Legal and Contractual Challenges: ABC Inc. Case Study Analysis

This case study examines several scenarios related to contract administration and legal disputes within a business context. The first scenario involves an employee at ABC, Inc. who identifies potentially incorrect charges on a government invoice, highlighting potential risks such as contract termination and legal action. The second scenario focuses on a subcontractor, UFP Inc., facing payment issues due to disputes between the prime contractor and the National Security Agency, exploring options for the subcontractor to receive payment, including direct claims and sponsored appeals. The third scenario presents a firm fixed-price contract for aluminum foil hats, where the buyer, Agent Mulder, demands excessive testing, leading to increased costs. The case explores potential solutions, including contract indemnification and negotiation. The document provides insights into dispute resolution, contract compliance, and the importance of understanding contractual obligations.

Below are discussions. Answers should not be more than 2-3
lines 300 words
You are a mid-level Contracts Administrator in the ABC, Inc. contracts department. You are
responsible for approving invoices being submitted to the Government. You notice on this
month's invoice that some charges appear that don't belong to the contract; perhaps it is
equipment rental or the assignment of a particular engineer. You go to your boss and he says
that he'll take care of correcting it. A few months later, you are reviewing some billing
information and you notice that the invoice that you questioned has been paid by the
Government. You check only to learn that the invoice, which you suspected was in error, was
submitted and paid.
What potential issues does the company face if the invoice turns out not to be okay?
One of the potential risk that the company could face is that the government may fail
award future contracts and terminate all the existing contracts with little notice period.
Secondly, the government can file an injunctive action for claiming the bill already paid.
The third option is that the Contracting officer can prepare provide assistance regarding
the payment problems and sort out the differences in the invoice. Thirdly, depending on
the terms of the contract, arbitration, mediation or conciliation proceedings can be
brought about in order to sort out the problems relating to the payment of invoice
amount.
Your small company, UFP Inc., has a subcontract with Sith Enterprises Corp. which has a prime
contract with the National Security Agency. Your subcontract requires UFP to provide
translators fluent in Klingon. The Sith program manager and subcontract administer refuse to
provide you with a copy of the prime contract. Because of your lack of negotiating leverage
(since there appear to be way too many Klingon speakers around), you had to accept a very one-
sided subcontract that says, among other things, that you get paid when the prime contractor gets
paid. Your translators working at the NSA facility report that there appears to be trouble between
the Sith program manager and the NSA program manager over who rules the universe. Now your
invoices aren’t getting paid and the Sith subcontractor administrator tells you that the problem is
that NSA is dissatisfied with your translators. Your translators at the NSA facility disagree very
strongly with this allegation.
What can you do at this point to resolve the issue and get paid? Can you talk directly to the NSA
contracting officer? Could you file a claim with the NSA contracting officer? Is there anything
the NSA contracting officer can do to help you get paid?
The subcontractor in this case can present a claim to NSA and request that it be passed
through or sponsored by the prime to the government. Since there is no privity of contract
between the NSA and the subcontractor in this case, he can submit claim to the prime.
Alternatively, the Sith Enterprises Corp can also sponsor the subcontractor’s claim and
bring an appeal on behalf of UFP Inc by permitting him to bring an appeal in the name of

Sith Enterprises. The provisions under FAR 44.203(c) explicitly allow such indirect
contractor appeals by the Subcontractor.
You have a firm fixed price contract to deliver 10,000 aluminum foil hats to Agent Mulder at the
FBI. The contract is silent on the method of testing but requires the contractor to present a test
and acceptance plan for approval. When you meet to present your test and acceptance plan,
Agent Mulder tells you that every single hat must be tested in a microwave oven. Your
understanding of accepted industry practice is that testing a one percent sample of the hats is
sufficient. After discussions, Agent Mulder is still adamant that every hat must be tested. If you
do this it will double your costs and delay deliveries.
What should your next step be, assuming that Agent Mulder is the program manager and not the
contracting officer? After talking to Contracting Officer Scully, it appears that she agrees with
Program Manager Mulder. Now what should you do? What steps might occur going forward
assuming the problem is not resolved?
Going the general rule, where the contractor has manufactured the goods by relying on the
government specifications, he is entitled to be paid, as long as the defect is not glaring and obvious.
Applying the same rule to this case, the contractor can for contract indemnification as the design has
been carried out as per the terms: first, that the product has been designed only for the government,
secondly, that the design has been approved and third, the same has been manufactured in
accordance with government specifications. Conciliation and mediation methods with the contracting
officer can be used to sort out the differences arising out of the contract.