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Published on January 30, 2023 • Law

Let’s All Say It Together: There’s No COVID Adjustment for Fixed-Price Contracts

The contractor wanted a price adjustment. The contractor argued the pandemic had increased its costs. But the ASBCA said the contractor was out of luck. The contractor had fixed-price contracts. Even if the pandemic had raised the contractor's costs, the contractor had to eat those costs.

Appeal of Heath & Core LLC, ASBCA No. 63403

Background

Heart & Core LLC had a fixed-price contracts with the Air Froce Academy. Heart & Core agreed to provide comforters, blankets, sweatpants, and bathrobes. Heart & Core asked the Air Force for an equitable adjustment. The company said its shipping and labor costs had increased due to the COVID-19 pandemic. The Air Force said no. Heart & Core appealed to the ASBCA.

Analysis

Heart & Core provided retail listings for bathrobes and comforters. The company argued these listings showed it was supplying items below market value. The board was not persuaded. It was not clear items in the retail listings were identical to Heart & Core's items. Also, while other vendors charged more for their items, that didn't prove Hearth & Core had experienced increased costs.

Regardless, Heart & Core had fixed-price contracts. The risk of a fixed-price contract is that the market will change. Even if the pandemic had increased costs, Heart & Core could not shift that increase to the government.

Heart & Core is represented by its President Jen Swendseid. The government is represented by Jeffrey P. Hildebrant, Isabelle P. Cutting, and Major Alissa J. Schrider of the Air Force.

--Case summary by Craig LaChance, Senior Editor

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