in the contract payment process, there’s not much personal, monetary (pecuniary) liability for a contracting officer here.
This conclusion comes from the GAO’s Principles of Federal Appropriations Law (or the Red Book as it’s popularly known), which discusses at length how federal law imposes personal liability on “an accountable officer.” The Red Book describes who is “an accountable officer,” identifying personnel such as “certifying officers, civilian and military disbursing officers, collecting officers, and other employees who by virtue of their employment have custody of government funds.” The contracting officer is not included on the Red Book’s list.
This may seem surprising, since a procurement shop is heavily involved in contract payments—legal and otherwise.
A contracting officer and contract specialist messed up spectacularly. Both approved a progress payment to a contractor even though the contract’s payments had been assigned to a bank and even though the contract did not allow progress payments. Trying to turn the law on its head, the Air Force wanted to hold these procurement people liable instead of making the accounting and finance officer and the certifying officer liable, as federal law requires. GAO concluded that the Air Force could not make the contracting officer and contracting specialist liable: “There is no authority to assess pecuniary liability against the government employee for losses resulting from an error in judgment or neglect of duty.”1
The Red Book adds that a contracting officer “may be made accountable in varying degrees by agency regulation,” but only if based on a federal statute.
Over the years our Office has taken the position in a number of different contexts that agencies may not hold employees liable for losses caused the government as a result of errors in judgment or neglect of duty in the absence of administrative regulations. . . . On one occasion, we concluded that an agency solely by regulation may establish pecuniary liability for employees supervising a certifying and disbursing process. This conclusion was repeated in passing or in dicta in some other decisions. . . . Regardless of [these decisions], in light of the Supreme Court decisions . . . we believe that an agency may impose pecuniary liability only with a statutory basis. Accordingly, we will no longer accept our earlier case law in this regard as precedent and any decision inconsistent herewith is overruled.2
Other government employees, such as certifying officials, are not so lucky.
In September 2001 a forest fire in the Gifford Pinchot National Forest (GPNF) led to the Forest Service’s contracting with Evergreen Bus Service for busses to carry firefighters. To get paid, Evergreen sent the Forest Service four invoices on Department of Agriculture forms. These invoices, totaling $5,631.85, were paid after the government’s certifying officer signed them on September 25. The next day, the government got four more invoices for the same work, in the same amount, but this time on Evergreen stationary, not on USDA forms. Two of these Evergreen invoices even had copies of the USDA forms signed earlier attached to them. The same certifying officer certified them, one two days later and the others eight days later. When the Forest Service realized a mistake had been made, it tried to get the money back from Evergreen, but Evergreen’s bankruptcy proceedings prevented that. The Forest Service asked GAO if the employee could not be held liable for the mistake because she paid the invoices in good faith and with reasonable diligence.
GAO said she had to pay the government back. Federal law makes certifying officers repay the government for any “illegal, improper, or incorrect” payments they make. Because the contractor had already been paid once, paying the contractor again was improper, so the certifying officer had to pay the government back unless the employee could come within one of the two exceptions to personal liability.
The first exception to personal liability was that the employee used “reasonable diligence.” Not here: “We cannot find that the certifying officer, in certifying the September 27 and October 5 payments, acted with reasonable ‘diligence and inquiry.’ If she had done so, she would have learned that, just days before, she had certified payments to Evergreen for the same services and in the same amounts. The standard of reasonable diligence and inquiry requires an examination of the ‘practical conditions prevailing at the time of certification, the sufficiency of the administrative procedures protecting the interest of the Government, and the apparency of the error.’ Here, the error was clearly apparent on the face of the invoices that the certifying officer was asked to certify.”
