Government’s Delayed Response Breached Contract, Says ASBCA

Here’s a situation my colleagues and I see with some frequency: a contractor, in the course of working on a government contract, submits a request of some sort to the agency.  Then waits for a response.  And waits some more.  Meanwhile, the government’s delay in responding prevents the contractor from moving forward with some aspect of the project, causing the contractor to incur costs.

For contractors faced with this type of government inaction, a recent decision by the Armed Services Board of Contract Appeals is welcome news.  In that case, the ASBCA held that the government breached its implied duty of good faith and fair dealing by waiting more than three months to respond to the contractor’s request to amend the Statement of Work–allowing the contractor to “twist in the wind” during that period.

The ASBCA’s decision in Relyant, LLC, ASBCA No. 59809 (2018) involved an Army contract for the acquisition of pre-fabricated relocatable buildings (abbreviated “RLBs” in the decision) for use at two different sites in Afghanistan.

The solicitation’s Statement of Work included certain specifications for the RLBs.  Among those specifications, the SOW required the installation of gypsum interior drywall to the interior of the shipping containers that would cover fiberglass insulation.  But in its proposal, Relyant, LLC proposed a different configuration: the use of a “sandwich panel,” including Styrofoam as the insulator instead of separate insulation and drywall.

The Army awarded the contract to Relyant, but did not adopt the SOW change Relyant had proposed.  In November 2008, Relyant submitted a written request to the Contracting Officer asking for permission to substitute the sandwich panel for the walls and ceilings.  However, this request was apparently lost due to government computer crashes.

Relyant resubmitted its request in April 2009.  Relyant then repeatedly followed up with the government about its request, while two Relyant employees in Afghanistan were on standby, awaiting the Army’s decision whether to allow the SOW change.  In August 2009, the Army finally rejected the proposed change, insisting that Relyant perform in accordance with the original SOW.

Relyant filed a claim with the Contracting Officer seeking damages for a variety of reasons.  In its claim, Relyant sought (among other things) labor costs and unabsorbed overhead associated with the Army’s delay in responding to Relyant’s request to change the SOW.  The Contracting Officer denied the claim, and Relyant appealed to the ASBCA.

The ASBCA held that the Army was within its rights to reject the sandwich panel and insist that Relyant perform in accordance with the original SOW.  Nevertheless, the ASBCA found that the government had breached the contract by waiting more than three months to respond to Relyant’s request.

The ASBCA wrote that “every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement.”  The duty “prevents a party’s acts or omissions that, though not proscribed by the contract expressly, are inconsistent with the contract’s purpose and deprive the other party of the contemplated value.”

In this case, the ASBCA wrote that the Army was “familiar” with Relyant’s proposed change, was “aware that Relyant was awaiting its answer for several months in the spring and summer of 2009, while Relyant continually prompted it to act,” and “was aware that its delay in decision-making was potentially to the detriment of Relyant in terms of its incurring additional costs during the waiting period.”  Moreover, “there were no circumstances that justified an extended wait on the part of the government before deciding whether to permit the change in the SOW.”  Indeed, “the government’s decision-making appears to have been accomplished within a matter of days once it turned its attention to the matter.”

The ASBCA held that the Army had breached the implied duty of good faith and fair dealing by waiting more than three months to respond to Relyant’s request, allowing Relyant to “twist in the wind.”  It awarded Relyant $151,816 in delay damages.

The ASBCA emphasized that its holding in Relyant was “very fact-specific.”  The ASBCA wrote that “we do not hold here that every unreasonable government action necessarily constitutes a breach” of the implied duty.  “For example,” the ASBCA explained, “in the event that a contractor requested a change to the SOW for which it had no realistic chance of approval, we might be less likely to find a breach of the duty if the government took an extensive period of time to resolve it.”

For contractors, the ASBCA’s caution is important: the holding in Relyant does not mean that every delay in the government’s response will be considered a breach.  But that said, as Relyant makes clear, some government delays are breaches.  For contractors who feel that an important request has disappeared into the proverbial black hole, Relyant may offer some helpful legal leverage to get things moving.

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