DECISION
The United States seeks review of the decision of the United States Court of Federal Claims in
Harbert/Lummus v. United States,
BACKGROUND
The facts of this case have been set out in great detail in the trial court’s decision and will be referred to in this opinion only to the extent necessary for an understanding of the issues that give rise to this appeal. During the oil crisis in the late 1970’s, the federal government investigated alternative sources of energy. Congress passed the Biomass Energy and Alcohol Fuels Act of 1980 (the “Act”), which created the Alcohol Fuels Program (the “Program”) to encourage private companies to design and build alternative fuel energy plants. The Act created the Office of Alcohol Fuels (the “Program Of *1431 fice”) within DOE to administer the Program. Specifically, the Program Office was vested with the power to issue government loan guarantees for up to 90 percent of the cost of construction of ethanol and other alternative fuel plants. The Program Office had no independent contracting authority.
One of these loan guarantees was issued to Agrifuels Refining Corporation (“Agrifuels”), which in turn contracted with Harbert/Lum-mus to construct an ethanol plant. The funds that Agrifuels needed to construct the plant were provided by lending banks and guaranteed by DOE through a loan guarantee agreement and a loan servicing agreement. Harbert/Lummus was not a party to these contracts and was in contractual privity only with Agrifuels through the construction contract. This construction contract provided for a bonus for Harbert/Lummus for early completion and a penalty for late completion.
The construction payment schedule, which was attached to both the construction contract and the loan servicing agreement, called for a 21-month work and payment schedule. During the pre-closing negotiations and after construction began, Har-bert/Lummus repeatedly requested that all the parties approve an accelerated 18-month work and payment schedule. Several DOE officials within the Program Office approved of the schedule modification, but later this approval, which was only circulated internally in the Program Office, was withdrawn. The trial court found that the DOE’s Contracting Officer (the “CO”) never expressed to Harbert/Lummus an intent to enter into a contract to modify this written schedule.
See Harbert/Lummus v. United States,
During construction of the plant, Har-bert/Lummus stated at a meeting at which all the parties were present that it was not receiving timely payments and that it wanted the accelerated construction schedule to be adopted by the parties. The Deputy Director of the Program Office responded that “DOE was committed to funding the project to completion, and if the contractor completes the project, all the payments would work out in the end.” Id. at 506. The Deputy Director did not have authority to bind the government. The trial court found that the CO was present at the same meeting, but did not question the offer and was silent after the offer was made. Id. The trial court found that the CO adopted the Deputy Director’s statement by his silence and created a new, binding unilateral offer to Har-beri/Lummus that the government would continue its role as guarantor of future borrowing requests by Agrifuels in exchange for Harbert/Lummus’ continued work on the project. Id. at 513. When Harbert/Lummus continued work on the project, the trial court held that Harbert/Lummus had accepted DOE’s offer, thereby creating a binding contract. Id. at 513-14.
Prior to completion of the plant, the ultimate parent companies of Agrifuels declared bankruptcy, triggering an event of default under the loan agreements between Agrifu-els and DOE. DOE eventually decided to stop funding the project and Harberi/Lum-mus sued for damages for breach of DOE’s promise to not withdraw its guarantee until completion of the project. The trial court awarded Harbert/Lummus $2,870,768 in damages for breach of this unilateral contract.
This appeal concerns the alleged formation of two oral contracts. The first contract regards the unilateral offer by the Deputy Director to continue guaranteeing Agrifuels’ borrowing requests until completion of the project. The second contract regards the alleged acceptance by DOE of an accelerated construction and payment schedule. With regard to the unilateral contract to continue to guarantee funding, the government argues that the trial court erred in recognizing this contract as binding because (1) the Act and its implementing regulations do not authorize DOE to contract directly with construction contractors, (2) DOE could not enter into this oral contract because of restrictions imposed by statute and regulations, (3) the CO was not delegated the authority to enter into such a contract, and (4) the CO did not ratify the contract. In its cross-appeal, Harberi/Lum- *1432 mus argues that the trial court erred in calculating the damages with respect to DOE’s breach of this oral agreement. We need only determine whether the CO had the authority to enter into the oral, unilateral contract and whether he ratified such contract. Harbert/Lummus also argues that the trial court erred in finding that DOE was not bound by a second agreement to accelerate the construction schedule.
DISCUSSION
In reviewing judgments of the Court of Federal Claims, we review conclusions of law
de novo
and findings of fact for clear error.
See City of El Centro v. United States,
A. The Alleged Contract to Continue Guaranteeing Funding of the Project
It is well established that the government is not bound by the acts of its agents beyond the scope of their actual authority.
See Federal Crop Ins. Corp. v. Merrill,
The CO’s authority to commit and bind DOE contractually was specifically conditioned in his delegation of authority as follows:
[The CO] is hereby delegated the authority, with respect to actions valued at $50 million or less, to approve, execute, enter into, modify, administer, closeout, terminate and take any other necessary and appropriate action (collectively, “Actions”) with respect to Financial Incentive awards on behalf of the Department of Energy without the prior written approval of or further delegation being necessary from the Director, Office of Procurement Operations (or designee). However, a separate prior uxritten approval of any such action must be given by or concurred in by [the CO] to accompany the action. At that dollar threshold, a specific delegation from the Director, Office of Procurement Operations (or designee) is not required. This delegation shall include the authority to make all required determinations and decisions, except those that are specifically to be made by other authority.
