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W.G. Yates & Sons Construction CO., Inc. v. Caldera

September 23, 1999


Before Michel, Rader, and Gajarsa, Circuit Judges.

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

Appealed from: Armed Services Board of Contract Appeals United States Court of Appeals for the Federal Circuit


W.G. Yates & Sons Construction Co., Inc. ("Yates") appeals the final decision of the Armed Services Board of Contract Appeals ("ASBCA"), ASBCA No. 47213, Contract No. DAHA22-92-C-0002. The ASBCA held that (1) Yates remained conditionally liable to its subcontractor, Industrial Door Co. ("IDC"), and therefore Yates had standing to bring a claim of its subcontractor against the Army; (2) the Army did not violate 10 U.S.C. § 2319 regarding qualification requirements for subcontractors; (3) the Army did not violate the conflict of interest provision of 48 C.F.R. § 9.505-2(b); and (4) IDC did not satisfy the requirement of the solicitation regarding the installation of at least ten "similar" doors. We affirm the Board's Conclusion that Yates remained liable to IDC but reverse the Board's Conclusion that the Army did not violate 10 U.S.C. § 2319. We therefore do not reach the conflict of interest issue or whether IDC met the requirement of similarity in the solicitation. For the reasons set forth below, we affirm-in-part, reverse-in-part, and remand.


On November 19, 1991, the Army issued a solicitation for the construction of support facilities and a composite maintenance hangar to house two tanker aircraft at the Mississippi Air National Guard Base at Key Field, Meridian, Mississippi. Section 08375 of the solicitation, entitled "HANGAR DOORS," required the design, manufacture, and installation of "motor operated steel hangar doors," approximately 306 feet wide and 67 feet high, for a total area of about 20,500 square feet.

This section also contained the two provisions that are at issue before us-paragraphs 1.4.B Qualifications and 1.4.C Standard of Quality:

B. Qualifications: 1. . . . [T]he manufacturer must support with written evidence that they have designed, manufactured, and installed a minimum of 10 similar door systems which have been in satisfactory operation for a minimum of five years, with a minimum of five installations that are equal to or in excess of 60'-0". . . . 2. Written evidence will include at least 10 hangar door installations made by their company. Such list shall include name of installation, location, owner, architect, date installed and specific data as to size of doors, type of doors, type of operation.

C. Standard of Quality: 1. Doors and operating mechanisms shall be equal in every respect to those manufactured by the following prequalified manufacturers who are named as the standard of quality desired and acceptable. a. Automated Services Corporation ["ASC"]/Rolling Door, Edmond, Oklahoma; b. Ferguson Door Company; c. Fleming Steel Company - New Castle, Pennsylvania. 2. Other manufacturers requesting approval as an equal to the companies named must submit their request in writing with the information as detailed in paragraph 1.4B of these specifications. Requests for approval shall be made at least three weeks prior to bid date to permit checking of references and qualifications by the [CO]. Hangar doors will not be approved by the [CO] except by those manufacturers who have so qualified and been approved in writing as having the required experience in the type and size of doors required for this project.

(Emphasis added.)

In a telephone conversation with a representative of IDC on January 13, 1992, less than three weeks prior to the date for opening bids, the contracting officer ("CO") informed IDC that it would waive the pre-bid qualification requirement of paragraph 1.4.C.2 if IDC could meet the remaining requirements at the time of submittal of bids. After the conversation, the CO deleted only the requirement of paragraph 1.4.C.2 necessitating a three-week pre-bid qualification for any non-listed manufacturer, thereby permitting qualification after prime contract award but prior to approval of subcontractor.

On January 30, 1992, Yates bid $10,118,000, which included $500,000 for the hangar doors based on its subcontractor IDC's $490,000 proposal. The Army awarded Yates the contract. Yates entered into a subcontract with IDC as manufacturer of hangar doors for $455,000. IDC submitted a list of 45 hangar door projects to support its qualification under paragraph 1.4. The Army disapproved of IDC as not meeting the requirements of paragraph 1.4, noting that only four of the hangar door projects submitted (Nos. 5 (two doors), 9, and 16) met the "similarity" requirement. After some confusion as to the meaning of the 60'-0" dimension in the solicitation, the CO waived the requirement of "equal to or in excess of 60'-0"" of paragraph 1.4.B.1. IDC then submitted a new list of hangar door projects in support of its qualification, and the Army disapproved again, noting that only three door projects (Nos. 5 (two doors) and 16) were "similar." *fn1 The finding of "similarity" was based on comparable area (i.e., at least one-third in size) and motorized operation. The Army further noted that IDC met the technical requirements, including engineering calculations, shop drawings, and other design submittals for the job, but that it failed to meet the manufacturer qualification requirements as established by paragraphs 1.4.B and 1.4.C.

After a series of communications between Yates and the Army in which the parties disagreed as to what "similar" meant, the CO continued to reject IDC, and Yates eventually contracted with and submitted ASC as its subcontractor for the hangar doors. The subcontract between Yates and ASC was for a fixed-price of $614,371, which was $159,371 greater than the proposal from IDC. The Army subsequently approved ASC, which was listed as a "prequalified manufacturer" under paragraph 1.4.C, in one day.

On July 8, 1993, Yates, IDC, and IDC's surety entered into a "Liquidation and Consolidated Claim Agreement" ("LCCA"). The agreement provided, inter alia, that IDC had a claim of $113,000 (presumably for damages and costs due to the government's improper rejection), that Yates had a $159,371 claim for excess reprocurement costs, and that Yates would sponsor IDC's claims in Yates' name, and if denied by the CO, to appeal IDC's and Yates' claims to the ASBCA. Further, the agreement provided that if the government's rejection of IDC was improper, "Yates is liable to IDC for its damages and costs but only as, when, and to the extent Yates receives payment from the Government for IDC's damages and costs." (Emphasis added.) In addition, IDC agreed to reimburse one-half of ...

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