Summary
The United States Court of Appeals for the Federal Circuit affirmed dismissal of AT&T and Lucent Technologies' claim seeking reformation of a fixed-price Navy contract. The court held that the Navy's violation of section 8118 of the Department of Defense Appropriations Act did not create a judicially enforceable private cause of action, and that applicable procurement regulations and directives provided no remedy. The court also concluded that the plaintiffs had waived their arguments by failing to raise them during contract negotiations. Circuit Judge Pauline Newman dissented, arguing that the case should have been remanded for consideration of potential equitable and contractual relief.
Topics
Practice areas
Questions Presented
- Whether section 8118 of the Department of Defense Act created a private judicial cause of action or enforceable interest allowing AT&T to obtain reformation of the fully performed contract.
- Whether procurement regulations and Department of Defense directives governing selection of contract type created an actionable right or prohibited the contracting officer from awarding the contract on a fixed-price basis.
- Whether AT&T waived its arguments by failing to raise them before contract execution or during contract negotiations.
Holdings
- Section 8118 is an appropriations oversight and reporting provision that provides for legislative, rather than judicial, enforcement; it does not create an express or implied private cause of action or an enforceable interest permitting AT&T to seek reformation.
- The cited procurement regulations and Department of Defense directives granted the contracting officer discretion in selecting contract type and supplied no judicial remedy to a private contractor, even if the officer abused that discretion.
- Even if AT&T had stated a valid claim, it waived its present arguments by failing to raise the alleged problem before contract execution or during negotiations.
Key quotations
“Thus section 8118 is an appropriations oversight provision that envisions enforcement, if any, in the form of legislative spending adjustments in future bills.” (¶ 12)
“Section 8118 simply does not provide implicitly or explicitly for any enforcement of its supervisory and congressional oversight provisions in a judicial forum.” (¶ 18)
“A caution, however, is not a prohibition.” (¶ 23)
“Like section 8118, these provisions supply no remedy for private parties in a judicial forum.” (¶ 24)
Factual background
The Navy solicited bids for a reduced diameter array as part of a sonar system designed to detect ultra-quiet submarines. It awarded AT&T a fixed-price contract on December 31, 1987, nine days after enactment of section 8118, without the required written determination that program risk had been sufficiently reduced for realistic pricing. AT&T completed performance at a cost exceeding $91 million, substantially more than the adjusted final contract price, and later sought reformation based on the statutory and regulatory violations.
Procedural history
The Navy awarded AT&T a fixed-price contract for development of a reduced diameter array without the written determination required by section 8118 of the Department of Defense Act. After AT&T fully performed the contract at substantially greater cost than the adjusted contract price, the Federal Circuit held en banc that the statutory violation did not void the contract and remanded for consideration of available relief. On remand, the Court of Federal Claims held that section 8118 and the asserted procurement regulations did not create an actionable private right or remedy and dismissed the complaint; the Federal Circuit affirmed.