Schneider Electric Buildings Americas, Inc. v. U. S., No. 21-788, January 18, 2023.

[bob7947]

In his opinion, Judge Tapp wrote "In contract cases, parties do not get what they deserve, only what they successfully negotiate."  In the quote below, he lists the 5 counts in the contractor's complaint. 

See Schneider Electric Buildings Americas, Inc. v. U. S., No. 21-788, January 18, 2023.

Quote

Schneider’s Complaint alleges that the United States wrongfully terminated for default (count I), breached the contract by not carrying its duty to maintain the boilers (count II), by denying Schneider access to USDA’s electric remote-access system that controlled and monitored the energy systems in the building (count III), by failing to compensate Schneider for the latent/differing site conditions (count IV), by failing to comply with its payment obligations under the contract (count V), and by breaching the covenant of good faith and fair dealing (count VI). (Compl. at 21–24, ECF No. 1). Schneider moves for summary judgment as to count I and partial summary judgment as to counts II, III, and V. (Pl.’s Mot. at 11, ECF No. 56).

 

[Vern Edwards]

The conclusion:

Quote

The United States took the drastic decision of terminating Schneider for default after receiving 91.45% of the value of the contract. (Pl.’s Ex. 62). The United States’ defense of its decision to unilaterally withhold progress payments at that stage and its underlying reasoning for termination is unpersuasive. Contract law keeps an attentive eye on the exercise of default termination power, having recognized that the power causes “a drastic adjustment of the contractual relationship.” Clay Bernard Sys. Int’l, Ltd. v. United States, 22 Cl. Ct. 804, 810 (1991). And so, the Court strongly adheres to the principle, also reflected in FAR, that the termination decision must be governed by the provisions of the contract. The United States’ approach in unilaterally withholding payments bypassed the Measurement and Verification procedure of the Contract. The United States’ default termination analysis also contorted the Contract’s stated goals and performance metrics. Feeling aggrieved by aspects of Schneider’s performance—rightly or wrongly—the United States’ freewheeling stroll down the road to default termination involved turning away from the paths specifically laid out by the Contract’s terms. The party that hastily diverts from the path provided by the contract’s terms is bound to meet its destiny on the road it took to avoid it. In such cases, FAR’s course correction involves converting an improper default termination to one for convenience.

The Court finds that the United States materially breached its payment obligations before terminating the Contract and that the CO’s reasoning behind the termination decision did not align with the terms of the contract.

BOOM!

[joel hoffman]

Bob, will you be following the proceedings for the remainder of the case (unresolved issues)?

Several issues related to O&M appear to be important. It appears that there was little or no O&M training provided and is uncertain whether there were written O&M manuals or other documentation provided to the government operators . That was unclear from the discussion and Court’s analysis.

The parties were at odds over who and what O&M was required. It could be a lack of contract coverage, lack of contractor training, lack of government operator performance, and/or lack of knowledge by the KO and legal of the O&M requirements and responsibilities.  

[joel hoffman]

It was also interesting that the KO thought that “endangering performance” meant or included hindering the government’s research efforts, without any mention of that within the contract’s goals and objectives or other mention within the contract. For that matter, there apparently was no explanation of what the government meant by the term “endangering performance in the various communications concerning possible or actual TFD actions

[bob7947]

I'm dependent on what the Court publishes but I will watch for it.

[joel hoffman]

Thanks, Bob.