In Appeal of Honeywell International, Inc., the Armed Services Board of Contract Appeals (“ASBCA”) held that the contractor was not entitled to reimbursement for services ordered by the government in excess of the specified maximum stated in the parties’ indefinite-delivery/indefinite-quantity contract. The dispute in this matter arose between the Navy Aviation Supply Office (“ASO”) and Allied Signal, Inc. (“Allied”), predecessor in interest to Honeywell International, Inc. (“Honeywell”), under a contract for maintenance and repair services for certain designated pieces of equipment. The contract incorporated by reference FAR 52.243.1, which includes a 30-day notice provision for constructive changes to the contract. The contract was later modified to include additional work associated with a subsequent solicitation issued by ASO. The modification did not change the pricing scheme, but did establish minimum and maximum quantities.
Despite these limitations, ASO placed two orders in the first year that exceeded the contract’s maximum terms. Allied made a business decision not to object to the excessive quantity ordered because it wanted to “be a good contractor and work with the government.” However, in the second year of its contract, when ASO placed another order that, together with the first year’s orders exceeded the contract’s order maximum, the contractor protested seeking to renegotiate the unit prices for the services offered under the contract. The contracting officer rejected Allied’s demand asserting that the maximum quantities applied per year, and not cumulatively, and argued that the second year’s cumulative orders had not exceeded the maximum. Allied agreed to deliver on the contract, but reserved its right to an equitable adjustment to recover the difference between the contract price and its proposed price for the excess units. Allied subsequently submitted a certified claim, which was rejected by the contracting officer.
On appeal, Allied principally argued that the contract established a maximum quantity for the two-year period of the contract, and that ASO constructively changed the contract when it required Allied to fulfill orders in excess of that maximum. ASO contended that the contract’s maximum quantity term applied to each year’s orders, not cumulatively over the life of the contract, and that maximum had not been exceeded in year two, and was waived in year one because Allied had not objected to performing work in excess of what was required under the contract.
Citing the plain language of the contract, the ASBCA rejected Allied’s argument. Significantly, the ASBCA also rejected Allied’s argument that it was entitled to equitable adjustment stemming from its protest to ASO. The ASBCA concluded that when Allied did not protest the issuance of excess orders in the first year such circumstances indicated volition to perform, and its decision to perform “for business reasons” precluded it from an equitable adjustment. ASBCA No. 54598, 2007 WL 1884589 (Jun. 20, 2007).