“You Guessed Wrong!” Government Not Liable for Wrong Estimates in an Indefinite Quantity Contract; Valor Healthcare, Inc. v. Department of Veterans Affairs, CBCA 6824

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Appeal alleging claim for negligent estimates is denied. The contractor alleged the agency had negligently estimated the services it would need and the contractor was entitled to difference between what it planned to earn based on the estimates and what it actually earned. The board noted that the contract at issue was an indefinite quantity contract. A party to an indefinite quantity contract is only entitled to the minimum contract amount, not the estimate amount of work. Thus, the claim for negligent estimates failed as a matter of law.

Valor Healthcare had a contract with the Department of Veterans Affairs to provide health care services at community clinics. The contract contained FAR 52.216-22, the Indefinite Quantify clause. Nevertheless, the VA had provided Valor with workload estimates, that the company had used in in calculating its price. Regardless of the estimates, the contract guaranteed a minimum number of patients per month.

Once Valor began performance, however, it did not treat as many patients at the VA estimated. Valor submitted a $1.5 million claim to the VA representing the difference between the anticipated profits based on the VA’s estimates and its actual profits. The VA denied the claim. Valor appealed to the CBCA. The government moved for summary judgment.

As a preliminary issue, the board had to address we whether the contract was an indefinite delivery contract. The board noted that the contract included the FAR’s Indefinite Quantity clause and a guaranteed minimum, which were indicia of indefinite quantity contract. But Valor claimed that the while contract contained indicia of indefinite quantity contract, it was actually a requirement contract because (1) Valor was required to provide care for all of VA’s primary care needs, and (2) the VA was not free to obtain these services from other contractors.

The board was not convinced. While Valor was required to meet all the VA’s primary care needs for the patients it saw, not all patients were required to seek primary care services from Valor. Also, patients could obtain primary care services from the VA directly, so contrary to it contentions, Valor was not the only provider of primary care services. This availability of choice precluded a finding that this was a requirements contract.

As part of its claim, Valor contended that the VA had negligently estimated the number of patients. But the board reasoned that because this was indefinite quantity contract, the negligent estimate claim failed as a matter of law. In an indefinite quantity contract, the contractor is guaranteed no more than the minimum amount of sale specified din the contrac.t The government cannot be liable for breaching an indefinite quality contract so long as it orders the contract minimum.

Valor also asserted a superior knowledge claim, alleging that the VA failed to share proper patient estimates. But the board reasoned that this was really just another way of asserting an erroneous estimate argument. Essentially, Valor was arguing that had it known there would be fewer patients than estimated, it would have bid differently. The damages for the VA’s alleged failure to disclose proper information was still the difference between what Valor earned and what it expected. Thus, Valor was simply alleging that the VA was obligated to buy services for the estimates set forth in the contract. But again, the board, reasoned that is not how an indefinite quantity contract works.

Valor is represented by Stuart B. Nibley, Amy C. Hoang, and Sarah F. Burgart of K&L Gates, LLP. The government is represented by Neil S. Deol of the Department of Veterans Affairs.

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