Court Opinion

ID: 9495464
Source: CourtListenerOpinion
Date Created: 2023-08-05 16:03:36.702452+00
Date Added: 2024-06-11T17:57:02.169587
License: Public Domain

*1382PAULINE NEWMAN, Circuit Judge,
dissenting.
This appeal is from the decision of the Court of Federal Claims, on remand from the Federal Circuit. This court had held that the fixed-price contract between AT & T and the Navy for development and production of the Surveillance Towed-Array Sensor System (a system for detecting previously undetectable submarines) was not void ab initio after complete performance, despite the Navy’s admitted violation of Section 81181 of Pub.L. No. 100-202. AT & T v. United States, 177 F.3d 1368 (Fed.Cir.1999) (en banc). The Federal Circuit held that violation of Section 8118 was not a ground for retroactive annulment of the contract, explaining that:
When a contract or a provision thereof is in violation of law but has been fully performed, the courts have variously sustained the contract, reformed it to correct the illegal term, or allowed recovery under an implied contract theory; the courts have not, however, simply declared the contract void ab initio.
Id. at 1376 (citing cases). The court remanded to the Court of Federal Claims for consideration of the question of relief, on the premise that the contract was not void ab initio.
On remand the trial court did not consider the questions raised concerning the cost of performance of the contract. This highly advanced military system was successfully produced by AT & T, but at a cost several times the original estimate. AT & T said, and it was not disputed, that new technological problems cost millions of dollars to solve. Although no record was developed, my colleagues on this panel suggest that AT & T deliberately bid a cost that it knew was too low, and on this hypothesis my colleagues suggest that AT & T waived additional compensation. My colleagues stress that AT & T is a “sophisticated” contractor, apparently concluding that AT & T took the risk of a $50 million overrun and waived review of entitlement based on unforeseen technologic problems. None of these aspects was the subject of evidence or findings.
My colleagues further suggest that AT & T did not challenge the fixed-price form of contract, although it knew that the Navy was violating directives and regulations, in order to avoid governmental oversight during performance — a strange theory, also not the subject of evidence or findings. The proposition that a sophisticated contractor recognized the possibility of a $50 million loss but chose to take that loss in order to avoid scrutiny of its performance hardly accords with sophistication, or indeed with reality. I also take note of the finding by my colleagues that the AT & T technical capability was “inferior,” a pejorative verdict on an issue outside the record; indeed, one must wonder if the Navy would select a technologically inferi- or candidate to develop so critical a defense.
None of these speculative theories was developed in the record; indeed, there was no evidence on any aspect of the project and its cost. The record before us shows only that the contractor completely and successfully performed a contact for which the technologic complexities, and the ensuing cost of technologic solutions, were seriously underestimated. As a fundamental *1383premise of governmental procurement, it is presumed that the Navy believed that this submarine surveillance system could be developed and produced at the contract price. Indeed, if the Navy entered a contract that it knew could not be performed at the contract price, then the procurement was fatally tainted.
On remand the Court of Federal Claims simply dismissed the case, holding that since Section 8118 was not “enforceable” by AT & T, AT & T had no claim based on the admitted violation of Section 8118 by the government; the court declined to consider any other ground presented by AT & T, including “reformation, implied contract recovery, rescission and restitution,” 48 Fed. Cl. at 161, and did not explain its conclusion that none of these grounds could apply. Instead, the Court of Federal Claims limited its consideration to the role of Section 8118, despite the Federal Circuit’s remand to consider the issue of relief. This panel also does not reach the issue of the remand. Instead, the panel majority simply restates and reexplains this court’s prior ruling that violation of Section 8118 does not render a fully performed contract void ab initio.
The briefs raise factual and legal questions, and equitable aspects, the weight and value of which have never been aired, and on which evidence has never been adduced. I do not know whether this contract warrants relief. But it is incorrect to hold that the facts are irrelevant and that there can be no relief unless Section 8118 is enforceable by AT & T.2 AT & T has not yet had its day in court. From my colleagues’ affirmance of the dismissal of this action, I respectfully dissent.

. Section 8118.None of the funds provided for the Department of Defense in this Act may be obligated or expended for fixed price-type contracts in excess of $10,000,000 for the development of a major system or subsystem unless the Under Secretary of Defense for Acquisition determines, in writing, that program risk has been reduced to the extent that realistic pricing can occur, and that the contract type permits an equitable and sensible allocation of program risk between the contracting parties. Pub.L. No. 100-202 § 8118, 101 Stat. 1329-84 (1987).

. I do not, of course, suggest that government procurement contracts are readily subject to change after performance. The law and precedent of contract and procurement require some grave error or mutual mistake or changed circumstance, such as would render it unconscionable for the government to require performance of the original terms. Government contracts differ from private contracts in that the government can always terminate a contract for ''convenience,” based on changed circumstances; the contractor, however, faces severe penalties for default if performance is discontinued.