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T & M Distributors Inc. v. United States

July 26, 1999

T & M DISTRIBUTORS, INC., PLAINTIFF-APPELLANT,
v.
UNITED STATES, DEFENDANT-APPELLEE.



Before Plager, Circuit Judge, Smith, Senior Circuit Judge, and Schall, Circuit Judge.

The opinion of the court was delivered by: Schall, Circuit Judge.

Appealed from: United States Court of Federal Claims Judge Bohdan A. Futey

T & M Distributors, Inc. (T&M) appeals from the final judgment of the United States Court of Federal Claims dismissing its claim against the United States for breach of a requirements contract. T & M Distrib. v. United States, No. 97-148C, 1998 WL 118077 (Fed. Cl. Mar. 17, 1998). Shortly after award, the Navy terminated its contract with T&M for the convenience of the government. In due course, T&M submitted a termination settlement proposal and a breach of contract claim alleging wrongful termination. The parties reached settlement on termination costs to which T&M was entitled, but the contracting officer denied the breach of contract claim. T&M appealed the denial to the Court of Federal Claims, which granted the government's motion for summary judgment after concluding that the contracting officer had not acted improperly in invoking the contract's termination for convenience clause. We affirm.

BACKGROUND

I.

On October 19, 1995, the Navy awarded Contract No. N00406-96-D-4026 to T&M. Under the contract, T&M was to provide the Navy with automotive and related vehicle parts and accessories to support the United States Public Works Center on the island of Guam. The contract was awarded pursuant to a competitive procurement bid solicitation. The solicitation sought bids for the operation and maintenance of a Contractor Operated Parts Store ("COPARS") on Guam for one base year and four one-year option periods. The Navy's annual requirements were estimated in a list of anticipated expenditures that was appended to the solicitation. An amendment to the solicitation included a list of questions and answers, among which was the following:

"Q10. What amount, if any, of government owned parts are currently on hand? Is there a listing available? What category are those parts under?"

"Answer: The amount of government owned parts on hand changes rapidly from day to day. The contractor shall assume that the Government does not have a supply of parts on hand to supplement contractor inventory."

T&M was awarded the contract, with performance to begin on December 1, 1995. The value of the contract for all five years was estimated at $1,130,000. The contract contained the standard clause found at 48 C.F.R. 52.249-2, allowing for termination of the contract for the convenience of the government.

After experiencing difficulties in compiling a comprehensive parts inventory list, T&M's president, Thomas W. Daly, visited Guam in early November 1995. Upon his return from Guam, Mr. Daly wrote the contracting officer that he had discovered circumstances that suggested a diminished value of the contract and possible obstacles to contract performance:

"[I]t was revealed to us that the Public Works Facility at Guam had an existing "base store" which provided them with replacement parts for their vehicles. This was troubling for two reasons; the contract clearly calls for the establishment of a COPARS to supply the [Department of Public Works (DPW)] with repair parts and this also affects our ability to put together a workable inventory if the DPW "base store" already stocks some parts."

"I discovered the following: the base store maintains an inventory of approximately $700,000.00 with a total number of 4000 line items. This is a long way from no inventory as had been stated. I was also informed that the DPW was required to go to the base store as their first source of supply, to [Fleet and Industrial Supply Center] next and then to the contractor. I also learned unofficially that the DPW also had [Basic Purchase Agreements] with local parts distributors. As you can imagine this all plays a part in how we structure our inventory and our ability to do business with DPW."

Although Mr. Daly assured the contracting officer that T&M was ready, willing, and able to be operational by December 1, 1995, he requested that the date for the commencement of contract performance be postponed to January 2, 1996.

On November 28, 1995, the contracting officer instructed T&M to suspend preparations. The next day, Mr. Daly sent a letter to the contracting officer in which he proposed contract modifications to "resolve the problems [in] making the COPARS store operational." In December, a government attorney visited Guam to investigate Mr. Daly's concerns and to obtain relevant information. The contracting officer later recounted what the investigation revealed:

"a. The government did have an existing inventory in the approximate amount of $700,000 and had Basic Purchase Agreement's (BPA's) with local firms. This information had not been disclosed to the Contracting Officer and this office during the solicitation process."

"b. The estimated amount in the contract was grossly understated. A review of the historical usage indicated the estimated amount for the base period and option periods should have been $4,455,911 ...


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