Contractors Relied on Inaccurate Cost Data to its Detriment
Two cases address impact of relying on Inaccurate Data
IAP received a firm fixed price contract for basic services including facility operations and service calls and repairs at six facilities. Prior to award the agency provided offerors information it said was to be used to determine material and equipment costs required to support the service calls. IAP found during performance it was spending more time per service call than had been noted in the information provided by the agency where, for example, the actual costs of providing the calls at the Philadelphia site were $480,000 more than its proposed costs. IAP filed a claim after the CO denied its request for an equitable adjustment. Citing an Admiral Elevator case (CBCA 470, 07-2) the board ruled that when an agency directs offerors to base their contract prices on significant, incorrect representations and the contractor does to its detriment the agency is responsible for the losses a contractor subsequently suffers. In this case the same principle applies where IAP relied on agency-provided data that was faulty and the board ruled the resulting additional work constituted a constructive change for which the agency was responsible (IAP World Services Inc. v Dept of Treasury, CBCA No. 2709).
TRG was awarded a fixed price IDIQ contract to provide housing maintenance services where it relied on the Army’s estimate to expect 50 routine calls per month. When TRG began receiving 90 service calls a month it complained it was loosing money and submitted a revised pricing proposal that was rejected where the government asserted its estimates could not be misleading because the data was unavailable to make accurate estimates. The Court explained that the risk of variance on contract estimates generally rests with the contractor but the government may be liable for breach of contract if it (1) failed to prepare an estimate in good faith (2) prepared the estimate negligently or (3) failed to use reasonable care. Here the Army breached its contract by providing misleading or negligent estimates upon which the contractor relied on stating the Army maintained the historical numbers and scope of service calls by month and this information could be available to TRG upon request. However, the court did not provide monetary damages to TRG stating the fact the service calls were above 50 does not in itself establish economic injury but TRG must also establish the excess service calls resulted in labor hours requiring compensation beyond the sum provided in the contract which it failed to do (The Ravens Group v US, Fed. Cl., No 07-754C)