The second exception to personal liability was “good faith.” That was not the case either: “Our office may relieve liability if the following three conditions are met: (1) the obligation was incurred in good faith; (2) no law specifically prohibited the payment; and (3) the United States Government received value for the payments.” GAO found that here, the certifying official here met only two of the necessary three criteria. She was certainly acting in good faith when she certified payments. And it is legal to pay for bus services during a fire. “However, in order to grant relief, we must find that the government received some value for the payments. Clearly, Evergreen had provided no additional bus services beyond those that GPNF had already paid for on September 25, 2001. Accordingly, we are unable to grant relief.”3
THE AGENCY’S FINANCIAL LIABILITY TO THE PUBLIC
“Mistakes were made”—the classic quote from the Clinton White House— is one reason for the Federal Tort Claims Act (FTCA). If an employee of a company makes a mistake, the company can be sued—and so can the employee.
The government makes mistakes. More accurately, government employees make mistakes. However, unlike government contractors and their employees, the government can be immune from financial liability under the FTCA for things a government employee including the contracting officer does as part of their government work. Here, we are discussing only the government’s liability, not the government employee’s liability which is discussed last.
Because a sovereign government is historically immune from lawsuits, the government must consent to be sued. Congress has given that consent via the FTCA, but that consent is very limited. This law waives the government’s sovereign immunity and makes the government liable for money damages when government employees commit some but not all “wrongful acts” or torts. People harmed by government action have a right to sue the government, but that right is very limited.
The government is financially liable for an action (1) of a government employee (and not an independent contractor) for (1) negligent or one of the “nonenumerated” intentional torts (3) in the performance of a government employee’s “discretionary” duty (4) “within the scope of employment of the government employee.”
As we will see, this last factor—whether the action was committed within the scope of employment of the government employee—is doubly important. It is one of four factors for determining whether or not the government is liable for the mistake and it is the only factor for determining whether or not the government employee will be held personally liable for it.
An Act by a Government Employee
The FTCA is a limited waiver of the government’s sovereign immunity. At the very least, it covers the employees of a federal agency because employees are agents of the government. If an injury was caused by an independent contractor, however, the contracting officer cannot be liable under the FTCA.
Because it is easy to determine that an act was done by a government employee, the typical issue here is whether or not the act was done by a government employee or by an independent contractor working for the government on a government contract, in other words by a government contractor.
When an accident happens during the performance of a government contract, the injured party may prefer to sue the government rather than the government contractor who may have actually caused the harm. Courts typically consider a relationship between the government and a contractor an agency relationship; if the government has the power to control the detailed physical performance of the contractor or if the government in fact supervises the day-to-day operations of the contractor, then the government may be held liable. However, an agency relationship is not necessarily established within the bounds of the FTCA simply because the government can inspect or supervise a contractor’s compliance with the contract specifications.
An indicator of an independent contractor relationship is the contractor’s having liability insurance. Courts interpret the requirement to have liability insurance as some evidence that the insured is acting as an independent contractor.
Two people were hurt while walking in front of a U.S. Customs Service building. They sued the government. In wonderful legal hyperbole, they claimed that they had been “violently propelled to the ground.” They argued that they were hurt because the government didn’t properly inspect or repair the sidewalk and didn’t provide a safe environment for both of them. The government had a contract with Eastco Building Services. The company was to maintain and repair the sidewalks in front of the building. No government employee supervised these day-to-day operations of the company. The Federal District Court threw the case out, concluding that Eastco was an independent contractor that was itself responsible for problems with the sidewalks. In this case, the government “did not exercise control over the detailed physical performance or supervise the day-to-day activities of Eastco but reserved the right to inspect performance to ensure compliance with the terms of the contract. These factors established that the government was acting ‘generally as an overseer’ and that no agency relationship existed with Eastco.” The court added, “in addition, Eastco maintained liability insurance to cover its operations under the Eastco contract.” In fact, the government contract required Eastco to do so.4
An important extension of this government immunity is the so-called “government contractor defense.” Under Boyle v. United Technologies Corp., 487 U.S. 500 (1988), government contractors who may have caused harm to a taxpayer have immunity under certain conditions.
A good example of government contractor immunity is the following.
