Summary
This is a decision by the Armed Services Board of Contract Appeals denying an appeal by Chromalloy Component Services, Inc. against the United States Air Force regarding a fixed-price contract for aircraft engine component remanufacturing. The appellant alleged the government possessed superior knowledge of blade pricing, improperly changed blades to government-furnished material leaving residual inventory, and violated a prior course of dealings by placing a large order late in the base year. The Board found that the contractor assumed the risk of price fluctuations, the contract explicitly permitted government-furnished materials, and there was insufficient evidence of a binding course of dealing, resulting in the denial of all claims.
Topics
Practice areas
Questions Presented
- Whether the government possessed superior knowledge of blade pricing and had a duty to disclose it
- Whether the contract permitted the government to provide the blades as government‑furnished material and whether that change constituted a breach
- Whether the government violated a prior course of dealings by placing a large order at base‑year pricing
- Whether Chromalloy’s claims constitute a constructive change under the contract
Holdings
- The Board held that the government did not possess superior knowledge of future blade prices and therefore had no duty to disclose such information.
- The Board held that the contract expressly allowed the government to furnish the blades as GFM, so no breach occurred.
- The Board held that the government did not violate any prior course of dealings because no sequence of conduct established a common understanding of pricing expectations.
- The Board held that Chromalloy failed to allege or prove any performance beyond the contract requirements; therefore, no constructive change existed.
Key quotations
“As a general rule, a contractor performing a fixed‑price contract assumes the risk of unexpected costs. However, the government has an implied duty to “disclose to a contractor otherwise unavailable information regarding some novel matter affecting the contract that is vital to its performance.”” (at 777-78)
Factual background
The Air Force contracted with Chromalloy to remanufacture low‑pressure turbine stage‑1 blades for F108 engines. The contract initially allowed use of commercially serviceable blades but was later amended to require new OEM blades, whose price rose from $1,700 to over $5,600 per blade. The government later supplied the blades as government‑furnished material, leaving Chromalloy with residual inventory, and placed a large order near the end of the base year at base‑year pricing.
Procedural history
Chromalloy filed an REA and claim for additional compensation based on alleged superior knowledge, change to government‑furnished material, and breach of prior course of dealings. The contracting officer denied each claim; Chromalloy appealed to the ASBCA, which held a hearing and issued this decision.