January 19, 2011
Court of Federal Claims to Armour of America: The "u" is for U Lose
In an opinion unsealed on January 10, 2011, the Court of Federal Claims rejected Armour of America's breach of contract claims and granted judgement to the United States on its counterclaims in Armour of America v. United States. The opinion is lengthy, so those in need of greater detail will have to consult the full opinion, linked to above.
The case has some similarities with the General Dynamics and Boeing cases, relating to the cancelled contracts to build the A-12 stealth aircraft, on which argument in the Supreme Court is scheduled for this week. As in those cases, this is a case about the Navy terminating a contract because the contractor had filed to make progress towards the completion of the contract in accordance with its terms.
On June 10, 2004, the Navy had awarded Armour of America (AOA) a contract to replace existing metallic armor on the CH-46E helicopter (pictured being trained to heal). The value of the contract was in excess of $6 million. One month later, the Navy realized that AOA's armor was insufficient for its purposes. The Navy sent AOA a letter advising AOA that it had about a month to develop a product that would serve the Navy's purposes or the contract would be terminated. One day before the deadline established in the letter, the parties met and AOA asked for three or four more weeks. One day after the deadline established in the letter, having received no satisfactory response from AOA, the Navy terminated the contract. The Navy then awarded the contract to ArmorWorks and sought in its counterclaim to recover $1.5 million in re-procurement costs plus over $45,000 in administrative costs
AOA challenged the termination arguing first that the Navy awarded the contract knowing of a ambiguity in AOA's bid and second that the termination was not for default but for the convenience of the government.
The court found no ambiguity in the minimum contract requirements and, allowing the contracting officer to terminate the contract if he reasonably believed AOA was not reasonably likely to complete the contract on time, found that AOA, given opportunity to cure any deficiencies, failed to alleviate the Navy's concerns in a timely manner. Even four weeks after the termination, although AOA continued ballistics testing, it still could not meet the Navy's specifications for its armor in terms of its ability to withstand impacts. The court thus concluded that there was no reasonable likelihood that AOA could complete the contract on time.
As a result, the court found that the Navy had acted reasonably in terminating the contract for default.
On the government's counterclaims, the court determined that the armor provided by ArmorWorks was substantially similar to that specified in the terminated contract with AOA. The court also found that the government had acted reasonably to minimize its re-procurement costs. As a result the court awarded the government the full damages sought on its counterclaim, including its administrative costs.
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