Appeal of the agency’s denial of a claim for contract termination costs is sustained, where the board was not persuaded by the agency’s argument that no contract existed between the parties. The board found the contract specialist had sent a contract and delivery order to the appellant, both of which appeared to be final documents. While the contract specialist did not have the authority to bind the government, the board noted the CO prepared and signed a final price negotiation memorandum and contract clearing request incorporating the appellant’s proposed price, and was aware of the contractor’s technical questions. While the CO stated she did not ask the contract specialist to forward the contract to Potomac, the board found the record conspicuously silent with regard to communications between the CO and contract specialist, and drew an adverse inference unfavorable to the government.
Potomac Electric Corporation appealed the Defense Logistics Agency’s denial of a claim for costs incurred under its contract. DLA argued no contract existed.
In June 2017, DLA issued a solicitation for the purchase of direct current motors as a small business set-aside IDIQ. The solicitation provided for the purchase of 200 motors in the first year, 150 motors in each of four option years, and a guaranteed minimum order of 150 motors. In August, the contract specialist sent Potomac a draft copy of the contract and first delivery order, and asked Potomac to sign and return them. The contract did not bear a watermark identifying it as a draft, or indicate it was a draft in any way. The delivery order ordered 200 motors for $784,476.00, which mirrored Potomac’s proposal. The DO set a delivery date of January 31, 2018. During proceedings, the CO stated that she did not direct the contract specialist to send the draft award.
Nonetheless, when Potomac asked the contract specialist to clarify the delivery schedule, which was accelerated by several months compared to the solicitation, the contract specialist corrected the delivery date and asked Potomac to sign the documents. When Potomac asked technical questions about the delivery order, a different CO responded. On August 18, the CO signed a final price negotiation memorandum reflecting Potomac’s proposed price, and on August 19, Potomac signed and returned the contract documents. At this time, Potomac told the contract specialist that work had to begin immediately in order to meet the tight deadline for delivery.
On August 23, the contract specialist forwarded the signed contact to the CO and on August 28, the CO signed a contract clearance request. However, also on August 28, DLA realized it needed the motors on a shorter time frame than provided in Potomac’s contract. DLA issued an amendment to the solicitation, to purchase 200 motors with a delivery date of 165 days after award, and deleted the remainder of the motors from the procurement.
The contact specialist forwarded the amended solicitation to Potomac, who responded that the solicitation had closed on July 7 and that a contract had been signed. Potomac inquired whether its contract was canceled and if the solicitation was being reopened. The appellant later submitted a claim for $27,000 for costs incurred in the performance of the contract between August 16, 2017, the date of putative contract award, and the date Potomac stopped working on the contract. Potomac alleged it incurred expenses reviewing the contract, conducting production simulation and planning, contacting vendors to negotiate delivery and to place purchase orders, placing ads to hire additional personnel to meet the large requirement, and contacting vendors to cancel orders.
In response, the CO stated that because no contract had been awarded, she lacked authority to resolve the claim and would take no further action. This appeal followed.
Potomac argued it was awarded a contract, and DLA disagreed. ASBCA sided with the appellant. First, the board held that the Potomac’s receipt of the contract, which was not labeled a draft and which mirrored its proposal, established mutuality of intent to contract. The board also found the parties intended their promises regarding performance and payment to be mutually binding. Further, the offer and accepted were unambiguous.
Finally, the board considered whether the contract specialist had the authority to bind the government. The board found he did not. However, the board noted that the CO took multiple actions to further the award of the contract, by preparing and signing the FPNM and the CCR. Further, the CO was aware of the technical questions Potomac posed so it could order the correct product, aware that Potomac had signed the contract, and aware that Potomac was operating under a tight schedule. While the CO stated she did not direct the contract specialist to send the draft award to Potomac, the board found the record conspicuously silent as to the communications between the CO and the contract specialist. The board found it difficult to believe that there were no communications regarding Potomac between the contract specialist, the CO, and the second CO who answered Potomac’s technical questions. The board made an adverse inference about the absence of these communications from the record, and concluded that the CO was sufficiently involved in the process to understand that a contract had been offered to Potomac.
When considered in concert, the board found Potomac adequately alleged the existence of a contract. Because the agency nullified a valid contract, the board held that the termination for convenience provisions should apply and granted Potomac’s claim in full.
Potomac Electric Corp. is represented by Leny Chertov, V.P. Operations. The government is represented by Daniel K. Poling, DLA Chief Trial Attorney, and Edward R. Murray, Trial Attorney, DLA Aviation.
