PCI is starting a new webinar series, the Case of the Month Club. Each month PCI’s Government Contracts law experts will discuss one or two recent cases. The first August case is Inserso Corp. v. United States. If you want to learn more about the Case of the Month Club, click here.
Facts: The Navy awarded a Firm Fix-Price contract to BGT Holdings for “stand-alone, complete outdoor-rated air cooled dual fuel [sic] LM2500 Gas Turbine Generator Set (GTGS) using [government furnished equipment].” Functionally, the contractor was going to assemble the generators using a set of parts provided by the Navy. The Navy provided all the parts except for one (which was large and expensive). A Navy procurement manager told BGT that the item would not be provided unless BGT submitted a price reduction submission for the value of the item. BGT claims the contracting officer orally substantiated this statement. BGT refused and purchased the item and completed the contract. The Government never provided the item as promised in the contract. They submitted a request for equitable adjustment for the value of the replacement item. The contracting officer rejected the equitable adjustment. BGT appealed the decision to the Court of Federal Claims.
Issue: Can a contractor get an equitable adjustment for costs incurred for undelivered GFE if the contracting officer does not sign a document confirming that the GFE would not be delivered?
Holding: No – the contractor in this instance was not able to receive an equitable adjustment for the costs incurred in replacing the undelivered GFE.
Reasoning: On its first argument, BGT argued that it deserved an equitable adjustment for the costs incurred due to non-delivery of the GFE. The COFC denied this claim because the contracting officer did not provide written confirmation that the GFE was not going to be delivered unless the contractor submitted a price reduction submission. In government contracting, only a warranted contracting officer can change a contract, and only in writing. The statements from the procurement manager could not bind the government, and so their statement that the item would not be delivered should not have been relied upon by the contractor until it was ratified by the contracting officer in writing. The non-delivery of the item was not sufficient to bind the contract.
BGT also submitted a breach of contract argument – that the Navy breached its contract by not delivering the GFE. This argument failed because the contract specifically stated that late or non-delivery of GFE was not a breach, and that instead an equitable adjustment was the proper remedy in that instance.
BGT also argued that the Government was acting in bad faith. The court denied this argument as well. It is extraordinarily difficult to prove bad faith on behalf of the Government, and the contractor would have had to overcome a very large hurdle.
Analysis: This case is noteworthy because it seems to hold that if the contracting officer never submits a written acknowledgment of undelivered GFE, that the contractor has no recourse to recover the associated costs.