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Reliable Contr. Group, LLC v. Department of Veterans Affairs

United States Court of Appeals, Federal Circuit

March 6, 2015


Appeal from the Civilian Board of Contract Appeals in No. 3048, Administrative Judge Anthony S. Borwick, Administrative Judge Patricia J. Sheridan, Administrative Judge Stephen M. Daniels.

REGINALD ASHTON WILLIAMSON, Kilpatrick Townsend & Stockton LLP, Atlanta, GA, argued for appellant. Also represented by WILLIAM E. DORRIS; THURSTON HOLDERNESS WEBB, Winston-Salem, NC.

WILLIAM JAMES GRIMALDI, Commercial Litigation Branch, Civil Division, United States Department of Justice, Washington, DC, argued for appellee. Also represented by STUART F. DELERY, ROBERT E. KIRSCHMAN, JR., KIRK T. MANHARDT.

Before NEWMAN, CLEVENGER, and DYK, Circuit Judges.


Page 1330

Dyk, Circuit Judge.

Reliable Contracting Group, LLC (" Reliable" ) appeals from a decision by the Civilian Board of Contract Appeals (" Board" ). The Board denied Reliable's claim for an equitable adjustment of a Department of Veterans Affairs (" VA" ) contract which required the installation of three backup generators for a VA medical center. Reliable contends that the VA improperly rejected the generators on the ground that they were not " new" as required by the contract. Because we hold that the Board erred in its interpretation of the contract, we vacate the Board's decision and remand for further proceedings.


On February 10, 2003, the VA awarded a contract to Echo Construction Company (" Echo" ) for the design and construction of electrical improvements at a VA medical center. On March 31, 2003, Echo, the VA, and Reliable entered into a novation agreement, effectively replacing Echo with Reliable.

The contract required that three backup generators be installed. Section 1.47 of the contract, entitled " MATERIAL AND WORKMANSHIP," required that " [a]ll equipment, material, and articles incorporated into the work covered by this contract shall be new and of the most suitable grade for the purpose intended, unless otherwise specifically provided in this contract." J.A. 79. That section did not define " new." Separately, § 1.79 incorporated Federal Acquisition Regulation (" FAR" ) 52.211-5 by reference. FAR 52.211-5 contained a separate requirement that supplies called for by the contract be " new, reconditioned, or remanufactured," and it defined " new" to require that the supplies be " composed of previously unused components." See 48 C.F.R. § 52.211-5.

Page 1331

Reliable sub-contracted the procurement of the electrical generators to Fisk Electric Company (" Fisk" ), which in turn contracted with DTE Energy Technologies, Inc. (" DTE" ) to provide the generators. On June 26 and 27 of 2004, DTE delivered two Cummins Power Generation (" Cummins" ) generators to the construction site. Upon delivery, the VA's senior resident engineer, Leonard Romano, inspected the two generators and determined that they were, in his view, not " new." He wrote to Reliable, stating:

I am concerned that [the two generators that were delivered] are not " new" as required by [§ 1.47(a)]. They show a lot of wear and tear including field burns to enlarge mounting holes. Are they new and will you certify them as such? I cannot pay you for these as planned in this month's payment without that certification.

J.A. 2.

This letter initiated a flurry of letters between Romano, Reliable, Fisk, and DTE, with Fisk and Reliable initially expressing agreement that the generators did not meet the contract specification. For example, on June 28, Fisk wrote to DTE, stating: " [m]y foreman noted that the units were in 'BAD CONDITION' and proceeded to install the units." J.A. 102. Similarly, on June 29, Reliable wrote to Fisk, stating: " [a]s we discussed with you, the equipment on site is clearly unacceptable by anyone's standards . . . ." J.A. 109. On that same day, Reliable wrote to Romano, stating:

Representatives of Fisk have assured us that they were as surprised as anyone at the condition of the equipment delivered to the site. We have been working closely with Fisk personnel to investigate the matter and per our conversation have directed them to remove the nonconforming generators from the project site.

J.A. 303. Both Fisk and Reliable personnel continued to investigate the matter, and Romano continued to assert his belief that the generators were not conforming.

After investigation, Reliable and Fisk came to the conclusion that the generators, which were manufactured in 2000, had been previously purchased by others but never used. Reliable presented this information to Romano on July 9, but Romano nonetheless rejected the generators, asserting that " [p]revious ownership makes them used." J.A. 6. Subsequently, Fisk obtained different generators, which were accepted by the VA and installed.

On April 3, 2007, Reliable submitted a claim to the VA, alleging that the VA had violated the contract and seeking roughly $1,100,000 for additional costs incurred as a result of the VA's rejection of the three original generators. The VA failed to timely respond, so Reliable appealed to the Board. On November 27, 2013, the Board denied Reliable's claim, finding that the generators were not " ...

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