Difference Between Actual vs Apparent Authority In Government Contracts?

In government contracting, there are harsh rules about apparent authority. The issues usually arise when contractors follow directions of Program Managers and Contracting Officer Technical Representatives (COTR).  

• Knowing the difference between actual and apparent authority can help you develop a better strategy when filing a contract claim against the government.
• Without a clear understanding of the basic rules, apparent authority arguments can have brutal impacts to a contractor claims against the government.

Appellate courts do not waiver on the difference actual authority vs apparent authority when it comes to making government claims.  Before litigating and wasting thousands in litigation costs, you should analyze the facts first.

Apparent Consent -What is Apparent Authority in Federal Government Contracts?

The legal theory of what is apparent authority generally applies to contractors and not the government. This issue was made clear in the case of Peter Bauwens Bauunternehmung GmbH Co. KG, ASBCA No. 44679, 98-1 BCA j 29,551 at 146,497, aff’d, 194 F.3d 1338 (Fed. Cir. 1999).

When assessing apparent authority, courts look at the conduct of the principal to see if the principal created reasonable belief that the actor was authorized by the principal in the manner relied on. This can be viewed as an objective standard. It is essential to know the legal difference between actual authority vs apparent authority.

• Defending against claims of apparent authority will not be successful by claiming that the actor had no actual authority.
• Apparent authority can be present through written or spoken words or other conduct of the principal which, if reasonably interpreted, causes another person to think that he has apparent consent to the agent’s actions.

No Apparent Authority Imputed to Contracting Agency

 Despite many arguments to the contrary when appealing claims against the government, federal agencies are not bound by actions of one who has authority to act for the government.  The court made this clear in the case of Federal Crop Ins. Corp. v. Merrill, 332 U.S. 380 (1947).

When contracting officers exceed the limits of their authority as agents of the government, the principal is not bound. For example, in Atlantic, Gulf & Pacific Co. of Manila, Inc., ASBCA 13533, 72-1 BCA ¶ 9415, a termination settlement was not binding on the contractor because it exceeded the TCO’s authority. In other cases, modifications have not been binding because an ACO lacked authority, Strick Corp. ASBCA 15921, 73-2 BCA ¶ 10,077.

• COTRs generally cannot bind the government  and do not have contracting officer authority;
• You should always get permission from the contracting officer.

Contractors are Bound By Procurement Rules in Government Contracting: On the other hand, contractors generally have a tough time defending against claims or allegations from the government when the agency uses the doctrine of what is the apparent authority.  Contractors cannot say that if the government is not bound that it too should not be bound by the same contract.

This argument simply will not work. See the case of American Anchor & Chain Corp. v. United States, 331 F.2d 860 (Ct. Cl. 1964) (government justified in assuming that contractor’s plant manager acted with authority).

What Are Alternative Strategies to Bind the Government? If you are looking for alternatives to apparent authority, you may want to consider the following when litigating government contract claims.

 Implied Authority

 When litigating adverse decisions against the government, you could use an implied authority strategy if you can show that the government employee has some actual authority. See H. Landau & Co. v. United States, 886 F.2d 322, 324 (Fed. Cir. 1989)

Courts and Appeal Boards may find implied authority to contract if the questionable acts, orders, or commitments of a government employee are an integral or inherent part of their assigned duties.

• These cases are very fact specific.
• You may want to seek legal advice from an experienced government contract claims attorney.  

Sometimes contract administrators have implied authority to act by giving change orders. This is especially true in emergency situations.  See the case of Sigma Constr. Co., ASBCA No. 37040, 91-2 BCA ¶ 23,926 (contract administrator at work site had implied authority to issue change orders issued under exigent circumstance [drying cement]).

In yet another case, the court found that the quality assurance representative had implied authority to order 100% testing of inflatable rafts. See  Switlik Parachute Co., ASBCA No. 17920, 74-2 BCA ¶ 10,970.

• The key to success in this alternative to apparent authority in government contracts is to be able to craft relevant facts to support your case.
• Contract clause can override this argument. Virtual all federal government contracts have clauses that expressly refute this legal theory.

When you have a claim against the government, and another person besides the contracting officer has directed you to do additional work, or change the scope of the contract, you must be careful when asserting the apparent authority argument.  Knowing the difference between actual and apparent authority can help you get the result you seek. There are other legal alternatives that can have merit.

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For additional help or questions about actual vs apparent authority in government contracts, call our government claims lawyers at 1-866-601-5518. FREE INITIAL CONSULTATION.