Appeal seeking to recover difference between what the government estimated in a contract and what the government actually ordered is denied. The contractor alleged that by ordering less than the amount estimated, the government had either partially terminated the contract or changed it. The board rejected these theories reasoning that the contract did not guarantee that the government would order a set amount of services. The contractor alleged that the government negligently estimated the amount it would need, but the board found that the contractor had not demonstrated that the government acted unreasonably in estimating the work.
Meridian Global Consulting, LLC had a contract with FEMA to provide security guard services at disaster sites. The contract was a labor hour contract with a fixed hourly rate. The contract contained one CLIN for the base period and additional CLINs for seven option periods. Each CLIN estimated the number of labor hours FEMA would require. But each CLIN identified the estimated hours as a “not to exceed” amount and stated that Meridian should bill based on actual hours.
FEMA ultimately exercised each option. But each time the agency exercised an option, Meridian signed a bilateral modification, which reduced the estimated labor hours for each option period. At the end of the contract, Meridian had only performed 51% of the hour originally estimated.
Meridian submitted a claim seeking the difference between the hours estimated and the hours actually ordered. The contracting officer denied the claim. Meridian appealed to the ASBCA asserting four theories: (1) the modifications reducing the estimated hours for each option period were partial terminations for convenience; (2) FEMA constructively changed the contract by reducing the number of hours ordered; (3) FEMA negligently estimated the hours it needed; and (4) FEMA breached by not disclosing its superior knowledge that it might not require all the estimated services.
The board reasoned that Meridian’s first two claims—termination for convenience, constructive change—failed because the contract contained no guarantee that FEMA would order a fixed amount of services. Rather, the contract stated that FEMA would only pay for the services it ordered and that Meridian must invoice only for actual hours. The estimated values were identified as maximum not-to-exceed values. Because the contract did not obligate FEMA to use every available labor hour, Meridian could not demonstrate that the failure to use every estimated hours was a termination or change.
As to third theory for negligent estimates, the board found that Meridian had not offered any evidence to show that the estimates in the contract were unreasonable. The mere fact that estimates do not pan out does not imply they were negligently calculated.
Lastly, the board found that Meridian’s superior knowledge claim also failed due to lack of evidence. Meridian had not demonstrated that FEMA knew its contract estimates would turn out to be too high.
A judge on the panel, Judge Lester, authored a separate concurrence. Judge Lester believed that the majority had avoided addressing whether Meridian could even recover for a negligent estimate claim under a labor hour contract. The Federal Circuit has held that a negligent estimate claim may be viable under requirements contract because the government has promised to obtain all its requirements from the contract. But such a claim is not valid under an IDIQ contract because the government does not promise to acquire all its services from the contractor. The contract in this case was neither a requirements contract nor an IDIQ contract.
Nevertheless, Judge Lester reasoned that the contract was more like an IDIQ contract. It did not obligate the government to acquire services exclusively form the sellers. Thus, the judge would have still resolved the negligent estimate claim in favor of the government, but on different grounds—namely, that the contract, like and IDIQ contract, never obligated the government to order anything more than it actually ordered.
Meridian is represented by Ryan C. Bradel and Stephen G. Darby of Ward & Berry PLLC. The government is represented by Keri Borzilleri and Matthew Lane of the Federal Emergency Management Agency.
