TITLE: B-306353, Architect of the Capitol--Contract Ratification, October 26, 2005
BNUMBER: B-306353
DATE: October 26, 2005
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B-306353, Architect of the Capitol--Contract Ratification, October 26, 2005

   Decision

   Matter of: Architect of the Capitol--Contract Ratification

   File: B-306353

   Date:  October 26, 2005

   DIGEST

   The Architect of the Capitol may use appropriated funds to pay a
   contractor for services rendered pursuant to an unauthorized commitment.
   The Architect of the Capitol's actions subsequent to learning of the
   unauthorized commitment constitutes a valid ratification. See generally
   B-259926, Mar. 31, 1995; B-251728.2, June 9, 1993.

   DECISION

   The Architect of the Capitol (AOC) has requested an advance decision under
   31 U.S.C. sect. 3529 on whether it may use appropriated funds to pay a
   contractor for construction performed pursuant to directives issued
   without authority by an AOC employee. Because AOC validly ratified the
   unauthorized directives, it may use appropriated funds to pay the costs of
   the construction performed under those directives. See generally B-259926,
   Mar. 31, 1995; B-251728.2, June 9, 1993.

   BACKGROUND

   AOC is responsible for the maintenance and improvement of the U.S. Capitol
   Grounds. 40 U.S.C. sect. 5102. Pursuant to this responsibility, AOC is
   expanding the West Refrigeration Plant near the Capitol. The general
   contractor for this project is Hitt Contracting, Inc. (Hitt). Letter from
   Alan M. Hantman, Architect of the Capitol, to David Walker, Comptroller
   General of the United States, Sept. 19, 2005 (Hantman Letter). An AOC
   employee issued three directive letters to Hitt (directives) on

   March 30, 2004, January 25, 2005, and February 14, 2005, instructing Hitt
   to undertake work on the refrigeration plant project. The employee who
   issued the directives lacked the authority to do so. Id.

   Hitt, believing the directive letters to be authorized, began the
   requested work. Telephone interview with Cynthia Bennett, Director of
   Procurement, AOC, Oct. 4, 2005 (Bennett Interview 1). Upon learning that
   the directives were unauthorized, AOC suspended the work. Id.
   Subsequently, the senior project manager for the refrigeration plant
   project and the AOC Director of Procurement determined that the work begun
   under the unauthorized directives was necessary for the project and that
   funds were available for the work. Hantman Letter, Attachment 1. As a
   result, the Director of Procurement signed Contract Modification 36, which
   authorized the work begun under the directives to continue. Id. Hitt then
   resumed the work. Bennett Interview 1. On August 5, 2005, Hitt submitted
   an invoice for the work to AOC. Hantman Letter, Attachment 2.

   AOC asks whether it may properly use appropriated funds to pay for the
   work performed by Hitt pursuant to the directives.

   ANALYSIS

   It is axiomatic that the United States cannot be bound beyond the actual
   authority conferred upon its agents by statute or regulation. B-212968,
   Apr. 10, 1984. Where, as here, a government agent purports to commit the
   government to a transaction he has no authority to enter, the government
   is not legally obligated to honor the transaction. B-209132, Oct. 3, 1983.
   Thus, the directives alone did not obligate AOC, because the individual
   who signed them lacked authority to bind the government. Bennett Interview
   1.

   Nevertheless, it has long been recognized that an authorized government
   official possessing knowledge of the facts may give effect to an
   unauthorized act of another government official by subsequently ratifying
   the action. United States v. Beebe, 180 U.S. 343 (1901). Traditionally,
   when an agency official, authorized to bind the agency in contract, knows
   of the relevant facts surrounding an unauthorized commitment and affirms
   that act, the agency then becomes bound as if the individual who made the
   original contract was authorized to do so. Id.  at 354. See also 22 Comp.
   Gen. 1083 (1943);  B-226248, May 13, 1987.

