The Civilian Board of Contract Appeals served up a recent decision “medium rare” for a small business in New Mexico — in Papa Franks v. Dep’t of Justice, (CBCA 2779), the Board denied relief to Papa Franks, a small burrito and sandwich shop in Albuquerque. Papa Franks entered into a contract that upon verbal request from the United States Marshal, it would provide meals to federal inmates in a courthouse and cellblock in Albuquerque. The contract was not to exceed $50,000 (the case was decided under the Board’s small claims procedure). For the first several months of the contract, Papa provided over 500 meals per month. A number of the requested meals were hamburgers, something Papa did not regularly provide to his retail customers. Papa’s insurance company informed him that due to the increase in hamburger production, he had to upgrade his grill hood and exhaust for fire safety purposes. Papa did so, and paid a contractor $4,157.91 for the new equipment.
The contracting officer later informed Papa that due to funding cuts, the requirements under the contract were going to be reduced, and the number of meals per month were reduced from over 500 to 85. Papa was paid approximately $21,664 under the contract.
Papa sought the cost of the upgrades to his kitchen and what he claimed was the difference between what he received under the contract ($21,664) and the size of the contract ($50,000).
The Board held that the contract was a blanket purchase agreement, not a requirements contract, stating that “there is no express or implied obligation by the agency to order every meal from the contractor.” The Board further held that there was no contract to pay Papa $50,000 and the government was obligated only to pay for the meals it ordered. As for the upgraded grill hood and exhaust, the Board held that Papa could not recover those funds because “no provision obligates the agency to reimburse the contractor for any of its particular costs of doing business or for any amount greater than the fixed, per meal charge.”
So, although Papa can now expand his retail menu to include hamburgers, he couldn’t charge the government for the kitchen improvements. The lesson of the story is that if you agree to a government contract, even one as small as serving burgers to inmates, you should have the facilities and operations in place to deliver on it.
Brian Stolarz is the attorney responsible for the content of this article.