(emphasis added) Thus, the CO’s delegation of contracting authority contained a separate and independent provision which required that all actions entered into by him be accompanied by his prior, written approval. Harbert/Lummus directs us to nothing in the record that evidences any separate, prior written approval by the CO of the oral, unilateral contract. Accordingly, the CO was not authorized to bind the government in disregard of this explicit provision. Har-bert/Lummus argues that the CO had implied authority to enter into the unilateral contract and that such a contract was “necessary and appropriate” with regard to his actions relating to the Financial Incentive awards. These arguments are unpersuasive in light of the express mandate in the delegation that the CO agree to any action by *1433 prior, written approval. Harbert/Lummus also argues that, because the government does not dispute the CO’s authority to enter into a written contract with Harbert/Lum-mus to care for the plant after DOE ceased its guarantees, the CO must have had the authority to enter into the oral, unilateral contract because both contracts stemmed from the CO’s authority to minimize DOE’s expenses with regard to the project. Again, this argument is unpersuasive because it does not address the fact that the unilateral contract was oral and did not contain the required written approval.
As we have held before, agency procedures must be followed before a binding contract can be formed.
See American Gen. Leasing, Inc. v. United States,
Even if the CO somehow possessed the authority to enter into the oral contract, we hold that he did not ratify it. The trial court found that the Deputy Director, who did not have any contracting authority, actually made the offer to enter into the unilateral contract. Agreements made by government agents without authority to bind the government may be subsequently ratified by those with authority if the ratifying officials have actual or constructive knowledge of the unauthorized acts.
See United States v. Beebe,
Where an agent has acted without authority and it is claimed that the principal has thereafter ratified his act, such ratification can only be based upon a full knowledge of all the facts upon which the unauthorized action was taken. This is as true in the ease of the government as in that of an individual. Knowledge is necessary in any event____ If there be want of it, though such want arises from the neglect of the principal, no ratification can be based on any act of his. Knowledge of the facts is the essential element of ratification, and must be shown or such facts proved that its existence is a necessary inference from them.
Id.
at 354,
In our case, the trial court merely found that the CO was present when the Deputy Director made the offer and was silent after the offer was made. There was no finding that the CO even heard the statement. This is not sufficient evidence to support a finding of actual knowledge by the CO of the offer. In addition, the facts as found by the trial court do not support imputing to the CO constructive knowledge of the unilateral contract. The mere fact that Harbert/Lummus continued performing its construction activities would not have put the CO on notice of the existence of a new, unilateral contract because Harbert/Lummus had been performing its construction activities before the offer by the Deputy Director in accordance with its construction contract with Agrifuels. In the absence of either
*1434
actual or constructive knowledge of the unilateral contract, the CO’s silence cannot be a ratification of the unilateral contract. Moreover, ratification must also be based on a demonstrated acceptance of the contract.
See EWG Assocs., Ltd.,
In addition, as previously discussed, the CO’s delegation of authority expressly provided that even a ratification by the CO would have to be in writing. In the absence of such a writing, the CO could not have properly demonstrated his acceptance of the contract. Because we find that the government is not bound by this oral contract to guarantee funding of the project to completion, we reverse the decision of the trial court that there was such a contract and we vacate the trial court’s damages award with respect to this alleged contract. We therefore need not reach Harbert/Lummus’ argument that such damages were improperly calculated.
B. The Alleged Contract to Accelerate the Construction Schedule
In its cross-appeal, Harbert/Lum-mus argues that the trial court erred in not recognizing that DOE was contractually bound to an accelerated construction and payment schedule. Harbert/Lummus argues that, although the CO never communicated to Harbert/Lummus or Agrifuels an intent to bind DOE to the accelerated schedule, the nonpublicized, internally-circulated approval by several officials within the Program Office, which office did not have authority to bind DOE, was' independently effective to bind DOE. Harbert/Lummus also argues that the CO’s failure to execute the 18-month schedule change order after the internally-circulated approval was merely a ministerial act and that the non-occurrence of such an act is insufficient to allow the government to escape contractual liability.
The party alleging the existence of a contract has the burden of demonstrating “a mutual intent to contract including an offer, an acceptance, and consideration.”
Trauma Serv. Group,
CONCLUSION
For the foregoing reasons, we reverse the judgment of the trial court with respect to its recognition of a binding oral, unilateral contract between the government and Har-berl/Lummus and therefore we vacate the trial court’s damages award for breach of this contract. We affirm the judgment of the trial court with respect to its finding that DOE was not contractually bound to an accelerated construction and payment schedule.
AFFIRMED-IN-PART, REVERSED-IN-PART, and VACATED-IN-PART.
COSTS
Each party to bear its own costs.
Notes
. Harbert/Lummus, a joint venture of Harbert International, Inc. and Lummus Crest, Inc., will be treated as a single party for purposes of this case. Throughout the opinion, this party will be referred to as Harbert/Lummus.