K-Con, Inc. v. Secretary of the Army
908 F.3d 719
Fed. Cir.2018Background
- The Army awarded two task orders in 2013 to K-Con for design/construction of a laundry facility and a communications shelter at Camp Edwards; solicitations used the Standard Form 1449 commercial-items format and did not expressly include FAR 52.228-15 (performance and payment bonds).
- The Army later required K-Con to furnish performance and payment bonds per FAR 28.102-2(b) before issuing notices to proceed; K-Con delayed providing bonds until September 2015.
- K-Con sought equitable adjustments totaling $116,336.56 for increased costs and labor during the two-year delay; the contracting officer denied relief, concluding the contracts were construction contracts subject to mandatory bonds incorporated at award under the Christian doctrine.
- The Armed Services Board of Contract Appeals affirmed; K-Con appealed, arguing (1) the contracts were commercial-item contracts (not construction), and (2) the Christian doctrine should not be used to incorporate the bonding clause.
- The Federal Circuit considered whether the solicitations were patently ambiguous about contract type and whether FAR 52.228-15 is mandatory and a deeply ingrained procurement policy such that it can be read into the contracts by operation of law.
Issues
| Issue | Plaintiff's Argument (K-Con) | Defendant's Argument (Government) | Held |
|---|---|---|---|
| Whether contracts are construction contracts or commercial-item contracts | Contracts used commercial-items form so they are commercial-item contracts not subject to mandatory bonds | Solicitations were patently ambiguous (commercial form but construction scope); K-Con should have inquired and is barred from now claiming commercial-item status | Contracts were patently ambiguous; K-Con failed to seek clarification and cannot now assert they are commercial-item contracts |
| Whether FAR 52.228-15 (performance and payment bonds) was incorporated by operation of law under the Christian doctrine | Christian doctrine inapplicable; clause not properly incorporated and/or not mandatory | FAR/Miller Act make bonds mandatory for covered construction contracts; clause expresses significant, long-standing procurement policy; Christian doctrine applies | FAR 52.228-15 is mandatory (statutory and regulatory “must/shall”) and satisfies Christian doctrine’s second prong; clause is incorporated by operation of law |
| Whether bonding requirement is mandatory or discretionary because contracting officer can adjust percentages | The contracting officer’s discretion to revise percentages means clause is not mandatory | Statute and FAR use mandatory language; revision of percentages does not negate overall mandatory nature | Requirement is mandatory under statute and FAR despite limited discretion to adjust percentages |
| Whether Christian doctrine is limited to contract-administration clauses or can apply to substantive clauses like bonds | Christian doctrine should not be extended to substantive procurement terms that materially change contractor’s obligations | Precedent allows incorporation of substantive statutory/regulatory clauses by operation of law when mandatory and deeply ingrained | Christian doctrine applies to substantive clauses; precedent (e.g., S.J. Amoroso) supports incorporation here |
Key Cases Cited
- G. L. Christian & Assocs. v. United States, 312 F.2d 418 (Ct. Cl. 1963) (establishing the Christian doctrine: mandatory procurement clauses may be read into contracts by operation of law)
- Gen. Eng’g & Mach. Works v. O’Keefe, 991 F.2d 775 (Fed. Cir. 1993) (describing two-prong Christian doctrine test: mandatory clause and deeply ingrained procurement policy)
- S.J. Amoroso Constr. Co. v. United States, 12 F.3d 1072 (Fed. Cir. 1993) (applying the Christian doctrine to incorporate substantive statutory requirements into contracts)
- F.D. Rich Co. v. United States ex rel. Indus. Lumber Co., 417 U.S. 116 (1974) (explaining the purpose of payment bonds to protect suppliers/subcontractors on federal projects)
- Stratos Mobile Networks USA, LLC v. United States, 213 F.3d 1375 (Fed. Cir. 2000) (defining patent ambiguity and contractor’s duty to seek clarification)
- Ins. Co. of the W. v. United States, 243 F.3d 1367 (Fed. Cir. 2001) (discussing the protective role of performance bonds)