Overview
Subpart 50.1 outlines the "extraordinary" authority granted to specific agencies under Public Law 85-804 and Executive Order 10789. This subpart allows the government to enter into, amend, or modify contracts without regard to other provisions of law (such as the need for consideration), provided the action is deemed necessary to facilitate the national defense.
Key Rules
- The "Last Resort" Policy: This authority may only be used when no other adequate legal authority exists within the agency. If relief is available through other means—such as FAR Part 33 (Contract Disputes)—those channels must be exhausted first.
- National Defense Requirement: Every action approved under this subpart must include a formal finding that the action "will facilitate the national defense."
- Prohibited Actions: Pub. L. 85-804 cannot be used to:
- Utilize cost-plus-a-percentage-of-cost contracting.
- Violate existing laws limiting profit or fees.
- Circumvent full and open competition requirements.
- Waive required bid, payment, or performance bonds.
- Monetary Thresholds & Congressional Oversight:
- $90,000: Actions exceeding this amount generally cannot be delegated below the "Secretarial Level."
- $150 Million: Any obligation exceeding this amount requires written notification to the Senate and House Committees on Armed Services and a 60-day Congressional waiting period.
- Timing Restrictions: Contractors must submit requests for contract amendments before all obligations under the contract have been discharged (final payment). Informal commitments must be submitted within six months of the contractor beginning work.
Responsibilities
- The President: Grants the initial authority to agencies performing defense-related functions.
- Agency Heads: Responsible for exercising or delegating the authority in writing; they must personally approve indemnification for unusually hazardous or nuclear risks.
- Approving Authority (Secretarial Level or Contract Adjustment Boards): High-level officials who review cases, sign the Memorandum of Decision, and ensure uniformity across the agency.
- Contracting Officers (CO): Responsible for conducting thorough investigations, gathering evidence (financial statements, affidavits), seeking legal advice when jurisdiction is unclear, and maintaining complete records of the proceedings.
- The Contractor: Bears the burden of proof. They must submit the request, certify it (if over the simplified acquisition threshold), and provide exhaustive financial data to justify the need for extraordinary relief.
Practical Implications
- Bailing Out Essential Suppliers: This subpart is most famously used for "Amendments Without Consideration." If a critical defense contractor is facing a loss that threatens their solvency, the government may pay them more than the contract price—without receiving additional services—simply to ensure the contractor remains a viable source for national security.
- Correcting "Obvious" Mistakes: While the Contract Disputes Act handles most errors, Subpart 50.1 allows for rapid correction of mutual mistakes or obvious clerical errors if doing so avoids a delay in defense programs.
- Indemnification for High-Risk Work: For contractors involved in nuclear energy or unusually hazardous aerospace projects where private insurance is unavailable or unaffordable, the government uses its "Residual Powers" under this subpart to provide indemnification against catastrophic liability.
- Validation of "Handshake" Deals: In rare, urgent defense scenarios where a government official gives an oral instruction to start work before a contract is signed, this subpart provides the mechanism to formalize that commitment and pay the contractor.