Contract performance

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

The ASBCA found that Bender, in submitting false invoices, acted with "wanton disregard of the facts," billing the government for 430 cubic meters of sludge while actually only disposing 229.12 cubic meters of sludge. (1316) Due to repeated false invoices, the ASBCA approved the Army's revocation of final acceptance due to Bender's gross mistakes amounting to fraud. (1317)

The Splice of Life

The ASBCA reviewed the economic waste principle in Valenzuela Engineering, Inc., (1318) denying a claim in which a contractor used spliced rails in contravention of the contract. The claim revolved around an appeal from a contracting officer's decision demanding liquidated damages of $184,800.00. The contract, for Navy weapons facility improvements, included construction of a Type C magazine which required blast doors suspended from a track. (1319) The specification specifically stated, "Track sections shall not be spliced." (1320)

Valenzuela's subcontractor delivered spliced rails. After the Navy complained, Valenzuela assured the Navy it would correct the issue. The subcontractor, despite two letters from Valenzuela, installed the track with alignment splices. (1321) The subcontractor replaced the spliced rails and charged Valenzuela for the additional work; Valenzuela submitted a request for an equitable adjustment which the government denied. (1322)

On appeal, the ASBCA denied the claim holding that Valenzuela and its subcontractor failed to substantially comply with the contract. The board noted in particular the contractor's failure to provide expert testimony which would indicate that spliced rails would not interfere with the purpose of containing explosives. (1323) Discussing economic waste, the board stated that economic waste does not excuse non-performance, but merely limits excessive damages for the repair of non-conforming work. The rule provides that in the absence of economic waste, the government has the right "to get precisely what it ordered." (1324) In this case, doubt over the safety of the spliced rails coupled with the Navy's right to demand strict compliance with the contract specifications properly resulted in the Navy denying Valenzuela's claim for additional compensation.

Major Andrew Kantner.

Terminations for Default

Five Default Terminations Survive Tests at the United States Court of Appeals for the Federal Circuit

This past fiscal year, the CAFC affirmed three Board of Contract Appeals decisions and two COFC decisions upholding government default terminations. Despite a variety of challenges from the defaulted contractors/plaintiffs, the government prevailed in each case. Three of these cases are discussed below; two in other sections of the Year in Review. (1325)

After Two Years of Bending, the Army Terminates

In Bender GmbH v. Brownlee, (1326) an Army contract required the contractor to replace and repair portions of a retaining wall on the Nahe River near Baumholder, Germany. (1327) A series of events ultimately resulted in execution of Modification Number Four (Modification 4). In Modification 4, the Army agreed to extend the completion date to 9 October 1998 and agreed to accept the contractor's "revised structural analysis" (statical). In exchange, the contractor, waived "'any and all claims or requests for equitable adjustment arising from or connected to, alleged differing site conditions....'" (1328) After the parties executed Modification 4, the Army warned Bender in a cure notice that "its failure to make adequate progress to ensure completion of the project by the contract deadline may result in termination of the contract." (1329) The Army terminated the contract on 24 November 1998. (1330)