Desktop version

Home arrow Management arrow The cor/cotr answer book

What are gross mistakes amounting to fraud?

"The elements of gross mistakes amounting to fraud are the same as those of fraud, except that there is no requirement to prove intent to mislead. This standard would require a knowing misrepresentation of a material fact, inducing acceptance by the government . . . . The requirement of a knowing misrepresentation on the part of the contractor is usually interpreted to mean a misleading statement, act, or omission . . . . In Catalytic Engineering & Manufacturing Corp., ASBCA 15257, 72-1 BCA 9342 (1972), the contractor was to supply dehydrator cartridges with end pieces made of polyvinyl chloride. The contractor's use of polystyrenean unsuitable materialwas a gross mistake, but not one amounting to fraud. The contractor's failure to tell the government of the change, however, was a gross mistake amounting to fraud. The board stated that the lack of an 'intent' element distinguished the gross mistake amounting to fraud from actual fraud."[1]

To prove a gross mistake, the government need only prove that the mistake was truly irresponsible or neglectful. A gross mistake can be legally pursued if the mistake is so obvious that the contractor never should have presented the work as complete.

What are warranties?

Warranties define the rights and obligations of the contractor and the government concerning defective items and services after acceptance. Warranties extend the rights of the government to correction of defects or replacement of a deliverable for the time period specified in the warranty. There are two types of warranties:

An express warranty is a written promise or affirmation given by a contractor to the government regarding the nature, usefulness, or condition of the supplies or performance of services furnished under a contract. Express warranties include:

- A government warranty clause specified in the contract

- A contractor's commercial warranty incorporated into a contract.

An implied warranty is an unwritten guarantee that the item of supply or a service will live up to the claim of the manufacturer or provider. Oral guarantees made to the government under a specific contract are not considered implied warranties. Implied warranties include the contractor's claims for:

- Warranty of merchantability

- Warranty for a particular purpose.

What are government warranty clauses?

Government warranty clauses provide for various types of warranties in supply and service contracts and generally fall into one of five basic categories:

Failure-free or hardware warranty. The contractor accepts the responsibility to correct any failure or defect that occurs during a specified or measured amount of use or operation.

Correction of deficiencies warranty. The contractor agrees to correct any deficiency in design, material, or workmanship that becomes apparent during a test or early operation and that results in the specific item's performing below the required standard. This type of warranty in a major systems contract usually also applies to spare parts and other supplies included in the contract.

Supply warranty. The contractor is obligated to replace or reperform work on contract items if defects in material or workmanship existed at the time of acceptance.

Service warranty. The contractor agrees to reperform defective services if defects in workmanship existed at the time of acceptance. This is similar to a repair warranty in a retail establishment.

Data warranty. The contractor agrees to either correct or replace data that does not at the time of delivery conform with the specification and all other requirements of the contract. If correction or replacement of the data is no longer required by the government, the government may elect a price or fee adjustment. This warranty lasts for a period of three years after delivery of the data.

  • [1] John Cibinic, Jr., and Ralph C. Nash, Jr., Administration of Government Contracts (Washington, D.C.: George Washington University Press, 1981), p. 379.
Found a mistake? Please highlight the word and press Shift + Enter  
< Prev   CONTENTS   Next >

Related topics