Government Contracts, Contractual and Sub-contractual Issues

GovernmentContracts, Contractual and Sub-contractual Issues

GovernmentContracts, Contractual and Sub-contractual Issues

BusinessScenario

Inthis case, the United States Government is required to construct andrepair damaged roads around different key states in the country toenhance access of citizens to urban centers easily and efficiently,hence saving both time and money. The Government, therefore, entersinto a contract with Prime Contractor ‘A’, a company that hasbuilt its reputation over the years in the road constructionbusiness, to carry out the task.

Howeverthe company A only deals with the actual construction and iteventually, by an agreement by the managing staff, decides tosub-contract company B to supply them with the necessary materialsrequired for the road construction. The agreement between the PrimeContractor and the sub-contractor not only defines the price andnature of their relationship in regards to the raw materials to beavailed but also the specific time and places that the delivery ofthe materials should be made.

Thesub-contractor then delays in the delivery and at times the deliveryis not made at all, but reasons are given to the Prime Contractor asagreed by both parties. This directly affects the contract betweencompany A and the United States Government as there is a clause thatexpressly sets the time limit for the construction and repair of theroads. The clause also states that the U.S. Government reserves theright to terminate the contract if, among other things, the deadlineis not met or when there is a clear possibility of the Primecontractors failing to meet the deadline.

TheIssues

Thebreach of contract occasioned by the sub-contractor gives theGovernment the right to terminate the company A by way of‘termination for the default.` The termination inevitably has adirect effect on the subcontractor even though notice was given tothe Prime Contractor on the reasons that caused the breach, whethersound or not (Whelan, 2014)

Anotherissue that present itself here is the relationship between thesub-contractor and the United States Government in regards to whetherit (the Government) is privy to the contract between the Company Aand the sub-contractor. Generally, failures by the sub-contractors isnot a concern of the government. Government policies do not allow itto deal directly with sub-contractors [ CITATION DeM11 l 1033 ].Legally this argument is sane. However, the same cannot be said whenit comes to economics and commerce as the Government will have dealtwith the increased costs, delayed delivery, and the generalperformance that may be regarded as a fundamental breach of thespecifications in the contract with the Prime Contractor ( Whelan,2014).

ThePossible Outcomes

Inrelation the termination by way of default, which is the most likelydecision that the government would take in this scenario, thecontractor A can excuse itself from any liability such as the paymentof excess cost or actual damages that the government might havesuffered. It is because the breach was directly caused by thesubcontractor and that the government had nothing to do with it.However, it is important to note that even when such action is taken,the government is not responsible for any loss that thesub-contractor may incur. The constitution would work to the benefitof the Government as it was not part of the contract between the twoparties[ CITATION DeM11 l 1033 ].

Thecustomer, in this case, is the United States Government and it is inits best interest that the construction is done timely and that allexpectations are met. This can be achieved by ensuring that thegovernment takes a management role by reviewing the primecontractor’s administrative activities, especially in the eventthat the company engages a sub-contractor. It would ensure that theGovernment is well aware of the dealings between the two companies,therefore, keeping them check (Whelan, 201). Based on the nature ofthe contract, the Government, being the customer in this scenario,can make changes to the terms of engagement. It is considered a oneof the vital rights that the Government reserves for itself. Thechange may greatly impact on the Prime contractor’s contract andmay also have a significant effect on the subcontractor. It wouldstill be the same case even when the contract did not have a clausethat would give effect to the Government’s change. Also, the changewould also work to give the sub-contractor a right to an ‘equitableadjustment’ of the price considering the variation of circumstanceswhen the initial performance provisions between the Government andthe Prime contractor are altered (Whelan, 2014). The alteration inperformance would, therefore, ensure that the Government increasesthe time limit for the construction and repair of the roads, and asopposed to terminating the contract, the Government would inevitablysave on resources as there would be no need of looking for othercontractors to complete the construction works.

References

DeMella, J. A. (2011). A primer on Prime contractor-Subcontractor Disputes Under Federal Courts. The Procurement Lawyer, 12-16.

Whelan, J. w. (184). Governent Contracts: Subcontractors and Privity. William &amp Mary Law Review, 82-93.

Malecki,E. J. (2012). Military spending and the US defense industry: regionalpatterns of military contracts and subcontracts. Environmentand Planning C: Government and Policy,2(1),31-44