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Saturday, February 4, 2006

Lack of Privity Dooms Sub

United_states_flag_2 One area where privity of contract is alive and well is the field of government contracts.  The long-standing rule in government contract claims is that only a “contractor” -- one who is a “party” to the contract -- can sue the government under a contract.  This means that if the government’s actions cause extra costs for the sub, the sub has no direct action against the government.  In such cases, the prime contractor usually sponsors the claim, which avoids the problem.  But what happens when the prime has “absconded with all the moneys” and has no intention of sponsoring a claim?

Well, the subcontractor loses.  Attorney Gregory S. Jacobs of Pittsburgh’s Reed Smith runs down the lessons to be learned from recent decision of the Armed Services Board of Contract Appeals in Alpine Computers Inc., ASBCA No. 54659, 05-02 BCA ¶ 32,997, in When Can a Subcontractor Sue? Less Often Than You Would Think.
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