A number of Hurricane Katrina victims sued the United States and government contractors who dredged the Mississippi River Gulf Outlet for damages caused by the hurricane. They claimed that the dredging damaged protective wetlands in the Mississippi River Gulf Outlet (MRGO), increased the storm surge during the hurricane, and undermined the levees and flood walls along the MRGO and the Industrial Canal, which led to the flooding of St. Bernard Parish and Orleans Parish. They based their lawsuit on government negligence, breach of implied warranty, concealment, and violation of environmental-protection laws. After losing in the trial court, they appealed. The government asked the appeals court to throw the case out because precedent gave the contractors immunity in carrying out certain public works authorized by Congress. In Yearsley v. W.R. Ross Construction Co., 309 U.S. 18 (1940), the U.S. Supreme Court held that the contractor that built dikes in the Missouri River pursuant to a contract with the federal government could not be held liable for damage caused by the construction of the dikes. That case involved a federal project authorized by an act of Congress and directed by the federal government. The government contractors were not liable: when “authority to carry out the project was validly conferred, that is, if what was done was within the constitutional power of Congress, there is no liability on the part of the contractor for executing its will.” Moreover, “where an agent or officer of the Government purporting to act on its behalf has been held to be liable for his conduct causing injury to another, the ground of liability has been found to be either that he exceeded his authority or that it was not validly conferred.”
Based on this precedent, the appeals court denied the residents’ claims. “Both cases involve public-works projects. In both cases, the actions causing the alleged harm were taken pursuant to contracts with the federal government that were for the purpose of furthering projects authorized by acts of Congress. And in both cases, the plaintiffs did not allege that the contractor defendant exceeded his authority or that it was not validly conferred. The appeals court dismissed the lawsuit.5
Negligence or One of the “Nonenumerated” Intentional Torts
The Federal Tort Claims Act is not an accurate name for the law because the law does not let people sue the government for all torts. Technically, the FTCA deals with the “negligent or wrongful act or omission” of a federal employee. Therefore, negligence—the most common type of tort—is included.
Some “intentional” torts are purposely put beyond the reach of an alleged victim—libel, slander, misrepresentation, deceit, interference with contract rights, assault, battery, or false arrest or imprisonment, except with reipect to investigative or law enforcement officers (28 U.S.C. § 2680[h]). The result is that the harm must come from one of the “non-enumerated” torts. Any other intentional torts not expressly excluded by the FTCA are covered.
The FDA posted a company’s trade secrets on the agency’s website, without telling the company it was doing so. The company sued the government under the FTCA for misappropriating the company’s trade secrets and breaching the FDA’s confidential relationship with the company. A Federal District Court threw the case out, holding that the case involved interference with contract rights, a tort the government could not be sued on. The appeals court ordered the lawsuit reinstated. To the appeals court, the lawsuit was not one of the expressly excluded intentional torts, like interference with contract rights. Rather, the lawsuit was over misappropriation of trade secrets or breach of confidentiality.6
Discretionary Function
Discretion demands immunity. If, for example, FAR gives a contracting officer wide latitude or discretion to decide which offer is the “best value” to the government, is it fair to make the government liable for negligence if the contracting officer makes a bad decision? Would making the government financially liable for bad judgment lead to better decisions? Or would placing the liability on the government employee make that employee reluctant to decide anything? Aren’t discretionary decisions best made if the decision maker is not afraid of financial liability or even the threat of a financial liability lawsuit?
Congress concluded that immunity made sense for discretionary decisions. So, what is a discretionary action? It is one that meets two tests— one that is easy to describe and one that is very difficult to describe.
First, if the government has to take an action (or is forbidden to take an action), the action cannot be discretionary. Therefore, mandatory actions are not discretionary. No policy is being violated when the government violates a mandatory regulation since letting the government carry out policy is the basis for immunity.
The above example of the FDA’s posting of a company’s trade secrets on the agency’s website without permission is also relevant here. The company sued the government under the FTCA for misappropriating the company’s trade secrets and breaching the FDA’s confidential relationship with the company. An appeals court said the action was not discretionary: “Disclosure of trade secrets is not a discretionary function because federal laws prohibit it.”7
A federal statute, policy, or regulation that makes an action mandatory or that forbids an action can lead to government liability if there are mistakes in doing the action. These mistakes are not considered “discretionary” acts and are not immune from lawsuit.
