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The contractors promised to deliver nitrile gloves needed for response to the COVID-19 pandemic. The contractors failed to deliver the gloves on time. The government terminated for default. The contractors alleged their failure to deliver should be excused due to pandemic-related shipping delays. The court rejected that argument, reasoning that the contractors knew about possible pandemic-related shipping delays when they entered the contracts. The pandemic was not some unknown factor and thus not an excuse for deficient performance.

Servant Health, LLC, Noble Attorneys, LLC and Transcendence, Inc. v. United States, COFC No. 21-1373C, 21-1456C, 21-1472C

Background

Due to shortages caused by the COVID-19 pandemic, the Department of Veterans Affairs issued solicitations seeking nitrile gloves. The solicitations stated the gloves had to be on hand; it was not a request for manufacturing. Additionally, the solicitations stated multiple times that the gloves had to be delivered by a 45-day deadline. Moreover, to avoid gray market or counterfeit gloves, offerors had to certify that the gloves came from an original equipment manufacturer (OEM). If the contractor was not an OEM, they had to certify they were an authorized distributor of an OEM

Servant Health, Noble Attorneys, and Transcendence, entered into contracts with the VA for the gloves. Each company, however, had problems delivering authorized gloves within the 45-day deadline. Transcendence didn’t deliver any gloves; instead, the company offered substitute gloves in exchange for a contract extension. Servant made one delivery of gloves from an unauthorized OEM, but they were only a fraction of the number promised. Noble made two deliveries during the 45-day deadline, but they were not from the authorized OEM. And, like Servant, Noble didn’t deliver the number of gloves promised.

The VA terminated the three contracts for default. The contractors filed suit with the Court of Federal Claims, challenging the terminations. 

Court’s Analysis

Default

When a contractor challenges a termination for default the government bears the initial burden of showing the contractor was in default at the time of termination. In this case, Transcendence and Servant both offered to provide 50 million gloves from the same OEM. Transcendence didn’t provide any gloves. Servant made a partial delivery from an undisclosed OEM. The court found that this constituted a prima facie default.

Noble made a partial delivery of gloves. Some were from its authorized OEM, but others were different brands. Noble said it could only continue by supplying the substitute, off-brand gloves. The court reasoned that once Noble stated it would only supply substitute gloves and failed to provide adequate assurance of continued performance, it had repudiated the contract. The government was entitled to treat Noble’s renunciation as a breach.

Excusable Delay

Once the government establishes a default, the burden shifts to the contractor to establish its failure to perform was excusable. Here, the contractors essentially contended they were the victims of pandemic-related shipping delays.

The court was not persuaded. As an initial matter, the claims of shipping delays were not supported. The record contained no shipping information—e.g., bills of lading, delivery schedules, etc. Additionally, the contractors should have considered—a year into the pandemic— the possibility of pandemic-related shipping delays. Moreover, the court refused to find that the contractors’ delays were without fault. During performance, the agency repeatedly requested updates, but those requests went unanswered or met with vague responses.

Substitute Goods

The contractors alleged the VA improperly rejected the gloves that were partially delivered. They contended those gloves were functionally equivalent to the gloves they had proposed.

The court wasn’t buying it. The government is entitled to obtain precisely what it orders. The contract did not obligate the VA to accept the contractors’ unilateral post-award substitutions. Through the solicitation and during performance, the VA stressed the no-substitution requirements. Aside from this, the contractors’ claims regarding the quality of the substitute gloves lacked clear evidentiary support.

Servant, Noble, and Transcendence are represented by Eric S. Montalvo and Carol A. Thompson of the Federal Practice Group. The government is represented by Alison S. Vicks, Brian M. Boynton, and Patricia M. McCarthy of the Department of Justice as well as Tracy Downing of the Department of Veterans Affairs.