The Coast Guard issued a delivery order under a GSA Schedule contract to U.S.I.A. Underwater Industrial Apparel (“USIA”) for 777 underwater dry suits. USIA delivered the first 100 suits with an invoice for $59,000. The Coast Guard tested these suits and found they did not meet the specifications for an adjustable Velcro neck. After discussing the problem, the parties signed a bilateral modification “to change the delivery date, change the specification, and add a first article requirement.” The Coast Guard did not return the 100 suits to USIA.
USIA then delivered 120 more suits with the new adjustable neckline. The Coast Guard again tested the suits and determined that 32.5% of the suits leaked. The Coast Guard then issued a cure notice for the delivery order requiring USIA to supply acceptable dry suits within 15 days or face termination.
The parties disagreed about whether the Coast Guard’s testing was necessary and done in the proper manner. USIA made numerous efforts to discuss the government’s testing of the dry suits and to exchange representatives to observe the testing procedures, but the Coast Guard ignored many of USIA’s efforts. Additionally, despite requests from USIA, the Coast Guard neither returned the initial 100 dry suits, nor paid the outstanding $59,900. Due to difficulty obtaining return of the suits, USIA was unable to respond substantively to the cure notice or effect a cure within 15 days.
The Coast Guard then issued a show cause letter giving USIA 10 days to show why the entire delivery order should not be terminated. USIA responded that the Coast Guard had failed to pay for the 100 delivered dry suits and that USIA no longer wished to work with the Coast Guard on the order. The contracting officer terminated the delivery order for default by a final decision assessing reprocurement costs. USIA appealed to the CBCA and the Coast Guard moved for summary relief.
The CBCA denied the Coast Guard’s motion for summary relief, finding that there were still material facts in dispute. Specifically, the CBCA held that the issue of whether the delivery order provided for testing was not clear. Citing to the bilateral agreement between the parties, the CBCA indicated it was likely that some testing was required, because the modification included the language “first article requirement,” which suggests the parties intended to incorporate by reference the FAR clause(s) related to Subpart 9.3 First Article Testing and Approval. Despite including this language, it was not clear what kind of testing was required or whether the government properly performed the tests.
Practice Tip: When a clause pertaining to First Article Testing in a contract fails to state unambiguously exactly what testing should be conducted, it creates uncertainty and risk for both the Government and the contractor. U.S.I.A. Underwater Equipment Sales Corp. v. Department of Homeland Security, CBCA 2579, March 5, 2013.