The second part of the discretionary job test is more difficult. Is the challenged action, in the words of the appeals court, “the type Congress meant to protect—i.e., whether the action involves a decision susceptible to social, economic, or political policy analysis”?8 Here the theory is that courts should not let a tort lawsuit be used to allow someone to second-guess legislative or agency decisions grounded in policy.
This is not an easy call. One court put it well, referring to:
the difficulty of charting a clear path through the weaving lines of precedent regarding what decisions are susceptible to social, economic, or political policy analysis. Government actions can be classified along a spectrum, ranging from those “totally divorced from the sphere of policy analysis,” such as driving a car, to those “fully grounded in regulatory policy,” such as the regulation and oversight of a bank. . . . But determining the appropriate place on the spectrum for any given government action can be a challenge.9
The court gave some helpful guidelines. One is the distinction between design and implementation. “We have generally held that the design of a course of governmental action is shielded by the discretionary function exception, whereas the implementation of that course of action is not.” Another guideline is that “matters of scientific and professional judgment—particularly judgments concerning safety—are rarely considered to be susceptible to social, economic, or political policy.”
The court then gave two clear examples:
In a suit alleging government negligence in the design and maintenance of a national park road, we held that designing the road without guardrails was a choice grounded in policy considerations and was therefore shielded under the discretionary function exception, but maintaining the road was a safety responsibility not susceptible to policy analysis. . . . Similarly, in a suit alleging government negligence in the design and construction of an irrigation canal, we held that the decision not to line the canal with concrete was susceptible to policy analysis, but the failure to remove unsuitable materials during construction was not. In three cases concerning injuries resulting from the government’s failure to post warnings concerning hazards present in national parks, we held that the government’s decision not to post signs warning of obvious dangers such as venturing off marked trails to walk next to the face of a waterfall, and the government’s decision to use brochures rather than posted signs to warn hikers of the dangers of unmaintained trails, involved the exercise of policy judgment of the type Congress meant to shield from liability, but that such policy judgment was absent when the government simply failed to warn of the danger to barefoot visitors of hot coals on a park beach, . . . and in an action for the death of a prospective logger “trying out” for a job with a government contractor at a logging site under the management of a government agency, we held that while the government’s authorization of the contract was protected under the discretionary function exception, the government’s failure to monitor and ensure safety at the work site was not.10
Particularly relevant to government contracts is precedent concluding that the selection of a specific contractor for a contract award is a discretionary function. Going back to an example from earlier in the chapter, two people were hurt while walking in front of a U.S. Customs Service building in New York City leased to GSA. They sued the government, claiming in their lawsuit that they were “violently propelled to the ground.” They argued that they were hurt because the government, among other things, didn’t wisely pick or properly monitor the company the government used to maintain and repair the sidewalks in front of the building. However, no government employee supervised these day-to-day operations of the company. The court threw out the case because the government involvement, if any, was discretionary. “GSA was not required to hire a particular contractor or to engage in a particular degree of oversight over the independent contractor it chose. . . . [T]he selection and supervision of contractors is a discretionary function and cannot form the basis for liability under the FTCA.”11
Within the Scope of the Employee’s Duties
As mentioned earlier, this factor is one of four used to determine whether the government would be liable for a mistake, but it is the only factor that determines whether the government employee would be personally liable. Specifically, was the government employee actually working for the government when the tort occurred?
This issue is decided by state law. Under some state laws (Ohio’s, for example), an employee acting within the scope of his employment has to at least meet the employer direction and control test. As applied to an auto accident involving a government employee, one court described this test as follows:
The employee was subject to the direction and control of the employer as to the operation of the employee’s automobile while using it in doing the work he was employed to do (so that the relation between the employer and the employee and the driving of the automobile will be the relationship of principal and agent or master and servant as distinguished from the relationship of employer and independent contractor).12
A government employee spent four hours at his office on Sunday working to get ready for government business on Monday. On his way home from the base, he was involved in an auto accident with a motorcycle. When the motorcyclist sued him, he claimed that the lawsuit really should be against the federal government because he was acting within the scope of his employment on his ride home. Under Ohio law, however, he was not acting within the scope of his employment because he was not subject to the direction and control of the employer while operating his car on his way home. He had chosen the day and time to make the trip, as well as his route to the office. At the time of the accident, the federal government was exercising no “constraints on Mr. Shimp’s time or activities with respect to his employment. No one called Mr. Shimp at home and directed him to go to his office . . . to collect the items which he would need to take [to] Los Angeles the next day. In addition Mr. Shimp was accommodating his own schedule when he went to his office . . . [He] was not required to gather the materials when he did.”
