Federal Circuit Vacates COFC Decision Entitling Contractor to Damages for Breach of Implied Warranty Because the Contractor Did Not Present the Claim to the CO

In Tolliver Group, Inc. v. United States, No. 2020-2341, 2021 WL 5872256 (Fed. Cir. Dec. 13, 2021), the Federal Circuit vacated and remanded the Court of Federal Claims’ (“COFC”) decision holding that the contractor was entitled to an equitable adjustment for damages caused by the Government’s breach of the implied warranty that satisfactory contract performance will result from adherence to contractual specifications.

The contractor’s underlying claim sought an equitable adjustment to a fixed-price contract for costs incurred to successfully defend against a False Claims Act (“FCA”) suit, claiming the costs as allowable under FAR 31.205-47, Costs related to legal and other proceedings. The FCA suit, brought by a whistleblower, alleged that the contractor violated the FCA in the performance of the contract, but the Government declined to intervene and the FCA suit was ultimately dismissed. The contracting officer denied the contractor’s claim for costs defending against the FCA suit on the basis that the fixed price contract did not permit recovery of costs in excess of the agreed-upon contract price.

In the COFC decision, which we reported on here, the court held sua sponte that the contractor was entitled to recover damages under the Spearin doctrine (citing to United States v. Spearin, 248 U.S. 132 (1918)) because the Government breached the implied warranty of performance. On appeal, the Federal Circuit vacated the COFC’s decision, holding that the contractor did not present a claim for breach of the implied warranty to the contracting officer for a final decision, and therefore the COFC lacked jurisdiction to grant entitlement under the Spearin doctrine. 

The Tolliver decision is an example of the tension (discussed here and here) that can exist between the purpose of the CDA—to provide for timely and cost-effective resolution of contract disputes—and the CDA’s procedural requirements when a court or Board determines they have not been met. In this case, after more than four years litigating its claim, the service-disabled veteran-owned small business contractor must now go back to the drawing board, a reminder to all contractors to engage in a thorough claim assessment at the outset of any CDA litigation.