Contract performance

Army Lawyer, Jan, 2005 by Steven Patoir, Andrew Kanter, Michael Benjamin, James Dorn

Dodson Livestock purchased eighteen purebred Texel sheep. About one year after the MARC auction, Dodson Livestock alleged that one ram was diagnosed with paratuberculosis. Dodson Livestock sold its entire flock for slaughter and filed a claim with the Department of Agriculture for $57,628,202 in lost profits. After three attempts to submit a properly certified claim, ultimately only the claim related to the one ram, number 806173, reached the court. (1284)

On 2 February 2001, the COFC granted the government's motion for summary judgment on the basis that the more specific statement of warning overruled any general theory of warranty. In addition, the efforts to screen the sale sheep for disease bolstered the warning theory. (1285) On appeal, the CAFC reversed the grant of summary judgment based on the existence of a question of material fact surrounding the effort to screen the sheep flock through various tests. (1286)

On remand, the COFC held an evidentiary hearing but was unconvinced by the plaintiff's conflicting evidence. The court held that the MARC representation was a disclosure, not a warranty; the MARC tested the sheep with reliable methods; and there was a question of fact as to the identity of ram number 806173. (1287)

The key to the warranty claim dismissal was that the language neither warranted that the animals would be free of paratuberculosis, nor stated that the independent testing would be foolproof. Instead, the government used a disclosure or disclaimer accompanied by a statement of intent to screen sheep for paratuberculosis prior to sale. (1288)

Final Rule on Production Surveillance and Reporting

The DOD issued a final rule amending the DFARS to eliminate requirements to perform production surveillance on "low-urgency contracts." (1289) The rule's goal is to focus more resources on critical and high-risk contracts. (1290) The final rule applies to all contracts classified as "Criticality Designator C." Production surveillance or contract monitoring for these low-urgency contracts is not required unless specifically requested by the contracting officer. (1291)

Air Force Changes Rules for Quality Assurance

The Air Force changed its policy regarding source inspection to be consistent with DOD policy and the changed DFARS rule. The memorandum states that there is no requirement for government contract quality assurance at source for contracts or delivery orders below $250,000. (1292) The memorandum lists exceptions for contracts mandated by regulation, required by memoranda of agreement, or determined by the contracting officer to have significant technical requirements, critical product features, or specific acquisition concerns. (1293)

A Game of Chicken

In Land O'Frost, (1294) the ASBCA rejected a warranty claim because the U.S. Army Soldier and Biological Chemical Command failed to provide the required notice in accordance with the warranty terms in the contract. The case involved the production of chicken breast filets for the Meals Ready-to-Eat (MRE) program. The specification involved inserting the filet into a polymer pouch, sealing the pouch, and thermoprocessing (or cooking) the entire package. (1295)