Ace-Federal Reporters, Inc. v. Barram
226 F.3d 1329 · Court of Appeals for the Federal Circuit · 2000
Facts
GSA awarded multiple-award schedule contracts for transcription and court reporting services to several companies, including the appellants. Despite contractual and regulatory obligations to order from these contractors, various federal agencies made unauthorized off-schedule purchases from non-contracted companies. The contractors sought lost profits for this breach, but the GSA Board of Contract Appeals denied their claims, ruling the contracts were not "requirements contracts" and thus did not guarantee business.
Issue
Did the GSA Board of Contract Appeals err in concluding that the multiple-award schedule contracts did not guarantee business and therefore precluded recovery of lost profits for the government's breach? Can contractors recover lost profits when federal agencies make unauthorized off-schedule purchases in violation of such contracts?
Holding
The court reversed the Board's decision, holding that the contracts were enforceable and that lost profits are recoverable for the government's breach. The case was remanded for the calculation of damages.
Rule
Government contracts that provide a contractor with a substantial chance at business, even without guaranteeing a specific quantity of work, are enforceable. When the government breaches such a contract by making unauthorized purchases, lost profits are a recoverable remedy if a reasonable probability of damage can be established and fairly approximated. A termination for convenience clause does not retroactively apply to unauthorized agency breaches.
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