A recent court decision delivers a stark warning to government contractors: failing to clearly include all the terms and conditions from your offer into the final contract could end up costing you. As this issue becomes increasingly common in federal contracting, the decision serves as a wake-up call for anyone drafting or negotiating government contracts.
Background
In Beacon Point Assocs., LLC v. Dep’t of Veterans Affairs, the Court of Appeals for the Federal Circuit examined whether the contractor’s quote—including its terms and conditions—was incorporated by reference into the contract. The court ruled it was not.
Beacon Point Associates LLC (Beacon) believed that the Department of Veterans Affairs was bound by the terms in its quote. Although the quote was cited in the award, the contract lacked specific language incorporating Beacon’s terms. Beacon argued that the quote was incorporated by reference based on extrinsic evidence, including email exchanges during contract formation.[1] Importantly, the quote’s provisions conflicted with the Federal Acquisition Regulation (FAR). Beacon’s terms required the government to exercise option years, while the FAR allows for the Contracting Officer’s discretion in the exercise of an option. The Court concluded the quote’s terms and conditions were not incorporated by reference, stating that Beacon should have used explicit language that its conflicting provisions were incorporated into the contract.[2]
Contrast this with CSI Aviation, Inc. v. Dep’t of Homeland Security, where the Federal Circuit addressed the same issue, but reached the opposite conclusion.
CSI Aviation, Inc. (CSI) sought over $40 Million in cancellation charges, citing a provision in its terms stating: “If no cancellation charges are set forth on the first page of this Agreement, then… [a] 100% cancellation charge will apply if [there is a cancellation] less than 14 days prior to flights.” [3] Although CSI’s terms potentially conflicted with the FAR, the Court found the terms were incorporated by reference. The Schedule Contract explicitly identified CSI’s terms and stated they would apply to all operations.[4]
Key Distinctions
Despite similar facts, the outcomes diverged sharply. Why?
- CSI’s contract explicitly incorporated its offer and terms.
- Beacon relied on assumptions and extrinsic evidence.
The Federal Circuit noted that CSI’s offer was “expressly incorporated and made part of the contract,” leaving no ambiguity. Beacon’s contract, by contrast, did not clearly communicate that the quote was meant to be incorporated.[5]
Lessons Learned
- Use Clear Language of Incorporation: Contractors must ensure (and confirm with their Contracting Officer in writing) that their offer and awarded contract explicitly state that their terms and conditions are incorporated by reference. The court doesn’t require “magic words,” but it does require clarity. Simply mentioning a quote or offer isn’t enough.
- Incorporation Doesn’t Guarantee Enforcement: Even properly incorporated terms may be overridden by FAR clauses. CSI’s case raised—but didn’t resolve—the issue of whether conflicting contractor provisions are enforceable. Still, clear incorporation gives contractors a fighting chance, which Beacon lacked.
Takeaway
Contractors must proactively and unambiguously identify which terms and conditions are incorporated into the contract before execution, especially if they conflict with FAR. As the Federal Circuit put it: “To incorporate material by reference, a contract must use clear and express language of incorporation, which unambiguously communicates that the purpose is to incorporate the referenced material.”[6]
If you have questions regarding this decision or need assistance with clearly incorporating your offer’s terms by reference or any other government contract matter, please contact Lauren Brier or another member of PilieroMazza’s REAs, Claims, and Appeals or Government Contracts practice groups. Special thanks to Adel Mansour for assisting in the preparation of this blog.
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[1] Beacon Point Assocs., LLC v. Dep’t of Veterans Affs., 139 F.4th 1306, 1309 (Fed. Cir. 2025).
[2] Id., at 1310.
[3] CSI Aviation, Inc. v. Dep’t of Homeland Sec., 31 F.4th 1349, 1352-53 (Fed. Cir. 2022).
[4] Id., at 1357.
[5] Beacon Point Assocs., LLC v. Dep’t of Veterans Affs., 139 F.4th at 1310.
[6] Id.
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