The primary method of interpreting a government contract is to determine the “plain meaning” of the disputed language. The plain meaning method is applied when the contractual language is clear and unambiguous. Under this method, contract terms are interpreted according to the plain and ordinary meaning of the disputed words, and extrinsic evidence may not be relied on for interpretation. In determining the plain meaning of the disputed language, adjudicative forums may look to the dictionary definitions of the relevant words. In doing so, the words are assigned the meaning they had at the time of contract formation. In situations where the disputed words have more than one dictionary definition, the definition that is most appropriate within the context of the whole contract prevails. However, even when the plain meaning interpretation is applied, the contract must be construed as a whole and interpreted to harmonize and give reasonable meaning to all its parts without rendering terms superfluous or meaningless.
In Armed Services Board of Contract Appeals (ASBCA) No. 62461, issued on August 17, 2021, the Army Contracting Command, Rock Island Arsenal, awarded a task order under the awardee’s General Services Administration (GSA) IT Schedule 70 for Network and Communications, Engineering and Installation Support for the Army in Afghanistan and Kuwait. The task order contained the clause at Federal Acquisition Regulation (FAR) 52.217-8, Option to Extend Services (Nov 1999), which stated in pertinent part that “[t]he Contracting Officer may exercise the option by written notice to the Contractor within 90 days before the expiration of the contract.” Following the award, the contractor encountered difficulties retaining staff at the proposed labor rates under the primarily firm-fixed-price task order, leading the contractor to discuss with the government the possibility of terminating the contract. Despite the contractor’s staffing difficulties, the Army notified the contractor four days before the base period ended that it would exercise its option to extend the task order.
Following the notification, the Army exercised its right to extend services for a three-month period under FAR 52.217-8 on the last day of the base period. Later, the contractor filed a claim for approximately $3.7 million for its excess incurred costs. In the appeal that followed the deemed denial of the claim, among other arguments, the contractor asserted that the Army had failed to timely exercise the option in accordance with the clause at FAR 52.217-8. Specifically, the contractor contended that since FAR 52.217-8 allowed the contracting officer to exercise the option “within 90 days before the expiration of the contract,” the Army was required to exercise the option at least 90 days before the expiration of the base period of performance. Stated another way, the contractor argued that the Army’s exercise of the option was untimely because the word “within” in the clause should be read as “at least.”
The Board disagreed with the contractor and interpreted the disputed language of FAR 52.217-8 based on the plain meaning of the word “within” and its ordinary use. The Board quoted the definition of the word “within” from the 3rd edition of the New Oxford American Dictionary. Per this definition, “within” meant “inside the range of” or “occurring inside (a particular period of time)”. In accordance with this definition, the Board found that the government had timely exercised the option because it did so inside the 90-day period preceding the contract’s end. The Board rejected the contractor’s interpretation of “within 90 days,” which would have required the Army to exercise the option no later than 90 days before the base period expired. The decision noted that the contractor’s interpretation was not supported by precedent or the plain meaning of the disputed words. Consequently, the Board held that the Army had properly exercised the option to extend services.
Plain meaning interpretation is the primary method employed to interpret government contracts. Under this method, words are assigned their ordinary, everyday meanings. When the meaning of the disputed terms is plain and unambiguous on the face of the contract, parties may not introduce extrinsic evidence to support their respective interpretations. Extrinsic evidence may only be relied upon when the language is ambiguous and open to more than one reasonable interpretation. As was the case in the decision described above, adjudicative forums may rely on contemporaneous dictionary definitions of the relevant words to determine their plain meaning in order to resolve government contracts interpretation disputes. In situations where a word has multiple dictionary definitions, the definition that is most appropriate given the context of the entire contract prevails. This is because even when the plain meaning method of interpretation is used, the contract is still construed as a whole, with reasonable meaning assigned to all its parts.
This Federal Procurement Insight is provided as a general summary of the applicable law in the practice area and does not constitute legal advice. Contractors wishing to learn more are encouraged to consult the TILLIT LAW PLLC Client Portal or Contact Us to determine how the law would apply in a specific situation.