The Federal Circuit’s published decision in BGT Holdings LLC v. United States (Dec. 23, 2020) holds that the government’s refusal to adequately consider a contractor’s request for equitable adjustment (REA) could be considered a breach of contract.
In this case, BGT Holdings LLC (BGT) was appealing a dismissal of its claims by the Court of Federal Claims (COFC) in a dispute with the Navy.
BGT was performing a fixed-price contract to build and deliver a gas turbine generator for the Navy. As part of its performance, BGT was to receive and incorporate certain government-furnished equipment (GFE) into its deliverable. Well into performance, the Navy cancelled two of the GFE items, requiring BGT to purchase them on the open market. BGT filed an REA to recoup the costs to purchase the cancelled GFE, consistent with FAR § 52.245-1(d)(2)(i), Government Property and FAR § 52.243-1, Changes – Fixed-Price. The Navy rejected the REA.
On appeal, the Federal Circuit considered BGT’s five grounds for relief in its complaint:
- The Navy’s withdrawal of the GFE was a constructive change, entitling BGT to an equitable adjustment;
- The reduction of GFE was an official change to the contract for which BGT was entitled to an equitable adjustment;
- The Navy breached its contractual duty to deliver the GFE, and therefore BGT was entitled to damages;
- The Navy breached its contractual duty to provide an equitable adjustment after failing to deliver the GFE and obligating BGT to provide it; and
- The Navy breached its implied duty of good faith and fair dealing by failing to deliver the GFE.
Keep reading this article at: https://www.mondaq.com/unitedstates/government-contracts-procurement-ppp/1040080/for-government-furnished-property-the-government-not-granting-an-equitable-adjustment-may-be-a-breach-of-contract