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I've been trying to find a court case.  Here are the specifics, if I am remembering them correctly:

  • it involved a well-known contractor,
  • the contract may have been a fixed-price contract but it included the words "best efforts" in the contract language,
  • the decision may have been from the U. S. Supreme Court, 
  • it's a case that kicked around the court system for years,
  • it may have been decided in last 10 years.

I remember reading the decision and was surprised that the best efforts wording turned the decision.  So, it may well have been a fixed-price contract.

Can you tell me the name and a citation.

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Perhaps McDonnell Douglas Corp. v. United States, 182 F.3d 1319, 1331 (Fed. Cir. 1999)?

Quote

[A] fixed-price incrementally funded contract imposes no obligations on a contractor beyond those associated with funding that has already been provided. The memorandum expresses the committee's view that:

f incremental funding is used, the contractor cannot be required to expend any effort beyond the Government's limitation of obligation. Failure to provide additional funding increments not only results in contract termination, but also makes it necessary to define, after the fact, what part of the effort should have been completed for the amount of funding actually provided. Since this division was apparently not possible in the first place, the contract, for all practical purposes, is converted to a best effort cost-type vehicle; the Government gets whatever the contractor was able to complete with the money provided.... Any advantages gained from use of a fixed price R & D contract are at risk until that point when incremental funding is replaced with full funding.


 

 

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Thanks Lionel:

That may be the beginning of the case.  It was a:

  • termination for default on a fixed-price contract,
  • large contractor and major program,
  • kicked around the court system for years,

This was the second remand back to the Court of Federal Claims:  McDonnell Douglas Corp. v.U. S., United States Court of Appeals, Federal Circuit, Mar 17, 2003, 323 F.3d 1006 (Fed. Cir. 2003).  This remand may go back to the COFC and then back to the Court of Appeals for the Federal Circuit for an opinion before it went to the U. S. Supreme Court.  If there is a  U. S. Supreme Court decision it would explain that this contract, although labeled fixed-price, was in reality a "best efforts" contract.  I remembered we were all stunned by the final ruling--if this is the correct case and there is a U. S. Supreme Court decision.  I'm going to search for it.

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This case did go back to the COFC and then back to the appeals court.  However, it appeared it ended there.  It didn't discuss the "best efforts" issue.  I'm using a document that summarizes the case.  Mention of the case is on p. 1051.

Either my memory is wrong or this was not the correct case.  Still looking for help.

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Bob, I  think you may be talking about the DIVADS case involving GD.  This was a Federal Tort Claims Act case brought in California against DCAA for negligent auditing.  In this case, GD and four senior official, including a former GD official who was then the Administrator of NASA were indicted along with GD before the government recognized the significance of the best efforts language.  The contract at issue was a firm fixed price best efforts contract which many government officials and agencies, including GAO, treated as a firm fixed price contract.  A senior Army official described the contract as a contract for a bucket of bolts because of the best efforts language.  The district court in Los Angeles found for GD, but the 9th Circuit reversed and found for the government.

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Retreadfed:

I think that's it.  Let me check.  The McDonnell Douglas case had several things in it too.  Maybe I should start something about most interesting cases.  It would be informative for younger members and the rest of us too.

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Thanks.  From a 1987 Washington Post (I did not get the pay me screen on this article) article:

Quote

General Dynamics' agreement with the Army on the Divad prototype was a highly unusual hybrid: a "firm fixed-price (best efforts)" deal.

Confronted with this strange animal, inspectors from the Defense Contract Audit Agency (DCAA), in a 1984 review, ignored the "best efforts" language and treated the agreement as a firm fixed-price contract. So when they discovered instance after instance in which General Dynamics billed costs related to the Divad contract to overhead expenses -- either for research and development or for preparing future bids -- Pentagon auditors, and later, Justice Department lawyers, believed they had uncovered a smoking arsenal of blatant mischarging.

The snag was that they had not grappled with the implications of the "best efforts" language.

* * * * *

"We now know when dealing with government contracting you can't rely on anybody until you have talked to everybody," Trott said. Still, he said, "There's nobody on this planet that can promise anybody there's never going to be another General Dynamics case."

Wow, 36 years ago.  It seems like ten years ago.

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Steve Schooner also wrote about it in the March 1999 edition of The Army Lawyer.  See "The FTCA Discretionary Function Exception Nullifies $25 Million Malpractice Judgment Against the DCAA:  A Sigh of Relief Concludes the DIVAD Contract Saga," available here (beginning at page 17).

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5 hours ago, bob7947 said:

"We now know when dealing with government contracting you can't rely on anybody until you have talked to everybody," Trott said

I don't recall who Trott was, but this statement is so true.  The case began to unravel when GD filed a FOIA request with the Army to get all their documents relating to the DIVAD.  The Army provided GD with 50 boxes of material, most of which DoJ had never seen although the Army had been trying to get DoJ to come look at what they had and to talk to Army personnel about the case.  However, DoJ had failed to do so.  When GD got the material from the Army, one of the things they found was a tape of negotiations concerning the contract in which the Army explained the best efforts concept to GD.  GD also found a memo from the Deputy General Counsel of the Army saying that all GD had to deliver under the contract was  a bucket of bolts.

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Retreadfed:

This is amusing.  You mentioned the 9th Circuit in an earlier post.  Here's a couple blurbs on Trott.  From the 1987 Post article.

Quote

"The defense procurement system is one of the most complicated processes with which we've ever been confronted," said Associate Attorney General Stephen S. Trott. "We received information from people who should have known what they were looking at, credible sources, not one, not two, but sufficient numbers to convince prosecutors acting in good faith that the claims were true." 

Stephen S. Trott is now a Senior Judge of the United States Court of Appeals for the Ninth Circuit.  He was nominated in 1987 and confirmed in 1988.

Lesson:  Always keep your next job in mind.

 

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