A recent decision by the United States Court of Federal Claims reminds us how important the Government’s estimated quantities are, even in a fixed price contract. In Agility Defense & Government Services, Inc. v United States (October 18, 2017), the Court of Federal Claims awarded Agility $6,906,339.20, plus interest, representing the cost of additional, unanticipated work Agility had to perform on the contract as a result of the Government’s negligent quantities estimates.
The claim arose out of a solicitation for a requirements contract to dispose of surplus military property from six areas of operation in Iraq, Afghanistan and Kuwait. The offerors were asked to submit a firm fixed price proposal for the work. Via Amendment 002, the Government provided a workload history and current inventory, but cautioned that
[t]he Government does not have workload projections.
Via Amendment 004, the Government added clause H-19, which contemplated that “the contractor may experience significant workload increases or decreases” and outlined a process for the contractor to “renegotiate the price” if the workload increased.
Via Amendment 007, the Government provided a chart that projected a stable workload for the first two years and then “workload declines” for option years three through five, down 75%, 50% and 30% respectively.
Agility successfully proposed to perform the work for one based year with four option years at a fixed price of $45,233,914.92 per year. Agility’s offer was well below the other two offerors who proposed $68,394,500.47 and $71,509,029.78, respectively.
Upon commencing work, Agility immediately fell behind schedule because the workload from the outset was substantially higher than anticipated. After receiving a letter from the Government expressing its concerns with Agility’s progress, Agility stated it would increase staffing by more than 50% at no additional cost to the Government. At approximately the same time, Agility discussed with the Government when it could invoke clause H-19 to obtain a price increase. Although clause H-19 was modified following these discussions, Agility never submitted a formal request for costs under either the original or amended clause H-19.
Following a termination for convenience, Agility submitted claims for its additional costs associated with contract performance.
Agility ultimately pursued its claims in the Court of Federal Claims and, although the court found that Agility experienced workloads “much greater than the Baseline Data during the base year of performance, the court denied Agility’s claims because the Government had provided Agility with reasonably available historical data and did not negligently estimate its needs.
The United States Court of Appeals for the Federal Circuit reversed the Court of Federal Claims, finding that the lower court’s findings were clearly erroneous, primarily for two reasons: (1) the court ignored that the Government did not only provide historical data, it also estimated its requirements via the Amendment 007 chart, and (2) the court failed to address evidence indicating that the Government’s historical data was not “the most current information available,” as required by FAR 16.503. The Court of Appeals noted that Agility presented evidence that the Government possessed information regarding its anticipated requirements above and beyond its historical requirements and, because the Government anticipated increased workload, simply providing offerors with historical workload was not “the most current information available” sufficient to provide a realistic estimate under FAR 16.503. Instead, the Government should have based its estimate on its anticipated “surge” in workload. The Court of Appeals also rejected the Government’s argument that clause H-19 was Agility’s only means of recovery, stating that “[w]e see no reason why [the Government’s] negligence in providing an adequate estimate during solicitation should be excused by its inclusion of a provision directed to workload changes upon performance.” The Court of Appeals reversed the Claims Court’s denial of Agility’s negligent estimate claim and remanded for calculation of Agility’s equitable adjustment.
On remand, the Court of Federal Claims found that Agility had furnished the court with ample evidence to satisfy the actual cost method of proving damages. To support its claim, Agility provided the court with its actual costs for the additional labor needed to complete performance, which Agility had segregated from Agility’s original staffing model.
The court held the additional costs accurately reflected the excess work Agility performed on the contract as a result of DRMS’ negligent estimate.
Government contractors who find themselves performing more work than originally anticipated notwithstanding the lack of a scope change may want to consider whether they have a claim for negligence on the part of the Government in estimated the original scope of work. Government contractors may want to couple this with a superior knowledge claim as, in this case, the Government had additional information about an increased workload which it did not share with proposers during the solicitation phase of the contract.
If you have questions about whether your business may have such a claim against the government, please don’t hesitate to contact us for advice.