A Contract Modification Doesn’t Get Rebid Unless it is a Cardinal Change

American Apparel, Inc., along with Bluewater Defense, Inc. provides coats and other all-weather clothing to the United States Defense Logistics Agency under a government contract.  The Agency wanted to purchase additional apparel not specifically listed in the contract via a Request for Additional Items.  It awarded the add-on order to Bluewater Defense, Inc. based on price.  American Apparel complained that this was a new procurement necessitating new bids with which the Agency should consider non-price factors, such as past performance.

The Court of Federal Claims disagreed and sustained the government’s Motion to Dismiss for Failure to State a Claim.  (Alternatively to finding that American Apparel failed to state a claim, it held that it lacking subject matter jurisdiction under the same rationale).

The court found that, as a matter of law, a contract modification was contemplated in the original procurement and that the type of work, quantity, performance period, and costs have not substantially changed.  Since the Competition in Contracting Act (“CICA”) was not implicated, the protest must be dismissed.

Unhelpfully, CICA does not contain a standard for determining whether a modification falls within the scope of the original competed contract. To address this problem, the Court looked to the “cardinal change”doctrine by analogy. The cardinal change doctrine prohibits the government from forcing contractors to undertake tasks that were not within the scope of their original contract. In applying this concept to CICA, the government cannot modify a contract to such an extent that the contract, as modified, is materially different from the contract that was originally competed.  The question turns on whether the original contract, as modified, calls for “essentially the same performance.”

Interestingly, the Court wrote that a change significantly increasing the price and value of the contract is not a determining factor in finding a “cardinal change” so long as the nature of the work has not significantly changed.

In this case the Court found that the Requests for Additional Items added the same type of coats, with somewhat different specifications, but only slightly varying types of functionally similar all-weather military coats.  Moreover, the changes involved “items” contemplated by the agency at the time of original solicitation — a solicitation that resulted in awards of contract to both Bluewater and American Apparel after evaluation of the product demonstration model (PDM), past performance/experience, and socioeconomic considerations.

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