Contractor's Deviation From Statement Of Work Was A $1 Million Mistake

Friday, August 03, 2018 3:44 am
August 2018 - Volume 40 Number 8

Breach of Contract

Appeal of Relyant, LLC 2018 ASBCA Lexis195 (June 27, 2018)

A contractor deviated from the project specs and must assume responsibility for the resulting costs. But the government will pay damages for delaying its response to (and an eventual rejection of) the contractor’s material substitution request.

In 2008, Relyant, LLC (Relyant) was the contractor on a government project for the manufacture, delivery and installation of pre-fabricated relocatable buildings (RLBs) at two locations in Afghanistan. The RLBs were to be created from shipping containers, and the contract’s statement of work (SOW) called for the installation of gypsum drywall for the interior. In its bid, Relyant had proposed a different wall material: a “sandwich panel” that utilized Styrofoam as the insulator. Relyant assumed that the government accepted the alternate sandwich panel. But the government did not adopt the sandwich panel or modify the SOW. The Armed Services Board of Contract Appeals called Relyant’s assumption “unfortunate.”

Relyant sought recovery of more than $1 million for the cost of shipping, labor, and unabsorbed overhead incurred during the production of RLBs that the government ultimately refused. The Board awarded Relyant just $151,816 in damages (to compensate for the government’s two-month delay in responding to a request for a substitution). Otherwise, the Board agreed that the government owed no money where Relyant failed to follow the SOW.

Noncompliant material passed specs test

The RLBs Relyant provided to project site 1 contained the sandwich panel. Though they passed a first article test (FAT), the contracting officer (CO) deemed them non-compliant with the SOW. To avoid this problem, Relyant then began shipping RLBs designated for site 1 first to project site 2 “where the local accepting authority (not the CO) apparently turned a blind eye to the RLBs fai[..]