Reliable Contracting Group, LLC v. Department of Veterans Affairs
2015 U.S. App. LEXIS 3548
| Fed. Cir. | 2015Background
- Reliable appeals from the VA Civilian Board of Contract Appeals after the VA rejected three backup generators for a VA medical center.
- The contract originally with Echo was novated to Reliable; the generators were procured through Fisk and DTE Energy Technologies.
- Section 1.47 requires that all equipment incorporated be new and of suitable grade, but § 1.79 incorporates FAR 52.211-5 which defines new as composed of previously unused components.
- Two Cummins generators delivered in 2004 were found by the VA’s on-site engineer to be not new; subsequent letters reflected ongoing concerns about conformance.
- The Board held the generators were not new because they could not be factory-tested; Reliable argued the contract’s two ‘new’ requirements are distinct and ambiguous, leading to remand.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| What does 'new' mean in § 1.47 vs § 1.79? | Reliable: § 1.47 defines 'new' for the generator as a whole; § 1.79's 'new' is only about unused components. | Board/VA: 'New' is tied to factory-testability under § 1.79 and the FAR definition, focusing on unused components. | Ambiguous; contract supports multiple readings; remand to resolve extent of damage and interpretation. |
| Did the generators’ damage and storage affect their 'new' status? | Reliable contends damage can be cured; non-use plus lack of substantial damage may still be 'new'. | VA/Board found the units not new due to damage and nonconforming condition. | Remand to determine if four-year storage damage was significant enough to render not 'new'. |
| Should the Board have considered industry practices and contemporaneous understandings? | Contemporaneous views support Reliable’s interpretation; industry practice can inform contract meaning. | Court should not rely on post hoc interpretations to construe contract terms. | Court finds contemporaneous interpretations probative; remand for fact-finding on damage extent and meaning. |
Key Cases Cited
- Mass. Bay Transp. Auth. v. United States, 129 F.3d 1226 (Fed.Cir. 1997) (industry practices aid ambiguous contract terms)
- Hunt Constr. Grp. v. United States, 281 F.3d 1369 (Fed.Cir. 2002) (industry meaning can aid contract interpretation)
- Sutton v. Calhoun, 593 F.2d 127 (10th Cir. 1979) (contemporaneous admissions evidence probative of fact)
- Granite Constr. Co. v. United States, 962 F.2d 998 (Fed.Cir. 1992) (economic waste doctrine overlaps with 'new' analysis)
- National Union Fire Ins. Co. v. Lumbermens Mut. Cas. Co., 385 F.3d 47 (1st Cir. 2004) (interpretation of contracts with industry standards)