Government Contracts Monitor

A Government Contractor Gets “Snowed” at the CBCA for $100,000

September 18, 2012

We all know it is very difficult to predict the weather. A government contractor learned that lesson the hard way -- the Civilian Board of Contract Appeals (CBCA) recently decided that even though a government contractor performed over $100,000 in snow removal from a government facility, in a year in which the snow fell at three times the average rate, the Government would not pay for it because it exceeded the terms of the firm, fixed-price contract the contractor had with the Government.

IAP World Services entered into a firm, fixed-price contract with the Government to remove snow from the parking lots and sidewalks at six IRS facilities, one of which was in Ogden, Utah.  The contract required “basic services” including snow removal, for a fixed price.  The contract included an exhibit that stated that from 1924 to 2001, the average annual snowfall in Ogden was 29.6 inches.   Well, the snow came in the winter of 2007-2008, and came down heavy – 98 inches, more than three times the average.  IAP performed the work, and submitted a request for equitable adjustment based on the record snowfall. The IRS Contracting Officer agreed to modify the contract and pay IAP $109,619.

In the winter of 2008-2009, the snow continued to come down at a record rate, and IAP again sought an equitable adjustment, this time for $100,326.  A new IRS Contracting Officer denied the request, stating that the contract was a firm, fixed-price contract and the “contractor bears the risk of the cost associated with additional snowfall just as the Government would not reap any benefit if there was no snowfall.”  IAP appealed.

The CBCA denied the appeal, stating that under the FAR, a “firm, fixed-price contract provides for a price that is not subject to any adjustment on the basis of the contractor’s cost experience in performing the contract.  This contract places upon the contractor maximum risk and full responsibility for all costs and resulting profit or loss.”  The Board also held that the contract only provided for payments in addition to the fixed price for “additional services,” such as hauling excess snow to another location, which was not performed by IAP.

Finally, the Board held that the prior IRS Contracting Officer approval of the equitable adjustment did not create a precedent or course of dealing. The Board cited previous cases in holding that “a single transaction cannot constitute a course of dealing.”  According to the Board, IAP did not demonstrate that it relied on the course of dealing to its detriment.  This is arguable given that IAP was paid an adjustment based on the prior record snowfall, which was followed by a record snowfall the next year.

This case demonstrates that just because one Contracting Officer gives you a break during performance of a contract, it does not mean that his or her replacement or successor will.  Government contractors should carefully scrutinize the services requested under a firm, fixed-price contract to make sure they do not get “snowed.”  The Board’s holding, although somewhat harsh, affirms the strict interpretation of a firm, fixed price contract.  Before IAP bids on more snow removal contracts, it should consult a Farmer’s Almanac and maybe The Weather Channel.

Click here to read the Board’s opinion in its entirety. 

 

Brian Stolarz is the attorney responsible for the content of this article.