The appeals court concluded that his “Sunday drive was on a day of the week when he was not required to go to the Air Force base at all. He had the option of picking up the documents at any time he chose, including the Friday before his trip or the Monday morning just before he left for Los Angeles.” The appeals court also considered that he never asked to be reimbursed for the distance he drove between his home and the base. “Although he called his work supervisor shortly after the accident, he did so only because the accident prevented him from traveling to Los Angeles the following day. Shimp simply was not ‘subject to the direction and control’ of his employer at the time of the accident.”13
It is a puzzling quirk of American law that some victims cannot sue either the government or the government’s employee.
A government doctor was sued for medical malpractice. The Supreme Court held that the government employee was protected from liability, even where the government had no liability. “The Court expressly recognized that the effect of its ruling was to leave certain tort victims without any remedy—either against the Government or against the employee-tortfeasor. The Court found that this was the intention of Congress.”14
Thus, government employees cannot be forced to pay damages for common-law torts like negligence that occur within the scope of their duties.
A CONTRACTING OFFICER’S LIABILITY
Acts Outside the Scope of Employment
As mentioned above, if the contracting officer is acting outside of his scope of employment, the contracting officer can be financially liable. Government employees are not automatically immune under another situation: constitutional torts.
Constitutional Torts
A “constitutional tort” involves a federal employee allegedly violating someone’s constitutional rights, such as an FBI agent violating a homeowner’s Fourth Amendment right to be safe in their home by executing a defective search warrant. But federal employees cannot be sued for constitutional torts if Congress has already set up an alternative as an exclusive remedy against the United States.
A federal employee who claimed he had been demoted for publicly criticizing his agency successfully used the federal civil service review system to get reinstated with back pay. Because Congress has set up the civil service review system, the employee could not then sue his supervisor personally. Nor can a Social Security employee who denied disability benefits to someone be sued for doing so because Congress had set up a legislative complaint process protecting Social Security disability claims.15
This “alternate remedy” theory protects procurement personnel by virtue of the Contract Disputes Act (CDA).
A contracting officer with the Army Corps of Engineers terminated construction contracts for poor performance. The termination notice was issued under the CDA and advised the contractor that it could appeal the decision to the Armed Services Board of Contract Appeals or the U.S. Court of Federal Claims. The contractor instead sued the contracting officer, the Corps’ chief of contracting for the North Atlantic division, the administrative contracting officer, and the program manager in federal court. The contractor claimed that these individuals had terminated the contracts in retaliation for the contractor’s criticism of the Corps’ mismanagement of the terminated projects and that the terminations deprived the contractor of its constitutionally protected rights to due process under the Fifth Amendment and free speech under the First Amendment.
A federal appeals court dismissed the cases against these government employees, concluding that the CDA protects procurement professionals from being sued personally for constitutional torts. The CDA was “the subject of an existing comprehensive remedial scheme. Indeed, for example, because the only retaliation alleged is termination of government contracts . . . the injury underlying the contractor’s First Amendment claim is certainly cognizable—if not fully compensable—under the CDA.” The same was true of the contractor’s claim of due process violations under the Fifth Amendment. The appeals court concluded that it would not be appropriate “to supplement the CDA’s remedial scheme with a new judicial remedy for alleged constitutional violations relating to the termination of federal government contracts. Rather, we defer to Congress, mindful that it is in a better position than are the courts to decide whether the public interest would best be served by the creation” of new rights against federal employees.16