The contractual duty of “good faith and fair dealing” is well established in private contracts. Depending on your jurisdiction, there is very likely either a formal or an informal rule that parties to a contract must deal with each other honestly and in good faith. This is (usually) not a written contract term – rather, the duty is implied automatically in order to reinforce the parties’ intent when entering into the agreement.
But, did you know that the same kind of duty exists in public contracts – and runs as a two-way street between contractors and the Federal government? It is true. And it can help your business in the pursuit of time or damages from the government as part of an REA or Claim.
Implicit in every government contract is the duty for the government to treat the contractor fairly and act in good faith. Courts discussing this duty place both affirmative and negative obligations on the government. In other words, the government (1) must take active steps to enable the contractor’s performance and (2) must not willfully or negligently interfere with said performance.
Allegations concerning a breach of the duty of good faith and fair dealing can arise in almost any contractual context. For example, it is very common to see such claims in the context of delay and disruption claims. The contractor seeks direction or guidance from the government on how to proceed with certain contract performance details – but the response from the government is delayed, unhelpful, or does not come at all.
A recent Court of Federal Claims decision also advises that contractors can proceed with fairly broad allegations concerning the government’s breach of good faith and fair dealing as part of an appeal. Specifically, in response to a motion to dismiss by the government, the Court ruled that a such a claim does not need to be tied to a specific contractual obligation in order to demonstrate a violation.
The decision is a win for contractors because it recognizes that contract performance does not take place within a vacuum. Even if there is no toehold to assert a breach tied to a specific obligation, the duty of good faith and fair dealing exists to ensure that the “reasonable expectations of the parties are respected” by both sides.
Contractors dealing with the government at almost any stage of contract performance would do well to give serious thought to the duty of good faith and fair dealing. While it is a “big picture” concept, it can have very real implications when a dispute arises – including a meaningful impact on recoveries for claims and appeals.