Lakeshore Engineering Services, Inc. v. United States
2014 U.S. App. LEXIS 6672
| Fed. Cir. | 2014Background
- The Army solicited an indefinite-delivery/indefinite-quantity job-order contract (Fort Rucker) using a Universal Unit Price Book (UUPB) from the Gordian Task Catalog (Dec. 2006) to set unit prices; bidders were to supply coefficients to cover all other costs and business risks.
- Solicitation described UUPB prices as a “Government Estimate,” warned contractors to verify unit prices, and stated "no allowance will be made after award;" task orders were firm fixed-price.
- Lakeshore bid using coefficients (1.28 normal, 1.46 overtime, 1.22 for non-UUPB items), after comparing UUPB prices to its past projects and learning from the prior contractor that UUPB prices appeared low post–Hurricane Katrina.
- Lakeshore alleged it later incurred nearly $2 million in additional costs due to inaccurate UUPB prices and post-contract inflation (notably steel and gasoline), sought equitable adjustment, and sued after the contracting officer denied relief.
- The Court of Federal Claims granted summary judgment for the government, concluding the contract allocated pricing risk to Lakeshore and limited adjustment rights; Lakeshore appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach based on inaccurate UUPB prices at contracting | Lakeshore: Govt warranted or assumed risk that UUPB prices were accurate; payment under those prices breaches contract | US: Contract warned prices were estimates; fixed-price task orders and required coefficients allocate risk to contractor | No breach — risk of inaccurate UUPB prices allocated to Lakeshore |
| Breach for refusal to adjust for post-contract inflation | Lakeshore: incorporation of FAR adjustment procedure and a price-adjustment clause imply broader relief for cost increases | US: Adjustment clauses apply only to specified circumstances (government changes or bargained index methodology); Lakeshore received allowed adjustments and shows no misapplication | No breach — only limited, contract-specified adjustments available |
| Breach of implied warranty (Spearin) | Lakeshore: government impliedly warranted UUPB accuracy | US: Spearin applies to design specs imposing government responsibility, not price estimates in fixed-price contracts | No breach — Spearin inapplicable; no implied warranty of UUPB accuracy |
| Mutual mistake / contract reformation | Lakeshore: both parties mistaken about UUPB accuracy or adequacy of adjustment mechanism, warranting reformation | US: Contract placed risk of those mistakes on Lakeshore; even if mistake existed, risk allocation bars reform | No reformation — Lakeshore bore the risk, failing mutual-mistake element |
Key Cases Cited
- United States v. Spearin, 248 U.S. 132 (Supreme Court) (implied warranty arises when government furnishes binding design specifications)
- Hercules, Inc. v. United States, 24 F.3d 188 (Fed. Cir.) (elements for implied warranty and contractor risk under fixed-price contracts)
- Northrop Grumman Info. Tech., Inc. v. United States, 535 F.3d 1339 (Fed. Cir.) (standard for incorporation of extrinsic documents into contracts)
- Precision Pine & Timber, Inc. v. United States, 596 F.3d 817 (Fed. Cir.) (incorporation and contract interpretation principles)
- American Capital Corp. v. FDIC, 472 F.3d 859 (Fed. Cir.) (standard of review for summary judgment from Court of Federal Claims)
- Dalton v. Cessna Aircraft Co., 98 F.3d 1298 (Fed. Cir.) (fixed-price contract allocates risk of cost overruns to contractor)
- ConocoPhillips v. United States, 501 F.3d 1374 (Fed. Cir.) (courts enforce the specific adjustment mechanisms bargained for in contract)
- Dairyland Power Coop. v. United States, 16 F.3d 1197 (Fed. Cir.) (mutual mistake requirements; future predictions are not "mistake")
- First Nationwide Bank v. United States, 431 F.3d 1342 (Fed. Cir.) (implied covenant of good faith tied to contractual obligations)
- Centex Corp. v. United States, 395 F.3d 1283 (Fed. Cir.) (scope of covenant of good faith and fair dealing)
- Nat’l Presto Indus., Inc. v. United States, 338 F.2d 99 (Ct. Cl.) (risk-allocation defeats mutual-mistake relief)
- Int’l Data Prods. Corp. v. United States, 492 F.3d 1317 (Fed. Cir.) (equitable-adjustment relief requires government-ordered contract change)
- Essex Electro Eng’rs, Inc. v. Danzig, 224 F.3d 1283 (Fed. Cir.) (clarifying Spearin's scope)