FEMA provided grants to Puerto Rico for disaster relief. Puerto Rico entered a contract with the grant money. When Puerto Rico didn’t pay, the contractor argued FEMA was liable for breach. CBCA rejected the claim. The government may be a grantor, but that doesn’t make it liable for the grantee’s breach.
Cobra Acquisitions, LLC v. Department of Homeland Security, CBCA 7724
- Nature of Claim – FEMA provided money to Puerto Rico for disaster relief. Puerto Rico agreed to be a grantee of the funds under the Stafford Act. Following Hurricane Maria, Puerto Rico entered into a contract with the claimant for power restoration services. The claimant submitted a claim to FEMA, alleging Puerto Rico had not paid for its work. FEMA denied the claim.
- Guarantee – On appeal to the CBCA, the claimant alleged FEMA had verbally guaranteed Puerto Rico’s payment obligation. The board, however, found that even if the parties had agreed to a suretyship, CBCA would not have jurisdiction. The CDA grants CBCA jurisdiction over procurement contracts. It does not allow the board to hear disputes arising out of suretyship contracts.
- Agent/Principal – Even if FEMA had not guaranteed payment, the claimant argued Puerto Rico was the mere purchasing agent for FEMA. Thus, FEMA should be liable as principal. CBCA rejected the argument. The Stafford Act permits FEMA to provide financial assistance through grants. While grantees may use contractors, those contracts are not made on behalf of and do not benefit FEMA. FEMA was not a party to the contract and was not liable for the alleged breach.
The claimant is represented by Christopher D. Man, Bryant Gardner, Kyllan Gilmore, and Abbe David Lowell of Winston & Strawn LLC. The government is represented by Matthew Lane of the Department of Homeland Security.
–Case summary by Craig LaChance, Senior Editor
