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Subcontractors Beware

By Bret S. Wacker / Jun 11, 2013

Most experienced federal prime contractors are familiar with, or at least aware of, the Christian Doctrine .  Based on G.L. Christian & Assoc. v. U.S. , 312 F.2d 418, 424 (Ct. Cl. 1963), the Doctrine stands for the proposition that a clause, although not explicitly included in a government prime contract, might be "read into" the contract by operation of law.  In the Christian case, the United States Court of Claims held that, although the standard "termination for convenience" clause was not explicitly incorporated into the prime contract, the court would read the clause into the contract as if it was a "mandatory clause" under the applicable federal procurement regulations.  Prime contractors are thus presumed to be on notice of mandatory contract clauses.

Historically, the Christian Doctrine has not been generally used to impose terms at the subcontractor level.  However, recently the U.S. District Court for the District of Columbia in UPMC Braddock v. Harris , No. 1:09-cv-01210-PLF (D.D.C. Mar. 30, 2013) referenced the Doctrine in imposing a mandatory flow-down clause to a government subcontractor although the clause itself was not included in the subcontract at issue.

The UPMC Braddock decision involved three University of Pittsburgh Medical Center-affiliated hospitals which entered into agreements with an HMO that provided a managed care health plan to federal employees under a contract with the U.S. Office of Personnel Management ("OPM").  In their contract, OPM and the HMO expressly agreed that medical service providers, including the UPMC hospitals, were not "subcontractors" to the federal government for OFCCP enforcement purposes.  Furthermore, the agreements between the hospitals and the HMO contain no provisions that required the hospitals to comply with the federal affirmative action requirements in the OPM/HMO contract.  Thus, the hospitals argued that they were not "subcontractors" and that they had never assented to do business with the federal government.  Accordingly, from their perspective, they could not be bound to federal procurement rules and regulations to which they didn't specifically agree to be bound.  US District Court Judge Paul Friedman disagreed, finding that the hospitals were indeed "subcontractors" in that they helped the HMO fulfill its agreement with OPM, and indirectly reaped the benefit of that agreement.  In rendering its decision, the Court observed that the hospitals provided no " cogent reason why the government may impose terms on government contracts by operation of law but not on government subcontracts.  They offer no persuasive explanation of why the same constructive knowledge of federal procurement regulations should not also be imputed to subcontractors who undertake to provide services that support a government contract ."

If you have any questions, please contact Bret Wacker at 202.772.0906 or bwacker@clarkhill.com .