   This traditional ratification rule has been modified in the federal arena
   by statute and regulation. The majority of government procurement actions
   are governed by title 48 of the Code of Federal Regulations, the Federal
   Acquisition Regulation (FAR). However, as a legislative branch agency, AOC
   is not subject to these rules. See 48 C.F.R. sections 1.101 and 2.101
   (2004); B-289867, Apr. 26, 2002; Bennett Interview 1. Nonetheless, AOC
   models its contracting and procurement practices after those in the FAR.
   Bennett Interview 1. Under both the traditional ratification rule and the
   FAR, which imposes more stringent ratification criteria than the
   traditional rule, AOC's actions constitute a ratification.[1]

   When AOC discovered the unauthorized commitments made by its employee, it
   quickly suspended the work being done by Hitt in order to ascertain the
   underlying facts. Bennett Interview 1. Having determined the scope of the
   work ordered by the directives[2] and the approximate cost involved, AOC's
   Director of Procurement, vested with contract authority, executed Contract
   Modification 36.[3] Id. This modification served as a ratification of the
   directives under the traditional rule, because an authorized agent,
   knowing of the facts surrounding the unauthorized act, affirmed the
   unauthorized transaction.

   Contract Modification 36 was also a valid ratification under the FAR. The
   FAR's requirements for ratification are found at 48 C.F.R. sect.
   1.602-3(c). The FAR provides that an agency may ratify an unauthorized
   commitment when:

   (1) supplies or services have been provided to and accepted by the
   government or the government otherwise has obtained or will obtain a
   benefit resulting from performance of the unauthorized commitment;

   (2) the ratifying official could have granted authority to enter or could
   have entered into a contractual commitment at the time it was made and
   still has authority to do so;

   (3) the resulting contract would otherwise have been proper if made by an
   appropriate contracting officer;

   (4) the contracting officer reviewing the unauthorized commitment
   determines the price to be fair and reasonable;

   (5) the contracting officer recommends payment and legal counsel concurs
   in the recommendation, unless agency procedures expressly do not require
   such concurrence;

   (6) funds are available and were available at the time the unauthorized
   commitment was made; and

   (7) the ratification is in accordance with any other limitations
   prescribed under agency procedures.

   AOC's actions subsequent to learning of the directives meet these
   criteria. See generally B-259926, Mar. 31, 1995; B-251728.2, June 9, 1993.
   First, by the time the unauthorized nature of the directives came to
   light, Hitt had made significant progress on the work requested by the
   directives. AOC's Director of Procurement later determined that such work
   was necessary and should be completed. Hantman Letter, Attachment 1. This
   constitutes acceptance by the government of the services provided under
   the directives. Second, the Director of Procurement at AOC, who signed
   Contract Modification 36, has authority to enter into the commitments
   contemplated by the directives. Bennett Interview 1. Third, but for the
   signatory's lack of authority, the directives would have been proper. Id.
   Fourth, the Director of Procurement determined the price to be fair and
   reasonable. Id. Fifth, the Director of Procurement recommended payment
   through execution of Contract Modification 36, and the AOC's General
   Counsel concurred. Hantman Letter, Attachment 1. Sixth, funds to pay for
   the work were available at the time the commitment was made. Bennett
   Interview 1. Finally, no other agency limitations exist to preclude
   ratification in these circumstances. Thus, AOC's actions subsequent to
   learning of the unauthorized nature of the directives constitute a
   ratification under the FAR as well.

   CONCLUSION

   AOC may use appropriated funds to pay the costs incurred under the
   directive letters, because Contract Modification 36 represents a valid
   ratification of the unauthorized commitments.

   /signed/

   Anthony H. Gamboa

   General Counsel

   ------------------------

   [1] In the past we have looked to the FAR for instruction regarding a
   ratification undertaken by a judicial branch agency, which likewise was
   not subject to the FAR. B-251728.2, June 9, 1993.

   [2] The work ordered by the directives was within the scope of the
   original contract. Hantman Letter, Attachment 1.

   [3] When AOC ordered Hitt to stop work, it told Hitt not to resume until a
   contract modification was signed authorizing resumption. Telephone
   interview with Cynthia Bennett, Director of Procurement, AOC, Oct. 5, 2005
   (Bennett Interview 2). Thus, Contract Modification 36 was meant to serve
   the practical function of restarting work pursuant to prior instructions,
   as well as to act as a vehicle for ratification. Id.