Section 16.33 Government Duty to Provide Realistic Estimates

• Library: Construction Law 2016 Supp

D. (§16.33) Government Duty to Provide Realistic Estimates

In Coastal States Petrochemical Co. v. United States, 559 F.2d 1 (Ct. Cl. 1977), the contractor was one of several contractors awarded contracts to supply the government with jet fuel at a time when the Vietnam War was in progress. Shortly after the plaintiff’s contract began, combat activities in Vietnam substantially decreased, resulting in the government’s jet fuel estimates being sharply reduced. As a result, the plaintiff’s jet fuel obligation was reduced to 57% of the original estimate. In seeking relief for its resultant losses, the plaintiff’s principal argument was that it had a requirements contract and therefore the government breached the contract by failing to obtain all of its jet fuel requirements from Coastal States. The court rejected this argument, holding that the contract was an IDIQ contract and, therefore, the government had not breached its contract by obtaining jet fuel from other suppliers. In so ruling, the court specifically held that when the government contracted with the plaintiff, it had properly based its estimates of future needs on its past experience. Thus, the court tangentially addressed the question of whether the estimates were accurate; the court, in essence, held that the government could not have known at the time of contracting that the Vietnam War would de-escalate, causing a reduction in its fuel requirements.

In Applied Devices Corp. v. United States, 591 F.2d 635 (Ct. Cl. 1979), the court held that the provision requiring the government to provide a realistic estimate was incorporated into the parties’ contract by operation of the Christian Doctrine—see §16.32, supra—even though there was no FAR clause requiring its inclusion.

In Dot Systems, Inc. v. United States, 231 Ct. Cl. 765 (1982), the contractor was awarded an IDIQ contract, which provided a minimum quantity of $500 worth of work and an estimated maximum of $11,689. But the plaintiff received orders of less than ten percent of the estimates. The plaintiff argued that he was entitled to compensation for the government’s error in its estimates, which were based on the government’s past needs. The director preparing the estimates consulted with other offices. “The actual estimates were prepared by taking a percentage of the historical data and, when in doubt, adopting a higher figure.” While the court recognized that the government is not held to the same negligence standard with an IDIQ contract as with a requirements contract, the regulations do set forth the requirement that the estimate be “as realistic as possible.” The regulations stated that “[t]he maximum may be obtained from the records of previous requirements and consumption, or by other means.” Because the estimates were prepared based on historical data of the entity’s past needs, the agency complied with the regulations; therefore, there was no breach.

Art Anderson Associates, ASBCA No. 27,807, 84-1 BCA ¶ 17,225 (March 9,1984), determined that an IQ contract is used when the United States cannot estimate its needs except in terms of minimums and maximums.

In Deterline Corp., ASBCA No. 33,090, 89-3 BCA ¶ 22,069 (May 19, 1989), the plaintiff-contractor was awarded an IDIQ contract with a $12 million maximum quantity. He contended that he “reasonably anticipated” that the orders would meet or exceed that amount based on the amounts the government had ordered under prior similar contracts and based on the government’s oral representations that they anticipated the orders would “approach the maximum...