LACK OF GOOD FAITH NOT SAME AS BAD FAITH

The Civilian Board of Contract Appeals (CBCA) has just released an opinion on a motion to dismiss in which the board reiterates the rule that proving the lack of good faith does not require the claimant contractor to allege and prove bad faith. The contractor alleged that the government breached its implied duty of good faith and fair dealing by refusing to respond to the contractor's many requests for the government to discharge its contractual duties.  The Board denied the motion to dismiss and noted that it was premature for the contractor to claim its attorney fees and costs incurred in responding to the government's motion.

"The covenant of good faith and fair dealing is inherent in every contract," the Board wrote.  Further, "[a] claim that HUD breached the implied covenant of good faith does not require a showing of bad faith."  As we've pointed out before in these articles, a claim that the government breached its duty of good faith and fair dealing is not the same as a claim the government acted in bad faith.  Bad faith involves motivation by malice.

The obligation of good faith and fair dealing is written into every contract by operation of law.  It is implied.  The duty of good faith and fair dealing can be breached, said the CBCA, by lack of diligence, negligence, or a failure to cooperate. As we have often repeated, the government has a duty to cooperate with the contractor or as the Armed Services Board of Contract Appeals (ASBCA) says, the government has a "duty to do whatever is reasonably necessary to enable the contractor to perform."

So the CBCA found that the absence of an allegation of bad faith did not defeat the contractor's claim and it denied the motion to dismiss.

The government often takes far too lightly a number of implied obligations it has in every contract.  It has the duty to provide specifications free from errors, conflicts and omissions which are commercially practicable to perform.  It has the duty to cooperate with the contractor and not interfere in the contractor's performance. It has the duty to communicate with the contractor.  Yes, the duty to communicate. And it has the duty to disclose information it has which is vital to the contractor's performance.  This latter obligation exists even if the parties are equally ignorant of the information but the government is in a better position to know it.

Stonewalling a contractor isn't just a bad business judgment.  It's illegal.  It's a breach of contract.  And damages for breach of contract can in appropriate cases include lost anticipated profits.

These kind of cases should not arise in today's enlightened procurement community.  This may be just another example of the people in the field not getting the message or not caring to follow it.

bill@spriggslawgroup.com            www.spriggslawgroup.com