Thursday, August 23, 2012


Administrative Judge Jack Delman of the Armed Service Board of Contract Appeals (ASBCA), has just held that the government breached its duty of good faith and fair dealing by pulling a "bait and switch" on a contractor for services at Walter Reed Army Medical Center.  He also found the contractor was entitled to lost anticipated profits resulting from the breach.

The contractor was awarded a contract but soon thereafter the contractor was advised the services were no longer needed.  In effect, the government stripped from the contract the line item for services by certain employees.  The employees, in turn, were hired as federal employees and the work therefore went in house.  So, says Judge Delman, the services for which the government had just contracted with the contractor were performed instead by federal employees.

This action served as a partial termination of most of the contractor's contract.  "A government contractor has every reason to expect, absent a lawful convenience termination of the contract, that it will have the opportunity to provide the services it has contracted for at the agreed upon contract price for the prescribed contract period."  Here, there was "a material interference with the contractor's reasonable contract expectations."

The ASBCA concluded:
We conclude that the government's whisking away of appellant's PAs and stripping appellant's contract of their services in the manner described -- and just shortly after the government had urged appellant to hire them -- in order that they perform the same PA services as federal employees was a breach of the government's duty of good faith and fair dealing.
The Board sustained the appeal of the contractor's claim and remanded the calculation of anticipatory profits to the parties for resolution.

Lesson:  There is an implied obligation or duty on the part of the government to enable the contractor to perform and not interfere in that performance.

1 comment:

  1. Bravo for the judge! As a former Federal procourement official, I'm often appalled by arrogant and improper behavior of a handful of government officials who think a written contract doesn't mean much.